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Friday, March 27, 2015

NAJIB'S GST IS A LIE: It's to help him to borrow even MORE money & defeat Dr M

NAJIB'S GST IS A LIE: It's to help him to borrow even MORE money & defeat Dr M
Around this time five years ago, I wrote an essay for Malaysiakini on Malaysia’s then proposed good and services tax (GST).
I still hold to what I wrote then for the economic, political and social conditions that confront Malaysians today. Only these conditions have decidedly worsened under Datuk Seri Najib Razak, who has to be, in my opinion, the worst prime minister and finance minister in Malaysia’s history to date.
Malaysians can be certain of one thing: the GST, which starts on April Fool’s day, will most certainly cause economic hardship and create political and social upheaval particularly among the waged class of Malaysians.
And at least half the salaried class who make up the bottom half of Malaysia’s middle-class will be relatively worse off than they are today after April 1.
To put it bluntly, Najib’s GST is a lie. It is a deception by an Umno-Barisan Nasional (BN) regime that does lies, deception, corruption through state-kleptomania and also racism expertly.
That’s because it can do nothing else well – at all. And contemporary Malaysian political history has proved this time and again. Najib’s utterly contemptuous regime is in very deep trouble.
Since taking over six years ago Najib has kept digging an ever-larger hole for himself, his kleptomanic party and for the country into which all will no doubt be buried, and probably sooner or later.
For these reasons, it is imperative that Malaysians bury the regime soon – before the regime buries them in greater misery.
That misery is upon the doorstep of most Malaysians. The GST is an economic deception of grand proportions, much as Vision 2020 was from the start a deception.
The GST is also a financial deception. It is not difficult to tear apart the underlying economic argument or assumptions for the GST as put forward by Najib.
Truth is, he has not said very much about it, and that’s for good reason. That reason can be found in what I had to say about Malaysia’s GST this time five years ago.
There is more than one reason, and they have not changed but for the worst, because Najib’s lies and deception have grown bolder and balder and more and more desperate. You’re seeing it through the buggery of the 1MDB scandal.
Since Malaysiakini never paid me for this essay (and many others like it), the copyright to the article is thus solely mine and I am therefore free to do with it as I please.
If Malaysians care about their country, if Malaysians care for each other, if race and religion are unimportant, as they ought to be, and if Malaysians truly want to bring an end to this miserably corrupt, incompetent and racist regime, I urge you to stand up and as one people demand a total stop the GST before its implementation date.
PM Najib
If you do not the GST will become fait accompli, when it need not be, and when it does, you will only have yourselves to blame for being robbed blind and asunder. Exercise your democratic rights before April 1, 2015.
If there is one reason for you to do this, it is because you have been sold a lemon. Do the research and you will find that so much of the rationale, the economic theory, the econometric modelling, the taxation premise, the mechanisms and the processes of the GST have all been hard-glued after ideas were plucked from thin air, as it were, from typically poor research from other places that have similar taxation policies and legislation in place.
Has anybody in Malaysia, including the opposition politicians, ever bothered to demand from Najib for a copy of a GST discussion paper, in-house or otherwise, or the final report on the GST for cabinet perusal, discussion, debate and approval? No. Why? Because in all likelihood one does not exist.
And yet, in this so-called democracy, your rights have been jettisoned and the GST, as ill thought-out as it is, is being rammed down your throats.
Along the way you are being told, in no uncertain terms, that you do not have the right to protest against it, any more than you have the right to criticise and condemn Malaysia’s woeful judiciary.
If Najib were to proffer a GST report today, all you will get are scraps of paper cobbled together that will exhibit the idiotic quality of Malaysian education.
For in these scraps you will not find the otherwise requisite exhaustive and intelligent research on the GST. Nor will you find thoughtful, critical, well-rounded and compelling arguments for this tax.
And, besides, where were the public discussions and debates on the GST? Who amongst you recall contributing to that so-called public discourse or indeed being asked by Najib to do so?
Before too long after April Fool’s day, Malaysians are going to find Najib’s GST looking much like dog’s breakfast. And it will be left to Malaysians to clean up, at a stifling public cost, long after Umno-BN politicians have cleaned up the Malaysian people.
The GST is, to be sure, far less than a half-baked venture. It’s wholly uncooked, wholly untested, and the systems management for it so underdone, so raw, that the public cost of pursuing the GST will most certainly worsen Malaysia’s overall fiscal position and make business’s compliance costs so huge that they may well be forced to pass those costs on to Malaysians by way of higher prices.
Which, co-incidentally, have been worsening for all the wrong reasons, chief among which are the numerous financial scandals over the decades for which Malaysians are still paying for those shenanigans and new ones, such as the bankrupt 1MDB, for which Malaysians will pay for decades to come through higher taxes and higher fees and charges.
If ever you thought that Malaysia’s as a “miracle” economy that came off the shelf of looney proselytisers of neoclassical free-market economics and therefore destined for greatness – yet another lie founded in such cheap slogans as Look East, Vision 2020, and Najib’s ridiculously unintelligent transformation hubris – you should now ask why, then, the ever-growing mountain of private and public debt. Indeed why is the net income effect of Malaysians plunging years after year, and the net wealth effect disappearing?
It’s because Malaysia’s economy is built on sand, with zero transparency, zero accountability, and zero good governance principles. This has been the case since Tun Dr Mahathir Mohamad introduced his privatisation policy in the 1980s.
And a fat lot of good that policy brought to Malaysians. The regime’s cronies and nepotists continue to be the ones laughing all the way to secret foreign bank accounts at the expense of the majority of Malaysians, including Kampung Malaysia.
Malaysia, to be sure, is the house-of-cards economy. It was almost wholly debt-financed in the 1980s, more so in the 1990s, worse still in the new millennium.
If you think Malaysia will never end up being another Greece, give Umno and BN another 35 years, by which time (2050) the regime says it will turn your “nation” into a “hub for science and technology”.
I read of similar lunacy that existed in the 1980s/90s expounded by Dr Mahathir. It was a con job. The GST is Najib’s con job.
Malaysians are being fooled even at this 11th hour, and the GST will make them worse-off for the gross absence of economic and income trade-offs.
The lie of GST
There’s an old saying: a lie is a lie is a lie, whichever way you care to spin it. There’s another saying: there are only two certainties in life – death and taxes.
And so when you put the two adages together, what do you say about the on-again off-again GST proposal by the Najib regime? Very simply: a tax is a tax is a tax, whichever way you care to spin it, and Najib wants it, every which way.
Much has been said why the Najib regime suddenly backed off bringing in the GST. It’s clear, from all accounts, that no comprehensive consultations were undertaken by the regime that would include and not preclude nor exclude some or more constituents.
And to that end the proposed GST, it seems to me, was wholly politically short-sighted but also politically engineered or motivated.
The underlying motivation is what to do about the Malaysian economy that is bleeding from a few gashes to its wrists.
With the world economy spinning into a global recession, and Malaysia’s key export markets collapsing around the knees, Kuala Lumpur (or Putrajaya) dithered even as the possibility of a real recession loomed larger by the week.
Its response to the crisis was to pump prime the economy. In late 2008 Najib, who also doubles as finance minister, threw RM7 billion at the economy, hoping that this would put a line beneath the economy by bolstering domestic aggregate demand.
This amount of money, even in contemporary Malaysian terms, was simply paltry when the regime’s cronies are known to milk the state and the economy multiples of that figure. And that’s not counting the corruption within the regime and its security forces.
Klang MP Charles Santiago wrote then that the fiscal stimulus package should have come sooner in 2008, not later. He was right: the economy was already headed into a tailspin.
Something else Najib did was that instead of finding creative ways of using public finances – the people’s taxes – to bolster the economy and throwing it around wildly as he did, he moved to shore up Valuecap to the tune of RM10 billion in a bid to put a floor under stocks whose values were crashing like typical Malaysian landslides, thanks to shoddy developers and local and state authorities who feed off each other.
EPU asleep
Nothing happened as a result of that stimulus package. Even the regime’s Malaysian Institute of Economic Research, a think-tank, said the stimulus packages were not working, given by the business and consumer confidence indices, which were collapsing to historical low points.
And still Najib, who is now postulating a new economic model for Malaysia, sat on his hands. As did the much-vaunted Economic Planning Unit (EPU) attached to his ministry. Did the EPU fall asleep or was the crisis way over its head?
The second stimulus package in March 2009 totalled RM60 billion. Enough to save the economy? By all evidence to date: no.
The economy slipped deep into recession and is now desperately trying to crawl its way out of the doldrums with domestic aggregate demand as weak as export orders from Malaysia.
And with the world economy still anaemic, with the possibility of a second round of recession in Malaysia’s key export markets in the United States and Europe, there is an even chance the Malaysian economy could slip into a double-dip recession.
And that means the regime throwing more money at the economy. At almost eight percent of gross domestic product, Malaysia’s fiscal stimulus package is the third largest after China and Saudi Arabia.
And its barely surprising because, as in the 1997 Asian financial crisis, and the so-called great financial crisis the last couple of years, the Malaysian regime again failed to undertake real economic reforms. One would have thought that historical lessons would have been learnt after every crisis.
In Malaysia the ruling elite and the bureaucracy poorly learn lessons in the same way that Malaysia’s education system has continuously failed to teach Malaysia students anything of real value that could be intrinsically linked to the primacy of the idea of the accumulation and praxis of knowledge – other than rote-learn for valueless public examinations.
There have been many missed opportunities, and deliberately so, because of the system of patronage that works in Malaysian society, politics and economy. And all of this is linked to the centrality of the regime survival.
Malaysia’s education system is therefore designed to teach Malaysians never to ask questions, much less to question authority. It’s the perfect dumb-down foil of repressive regimes.
As debt deepens in Malaysia, especially budget deficits as a result of wild and woolly nature of that spending that added to naught in terms to turning the economy around on that basis, new revenue would have to be raised, especially at a time when the cost of borrowing, in relative international terms, is still prohibitive, and as the risk of Malaysia’s international credit rating taking a hit.
The goods and services tax that was proposed was nothing more than the cynical opportunism that is the hallmark of the Umno and Barisan Nasional regime to ensure its fiscal debt does not impair the possibility of the regime continuing with funding those projects that would bolster its own stocks by saving the regime’s cronies.
Cheer squad
And if you think this is being overly cynical, do the research and see which business or industry sectors were the loudest in their praise of the regime’s stimulus packages.
The first one was hailed loudly but the second stimulus package had the regime’s biggest cheer squad parading wildly in their boardrooms.
They saw the possibility of making money and returning little in the way of real value to the real economy. Just look at the unemployment figure in Malaysia, even today.
Not that there is much wrong with any GST if it is introduced after a lot of soul searching and a lot of community-level consultations. Because a 10% GST means a 10% increase in prices of all goods and services.
And 10% could tip the scales in not ameliorating but adding to the misery of poverty amongst most Malaysians, including the lower middle classes.
And in the short to medium term it would also mean Malaysian exports would be less competitive, especially as the world economy looks likely to bump along the bottom for several more years.
Any GST implementation must see a reciprocal improvement in efficiencies across the board, productivity increases that would lead to increases in real wages.
There is nothing more politically disastrous than find the income-output gap widen to the extent that people start rebelling against the regime. Not that they haven’t already but they would be justified to pour into the streets and burn down the Umno and BN flags.
The scale of justice that is the emblem of the BN flag is a lie. So the GST is a lie. Just as the Najib regime is founded on a series of cowardice, lies and deceptions.
Given the state of social, political and economic realities in Malaysia, the GST is unjustifiable. But if it could be justified, then the regime needs to compensate Malaysians and business in sync by reducing income and corporate taxes.
Because that would give people back some disposable income but never, from all the evidence I have read from all the countries that have implemented versions of the GST, to truly compensate the people in full.
No evidence
There is not a shred of evidence anywhere that shows GST will bring down prices. That’s pure fantasy and an outright grand lie. GST will – and has – increased prices everywhere. And incomes have not grown for most people sufficient to match price increases that were brought on by the introduction of the GST.
In fact, prices rises are linked to exogenous and endogenous factors. Prices that rise outside of the ambit of the GST are related to cost-push and demand-pull factors and resource scarcities.
You can see this through opportunity costs curves. Any price increase from any of these factors will not only climb by that number but greater once slapped with the constant percentage of the GST.
It’s a double-whammy that nobody in their right minds ought to put up with if their real incomes are not also rising. And they won’t unless efficiencies are gained and productivity is improved.
The problem here is that there have not been any real microeconomic reforms in Malaysia because, as always, either the Umno regime has dithered on this yet again or that such reforms are way out of its depth.
And Malaysian businesses would be loathed to offer wage and salary increases even if efficiencies and productivity have improved. That’s clear. And if they are to be given, then the incentive must come from the regime with compensatory cost measures, such as decreasing business’s tax burdens.
Problem is, there are good businesses that do things by the book, and there are businesses that do not. The latter are the regime’s cronies.
Given this, there is no way in hell for the regime to implement tax reforms that are uniform across the economy and that are wholly transparent. And there has to be income tax cuts too if the GST were to be implemented.
Since the entire GST argument that has been put forth by the Najib regime lacked transparency through and through – and how can it be transparent when the regime itself is not – it is testimony to the political spirit of Malaysians to have raised their doubts and anger as bluntly as they have in stopping the perpetration of this grand fraud by the Najib-led Umno-BN regime. – TMI

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