Tuesday, October 18, 2011

Najib's last gamble: Using GST to pay for Budget 2012's cash incentives

Written by Rafizi Ramli
Najib's last gamble: Using GST to pay for Budget 2012's cash incentives

Recent economic reports show that the growth predictions of the Prime Minister unveiled in Budget 2012 are not realistic. The latest is the projection made by the Malaysian Institute of Economics Research (MIER), which lowered its projection of 2011 economic growth to 4.6%.

Based on the global economic reality, the 5%-6% growth target will be diifficult to achieve. This will affect the national income for the year 2012 caused by the decrease in the collection of taxes and other revenue following slower economic growth in 2012.

Barisan Nasional needs to borrow at least RM46 billion to pay for the Budget 2012 deficit, if the economic growth rate is at 5%-6% for the year 2012. At the same time, the capability of the government to raise bonds and other means of loans in 2012 is limited due to the nation’s debt ceiling which is capped at 55% of the Gross Domestic Product under these two Acts - the Akta Pinjaman (Tempatan) 1959 and Akta Pendanaan Kerajaan 1983.

The national debt has already reached 53% of GDP based on official figures released by Bank Negara Malaysia in June 2011, therefore any new debt will contravene the country’s laws.

Najib's last gamble

I am of the opinion that the Prime Minister and the Barisan Nasional administration are not well-informed with regards to the economic figures and the government’s debt limit under those two Acts. I am also sure that the Prime Minister was advised that the 5%-6% growth prediction used in the Budget 2012 is not realistic.

This brings us to one conclusion.

The Budget 2012, which costs RM232 billion in total, at a time when the national income would not be able to service it and given the limitation in the government’s ability to borrow confirms the intention of the Prime Minister to immediately implement the Goods and Services Tax (GST) if the Barisan Nasional wins GE-13.

This is a gamble taken by the Prime Minister with the intention to pull wool over the people’s eyes, offering sweets starting with the payment in January 2012, which will be taxed back through GST once GE-13 is over.

Thus, the PKR political bureau has decided along with our Pakatan Rakyat colleagues to bring the GST issue to the attention of the people. There is no doubt GST should be the main GE-13 issue so that the people understand exactly what it means to vote for BN. In fact, "Voting for BN means Voting for GST”.

- Rafizi Ramli is the director of strategy for Parti Keadilan Rakya

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