Customs director-general T Subromaniam has poured scorn on Pakatan Harapan’s proposal to ditch GST with something similar to the sales and services tax (SST).
Speaking to FMT, he said there was no guarantee that the switch would lead to increased consumer spending because the SST system lacked transparency and therefore could not ensure that the prices of goods and services would drop.
He dismissed Pakatan’s proposal to maintain the GST’s reporting system for the new system as unfeasible.
On Wednesday, in unveiling its alternative budget, Pakatan said it would zeroise the GST and revert to a consumption tax like the SST as a short-term measure.
Subromaniam said the GST system was transparent, meaning reductions in other taxes like import duties could flow through it and be monitored.
“In many budgets over the years prior to the GST, the slew of import duty reductions didn’t lead to prices coming down and this is because the SST is an inelastic tax system,” he said. “Only unscrupulous businesses made money.
“With the GST, everyone down the supply chain has to claim GST. So, if there are reductions in import duties, the savings can be passed on through the GST.”
With the SST, he said, only manufacturers and importers would clearly enjoy savings if import duties were reduced.
“There’s no guarantee that anyone down the supply line will enjoy savings and will subsequently lower their prices.”
He said the reporting mechanism was designed specifically for the GST and Pakatan was being simplistic in proposing to use it for another tax system.
“Companies have spent a lot of money to comply with the system, and for it to be used for the SST, you will need a complete overhaul.”
He defended the GST system as one that had been “tried and tested”.
“No country in the world which has GST has ever reverted to SST,” he added. “The world will laugh at us if we do.”