No running away from reintroducing GST to reduce debt, says economist
Carmelo Ferlito says there seems to be a lack of strategy in solving Malaysia’s debt woes.
Economists Carmelo Ferlito and Shankaran Nambiar have proposed that the GST be reintroduced to help the country reduce its debt.
PETALING JAYA: The government cannot avoid reintroducing the goods and services tax (GST) if it wants to reduce its ballooning debt, says an economist.
Carmelo Ferlito of the Center for Market Education said the GST was one of the most practical solutions to the country’s RM1.5 trillion debt problem.
He was commenting on former second finance minister Johari Ghani’s warning that the country’s debt situation should not be taken lightly as Malaysia can no longer rely on oil revenue to keep the economy afloat.
In an interview with FMT, Johari, who is also the Titiwangsa MP, said if Malaysia’s debt and continually widening federal budget deficit were not remedied, the economy would inevitably collapse and cause immense suffering to future generations.
Ferlito said the GST, which was introduced in 2015 and scrapped three years later, broadened the tax base and reduced tax evasion, especially from the shadow economy.
“The debt level and the rate at which it increased is worrying but more disconcerting is that there does not seem to be any strategy (yet) to solve the problem,” he told FMT Business.
He said the government has to bite the bullet and reintroduce GST, and while it may not want to bring the tax back now because of the current economic situation, it should commit to doing so.
“The government should announce a plan to reintroduce the GST, including a time for doing so, and communicate it clearly to the public and the markets.
“This way, it has sufficient time to address concerns and prepare businesses as well as the public for the GST’s reintroduction,” he said, adding that the government should also look to cut operations costs.
Shankaran Nambiar of the Malaysian Institute of Economic Research (MIER) said the country’s debt will affect its credit ratings and its ability to support the economy in difficult times.
“It is a problem that should have been dealt with a long time ago,” Nambiar told FMT Business.
He said the government needs to find alternative sources of revenue, and proposed raising corporate tax.
Other alternatives included the GST or a modified sales and services tax to enable the government to collect more revenue.
“However, the government seems reluctant to introduce any tax at this point,” he said, adding that state revenue would likely remain low.
Last week, Prime Minister Anwar Ibrahim told the Dewan Rakyat the government will not reintroduce the GST and opt instead for more targeted subsidies.
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