SOMETIME this month, Malaysians of all creeds will be glued to their television sets, listening to Prime Minister Datuk Seri Najib Razak as he unveils his administration’s maiden budget. Increasing the tax on cigarettes and liquor will definitely be on the agenda. As for others, the rakyat can only wait for the announcement.

Of late, there has been increasing talk about introducing the value added tax (VAT) or goods and service tax (GST) ostensibly to increase government revenue. As some quarters are predicting a decrease in income and corporate tax, the introduction of these taxes is to make up for the shortfall.

Also, introducing VAT or GST allows the government to diversify its income streams as reliance on oil and petrol revenue is economically unsound.

But, is this the correct time to introduce an additional tax in view of the economic crisis? Yes, there are signs of recovery but “signs …” means the economy has yet to recover. Introducing more taxes now would only be an additional burden which the rakyat must bear in view of rising inflation and stagnant salaries.

Which begs the question of when these taxes can be introduced. I strongly believe that VAT or GST should never see the light of day. Malaysians already pay a large amount to the government in the form of excise duties, ie when buying vehicles. Others include the tax imposed when eating out in certain restaurants, income tax, tax on investments, etc.

An additional tax, especially one which has a direct impact on the cost of living, would only burden citizens by reducing their disposable income.

If the government is serious about its revenue, it is suggested that it seriously takes a look at its spending. Reports indicate operating expenditure – a fixed cost in theory – was RM154 billion last year, up from RM90 billion in 2005. The numbers are staggering. Many questions can be asked, “where does all that money go to?” for one. Aggressively freeing up funds by eliminating waste and profligacy, increasing efficiency and maximising assets – things that earn money – can go a long way in ensuring sufficient funds in the coffers.

Source: The Sun – October 7, 2009