From Syed S

I am disappointed with the tax advocacy that the Malaysian Institute of Economic Research (MIER) is doing.

MIER’s research paper titled “Harmonising Sales and Services Taxes: The Better Alternative to Reintroducing GST” is a work of lobbying that does not have the merit the public expects from a once-premier think tank.

The paper claims that the harmonising of the sales and services taxes (HSST) is better than reintroducing GST.

The paper is subversive to national interests and biased. It is against the principles of economics and not based on any study or evidence.

It states that HSST is better than GST because with HSST, the government needs to tax only 80,000 companies. Under GST, 480,000 are taxed.

MIER has forgotten that one of the advantages of GST is that it is a broad tax that covers all companies and all consumers, even migrant workers.

Why does MIER want to protect only SMEs and family businesses at the expense of the rakyat?

Another reason MIER gives for rejecting GST is that the refunds are given back slowly. If the refunds are slow, then the government must correct the problem of late refunds, not reject the whole tax system.

MIER says GST will lead to inflation. Now we do not have GST but we have high inflation. You cannot put the blame for everything on GST. This was the campaign that some groups did to bring down the government of that time.

MIER makes spurious arguments in the paper. It says that higher tax revenue will not lead to a reduction in government debt. Yes, tax revenues will not reduce debt, but higher revenue will pay for government expenditure. This is what we want. For that matter, HSST will not reduce government debt.

MIER proposes that all clusters, i.e. groups of companies in an industry, such as advertising, should not pay input tax. For example, the advertising industry does not pay input tax, but if these clusters cover more and more industries, from services to manufacturing, then where will tax revenue come from?

MIER’s HSST proposal does not talk about social inequality and the B40. Under GST, the government gave cash handouts to those eligible so as to address the regressive tax. So, the regressive characteristic is counter-balanced.

HSST is pro-SME and takes care of family businesses, not the rakyat. The scope for tax avoidance and transfer pricing can be exploited under HSST. That is why SMEs do not want GST. The scope for manipulation is much less under GST and monitoring is possible under the tax regime.

I heard on the MIER webinar on HSST former customs director-general T Subromaniam and tax expert Veerinderjeet Singh saying clearly that GST is the best tax system. However, MIER’s paper is advocating HSST.

The rakyat expects MIER to give fair and unbiased views. Please uphold your principles and do not mislead the public by giving papers that have no data, no empirical work and no theoretical justification.

Syed S (full name provided) is an FMT reader.

The views expressed are those of the writer and do not necessarily reflect those of FMT.