DAP Opposes The Goods & Services Tax(GST) On All Goods And Services As It Will Only Impose Hardship On The Poor

http://dapmalaysia.org

DAP Opposes The Goods & Services Tax(GST) On All Goods And Services As It Will Only Impose Hardship On The Poor

Speech
by Lim Guan Eng

(Klang, Tuesday): DAP opposes strongly with Second Minister of Finance Nor Mohamed Yaakop’s proposed GST on all goods and services as it will only increase the burden and hardship on the poor. GST should only be imposed on luxury goods and not all goods and services.

There is no feeling of well-being despite the government's announcement of good 8% economic growth in the second quarter. Ordinary Malaysians can not understand this "prosper less" growth unlike in the past a great sense of "good times" when there is an 8% economic growth. Many businessmen are puzzled how the economy can be booming at 8% when their business has gone down.

The construction industry is expected to contribute 0% growth for this year and only 0.1% for next year creating huge unemployment amongst contractors. The services industry and manufacturing industry contributes almost the entire economic growth rate for 2004.

That is why the government should not discriminate in its issuance of loans. The government should open up the RM2 billion allocation for the New Entrepreneur Fund to promote new productive capacity limited to bumis to all Malaysians. Many non-bumi contractors who are without work are unhappy that government contracts are not given to them. What is the use of MCA and Gerakan being in government if they can not get government contracts to be given to all Malaysians.

At a time when even a 8% economic growth is prosperless to some, DAP urges the government to reconsider its proposed implementation of a Goods and Services Tax(GST). A GST can have a direct impact on the price of basic necessities bought by the poor. With a GST, even if the poor need not pay any income tax, they are paying an indirect tax through the GST.

Apart from imposing additional hardship to the poor, GST can and cause great inconvenience. Imagine the difficulty for the hawker selling vegetables for RM 2.30 and having to calculate the extra tax.

Furthermore, can the Internal Revenue Service(IRS) cope with all the extra filling of forms when it is already facing problems with the implementation of the Self-Assessment system for income tax this year? When a simple matter like timely refunds of taxes within a month requires personal attention of the top government leaders, questions are raised about the IRS ability to cope. Further it is regrettable that IRS has refused to conduct in Mandarin despite the fact that Chinese businessmen make a major proportion of taxpayers.

Petronas Should Announce Its Profits And Act In The National Interest By Paying Out RM 10.7 Billion In Fuel Subsidies To Forestall Any Increase In Fuel Prices

DAP strongly opposes the proposed 10 cents to 20 cents jump in fuel prices to alleviate the government’s burden of having to pay out RM 10.7 billion in annual fuel subsidies. DAP believes that there can be a win-win solution if Petronas can act in the national interest by paying out the RM 10.7 billion fuel annual subsidies from its huge profits to forestall any price increase so as not to burden ordinary Malaysians.

Prime Minister Datuk Seri Abdullah Badawi had hinted that fuel price increases was unavoidable as the government can not afford to continue to pay out RM 10.7 billion if world oil prices continue to rise. Fuel prices would rise to more than RM 2 per litre from the present RM 1.37 per liter if there were no fuel subsidies.

According to a Star report dated 25.6.2004, the amount of petroleum subsidies totalled RM6.8bil compared with RM4.3bil in 2002, RM7.4bil in 2001, RM8.4bil in 2000, and RM3.6bil in 1999. Whilst fuel subsidies may be required to be reduced to further cut the 2005 deficit at RM 17.7 billion or 3.8% of the GDP, we can still enjoy low fuel prices if Petronas is willing to step in.

For the year 2005, petroleum is expected to contribute RM 24,123 million to the Government’s revenue comprising:

1.     Petroleum income tax of RM 11,274 million as a result of the rise in oil price of USD 30.35 per barrel in 2003 to USD 37.00 per barrel in 2004.;

2.     Export duties of RM 1,576 million;

3.     Petroleum and gas royalty of RM 2,575 million;

4.     Income from exploration of oil and gas of RM 98 million; and

5.     Petronas dividend of RM 8,600 million compared to RM 9,100 million in 2004.

This RM 24,123 million in 2005 is almost RM 1 billion higher than the petroleum revenue of RM 23,291 million for 2004.

Based on the huge amount of oil-related tax revenue, it is clear that Petronas has benefited from the rise in oil prices. It is regrettable that we do not know how much Petronas is earning, but we can be quite certain that Petronas can afford the RM 10.7 billion in fuel subsidies required to maintain our present fuel prices.

The government must be responsible about increasing fuel prices as it has great impact on the economy, especially small businesses. For example, every 10 cent increase in fuel prices, the costs for a transport company would rise by 4-5%. Such a rise would wipe out the business’ profits. The BN government must realize that the negative impact of any fuel increases will be felt fully by the small businessman, poor and ordinary Malaysians. How then can the 2005 Budget be called a small man’s budget if the fuel price is increased?

In the interests of transparency DAP urges the government to reveal Petronas profits and utilize these huge profits for the benefit of ordinary Malaysians. As an oil producing country, Malaysians should enjoy the benefits by paying low fuel prices. What is the point of being an oil exporter if we still have to pay high fuel prices like other oil-importing countries.

The 2005 Budget Will Only Be A "Small Man's" Budget If Substantial Tax Deductions Are Offered For Education And Health Requirements And Address The Problems Of Small Businesses Left Out By The 8% Economic Growth

The 2005 Budget will only be a "small man's" budget if substantial tax deductions are offered for education and health requirements and also addresses the problems of small businesses left out by the 8% economic growth. Even though the BN-controlled media have lauded the Budget as a small man's budget, only the civil servants and security personnel are the main winners.

As for the ordinary man in the street, the 2005 have not brought any significant gains to his educational and health needs. Based on the Government's 2005 Federal Government's Revenue estimates, the direct tax benefits for the small man amounts to only RM 4.3 million (RM 2.2 million from the increase in tax rebate for computers by RM100 and RM 2.1 million from the increase in tax relief by RM 200 for the purchase of of books).

Increasing Tax Relief Per Child

The RM94 million from the RM 1,000 increase in tax relief for insurance and EPF payments is helpful but does not make a significant impact towards the educational needs of ordinary families. A more effective measure is to:

• increase the tax relief of an unmarried child below 18 years old by 20% from RM 1,000 per child to RM 1,200 per child;

• increase the tax relief of an unmarried child above 18 years old studying in Malaysia by 20% from RM 4,000 per child to RM 4,800 per child; and

• make the tax relief of an unmarried child above 18 years old studying overseas (presently only RM 1,000 per child) be the same as those studying in Malaysia to RM 4,800 per child.

There is no reason why there is discrimination between children studying locally and overseas as they are still children studying. The government must remember that most students prefer to study locally as it is cheaper. They are forced to study overseas only because they can not get places locally despite securing excellent results due to the government’s discriminatory policies.

Channelling Some Of The Extra RM 2.3 Billion In Sin Taxes To Alcohol And Smoking-Related Diseases

Over RM 2 billion is collected from the so-called “sin taxes” of alcohol and cigarettes in 2004. The Government is expected to collect an extra RM 291 million from the increase in excise duties of alcohol and liquour. Since those who smoke and drink have to pay more, the government should channel a major portion of the RM 2.3 billion collected in 2005 to alcohol and smoking-related diseases such as lung and liver diseases. It is only fair that there is some assistance for their health problems later when smokers and drinkers have paid extra for smoking and drinking.

(21/9/2004)

* Lim Guan Eng, DAP Secretary-General