Speech by Lim Guan Eng during the DAP Perak State Annual Convention in Regency Hotel Ipoh on Sunday, 29^th November 2009: 

The proposed 4% Goods and Services Tax(GST) does not widen the tax base as it raises only RM 1 billion extra revenue yearly when at least RM 28 billion can be saved by fighting corruption and affect the 85% of workers not paying any taxes now 

DAP urges the BN Federal government to reconsider the proposed 4% GST to be tabled in Parliament next year as it does not widen the tax base and would burden the poor and middle-class. These two failures are enough for DAP to oppose the proposed GST because it raises only an extra RM 1 billion in revenue yearly when at least RM 28 billion can be saved by fighting corruption as well as affecting 85% of the working population not paying taxes.

Even though GST is a more efficient revenue collection mechanism, it can also lead to inflationary expectations as well as under-reporting. However as pointed out by Petaling Jaya Utara MP Tony Pua, only 6.7% of its 27 million population pay any income taxes, or 15% of its working population pays taxes. This means that any introduction of GST today would mean a substantial burden on 85% of the working population who currently do not pay a single cent of tax.

The 85% working population are not pay tax not because they are evading paying taxes, but because their income is below taxable levels. Those not paying taxes would now have to pay the GST. The impact would be most severely felt on the 38 per cent of the 5.6 million household in Malaysia with income levels of less than RM2000 a month or 2.12 million households.

Further if the Prime Minister Datuk Seri Najib Tun Razak wants a more efficient economic management system that would help narrow the nation’s current budget deficit, why not focus on fighting corruption which would not only increase economic efficiency but also have higher savings of at least RM 28 billion yearly. This RM 28 billion was admitted by Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah as the cost of leakages from having closed tenders in government procurement or just failing to have open tenders for government contracts in an open transparent manner.

The latest scandalous project that comes to mind is the RM 628 million Matrade MICE centre. But the RM 28 billion losses yearly to corruption may be too small as Time magazine had quoted Daniel Lian, a Southeast Asia economist at Morgan Stanley in Singapore, saying that Malaysia might have lost “as much as US$100 billion since the early 1980s to corruption”.

What is disappointing is the unconditional surrender and support for UMNO’s GST by MCA, Gerakan, SUPP and MIC. No MCA Minister has defended public interest but has continued to perpetuate this national economic divide by burdening the poor and middle-class instead of fighting corruption to get more money. Why fear fighting corruption so much?

The failure of MCA, Gerakan and MIC Ministers to stand up for a united nation and give meaning to Datuk Seri Najib’s One Malaysia is evident when they supported a 15% preferential income tax rates for professionals in selected areas in Iskandar Development Region(IDR) when professionals in other states have to pay 26%? How can there be One Malaysia when we have one country two systems with double-standards and discrimination in tax treatment?

We can understand the silence of MCA and MIC who are too busy with their petty power struggles? But is Gerakan also having an internal power struggle when their KPI Minister dare not seek justice for other states in demanding a similar tax treatment of 15%? For 18 years, that Gerakan Minister has caused Penang to lose its lead by not daring to oppose unfair, unjust and short-sighted UMNO policies. Now he has still not learned his lesson by repeating his failure and lack of courage at the national level.

In the national interest, DAP calls for a withdrawal of the GST and that the 15% preferential income tax for professionals in selected areas be offered to all in Malaysia and not just in Iskandar.

*Lim Guan Eng, DAP Secretary-General & Penang Chief Minister; Member of Parliament for Bagan