Funding the nation: Money is needed for public services, education, and healthcare reforms, while new challenges such as artificial intelligence technology and digitalisation also demand the disbursement of funds. — 123rf
TAXATION in any form and name is never popular, and the expansion of the sales and service tax (SST) is no exception. It is unpopular, full stop.
Nobody likes taxes but there is no such thing as looking for a better time in the future to impose the taxes for the government to increase revenue.
Putrajaya knows well that this decision won’t make the Prime Minister and his government popular. But it has to be done.
Even if the Madani government were not in power, another government would still have needed to carry out this exercise, maybe under another name.
The government is already two months behind its self-imposed May 1 target but the SST will finally take off on July 1.
What needs to be done is to have as many communication engagements as possible with the media, as well as social media influencers, business and professional groups, non-governmental organisation leaders, and other stakeholders.
Finance Minister II Datuk Seri Amir Hamzah Azizan remains the best person to explain the issue but it is not the job of one person to do all the explaining.
Some questions are easier to answer while some are more complicated, but clarifications and some convincing are needed for a national buy-in.
The T20 (top 20% of income earners) has questions and priorities that are different from the M40 (middle income) and B40 (low income) groups. Business-men who read financial newspapers will scrutinise interviews with Amir as well as a host of analysts giving different perspectives.
The loudest grumble but certainly a reasonable concern is the inclusion of commercial rental and leasing under the SST, alongside selected goods and services.
The additional cost burden, at a time when many businesses are already struggling with rising operational expenses – including minimum wage adjustments and heightened regulatory compliances – will surely put pressure on margins.
This segment is justified in worrying about increasing operational costs while staring at weak business prospects and the continuing storms of the global trade wars.
The M40, which comprises mostly wage earners, are worried that they might have to pay more for their meals and rentals while members of the B40 group are left struggling and probably have no time at all to read the narratives about the SST.
Let’s not kid ourselves that all will be hunky-dory and that our lives will still be the same. Our pockets will be hit.
We read news reports that an additional revenue of RM5bil is expected in the second half of 2025 from the expanded SST to bolster the Federal Government’s revenue estimate to RM51.7bil, or 2.5% of GDP, from RM46.7bil, or 2.2% of GDP.
The revenue boost is reportedly RM10bil, or 2.5%, per annum but it is still short of about RM7bil to RM12bil of the 3% of GDP that could have come from the goods and services tax (GST).
But of course, no politician is going to touch another round of GST, even though the net spread is wider. The backlash from the word itself would be tremendously negative.
So, in simple language, the targeted collection of revenue from the broadened SST would still be insufficient.
What is needed from the narratives isn’t how much can be collected, but what the extra money from the SST would be used for.
Amir said in an interview: “The role of the government is to be judicious in how it spends and to be smart about how it actually tries to manage the reform.
“But we can see this reform, this transformation, is materially making a difference for Malaysia,’’ he said.
Taxpayers want to know where the money will go. They know development has a cost but it is always good to share with the rakyat again and again.
Money is needed for public services, education, and healthcare reforms while new challenges such as artificial intelligence technology and digitalisation also demand the disbursement of funds, and more funds.
Malaysians also need to wake up to the fact that PETRONAS is no longer the golden goose. We can no longer depend on dividends from PETRONAS as its contributions have dropped. It even had to downsize its own staff to ensure a tighter ship.
Even the rich oil-producing Arab nations started looking for other sources of revenue a long time ago.
Who would have thought that the day would come that conservative Saudi Arabia opens its doors to non-Muslim tourists?
I took a trip to various parts of the country, except Mecca, in 2023 and saw with my own eyes how it is aggressively promoting tourism.
One day, I was sitting at a bar in Al Ula that was blasting loud rave party music and the next, I was standing outside the holy Prophet’s Mosque, the Al Masjid an Nabawi, in Medina, which was previously forbidden to non-Muslims.
Malaysians need to be told that we cannot continue spending more money than the revenue we collect year after year.
That’s what we have been doing for a long time, with our debt-funded excess spending for the last 28 years of budget deficits. The SST collection just isn’t enough to service that debt.
This is a country that has relied on subsidies for almost everything – our petrol, for one, remains the cheapest in the region – but subsidies need to be cut, although this is another move that will never be popular.
The government has to do the necessary surgical cuts now instead of passing the burden to the next generation.
It has over two years before the next general election and can still do what is correct and not what is popular.
That window will close as soon as the election looms.
In fact, the campaigning has already started.
SST collection is not an interesting subject and the focus has been reduced to a debate on why imported fruits should be taxed.
Malaysia is not the only country that has imposed such a tariff in varying ways on imported fruits. For us, they included imported bananas, pineapples, apples, pears and grapes, for example.
Just Google and check. In the United States, a Congress reports states that about 60% of fruits and vegetables gets a tariff of less than 5%. In China, it is said that the tariff ranges from 25% to 40% depending on the fruit types, with tropical fruits getting the hit mostly.
The other countries included Egypt, Japan, South Korea and the European Union nations. It is a flawed argument that our local fruits are mostly seasonal. Our choices are plenty including bananas, guavas, papayas, watermelon, jackfruit and dragon fruits.
But there are good reasons to listen to calls that apples and oranges should be exempt as they are hardly luxury items. It is commendable that the government is prepared to relook these items as they should not be regarded as luxury goods.
World Bank Malaysia lead economist Apurva Sanghi tweeted: “Imported food price inflation is a concern but it may be overblown – only RM16bil of RM79bil imports affected.’’
The SST needs plenty of improvements, and many of the criticisms are justified, but more importantly, the conversations must continue and be encouraged if we are to make Malaysia a better place.
Apurva said: “Tax hikes are painful but people can bear them – if they are meaningful. This means faster progress, especially on governance reforms, and that would increase trust.
“Malaysia needs to spend more; not less. But there are areas where spending can be cut, waste arrested; and foregone revenues clawed back.’’
He cited that both revenue and spending have dropped – 30% lower since 2012 levels, which is well below global peers.
That is not to say we cannot criticise the government. If we are critical of Malaysia, it is because we love our country, and taxpayers should be regarded as customers by the Inland Revenue Board. And we should also adopt the attitude that it is a virtue to pay taxes.
What Malaysians cannot tolerate are horrendous leakages and the stealing of public money by politicians and people that we put our trust in.
Every year the Auditor-General uncovers and makes public losses in funds, irregular payments, and wastage across various ministries.
As Apurva says, the Government Procurement Act has been delayed. Faster progress on such reforms that build trust with the rakyat can make it easier to swallow bitter tax hikes.
He aptly quoted award-winning Japanese writer Haruki Murakami: “I can bear any pain as long as it has meaning.”
