KUALA LUMPUR: The abolition of the Goods and Services Tax (GST) will leave the government with three options that could hurt the country’s economy, says Permodalan Nasional Bhd chairman Tan Sri Abdul Wahid Omar.
He cited the choices as raising income tax or introducing a new tax such as capital gains tax; increasing the country’s fiscal deficit to 5% or reducing spending, including development expenditure.
He said the three options were very dangerous as they could affect the capital market and result in the ratings of the country’s international debt credit being downgraded to BBB from the A3/A level.
“This will increase borrowing costs and harm the country’s economy,” he said.
Wahid, who was former minister in the Prime Minister’s Department, said the original purpose of the GST implementation was to widen the tax base of the nation as Malaysia had only two million income taxpayers then, a small number against its population of 30 million.
“GST is a consumption or indirect tax where those who spend more are among the people who earn more,” he said.
The introduction of the GST was also in line with the fiscal consolidation measures targeting a balanced budget in the medium term, he added.
“With the increase in government revenues, we have not only reduced our fiscal deficit, but also implemented many of the previously delayed development projects such as highways, roads, bridges, schools, hospitals, rural clinics, and others.
“This includes the construction of the Pan Borneo Highway, which is progressing rapidly, and the project is expected to be completed by 2022,” he said.
