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Pakatan’s blueprint for national bankruptcy

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I admit that Pakatan’s alternative budget is positively revolutionary compared to the one unveiled by Najib on October 27th. There’s a reason for this: For years, Pakatan leaders have claimed that Malaysia is going bankrupt. Sadly for them, it hasn’t happened. Having just read their budget, I think they’ve decided to take matters into their own hands. If Malaysia refuses to go bankrupt, then they’re going to make it go bankrupt once they’re in power.

 

Give them credit for being proactive.

 

Let’s just start with the fact that their proposals are hilariously contradictory. They want to replace the GST with the Sales and Service tax (SST), but keep the current GST reporting system. But the GST is levied at every stage of the supply chain, while the SST only applies to a single stage. So, what’s there for businesses to report then? Report kepala hotak kau lah.

 

More importantly, critics are rightly asking how Pakatan intends to plug the massive RM42 billion shortfall in government revenue from eliminating the GST. Pakatan tells us not to worry – once the GST is gone, consumers will start spending more and business activity will intensify. Consequently, the government would automatically collect more tax revenue from the resulting economic boom.

 

Sounds great, right? Except that’s the same failed, bullsh*t theory peddled for decades by US Republicans and now their clueless, bumbling president, Donald Trump. And the evidence against it has been pretty clear. A 65-year US study found that tax cuts failed to stimulate the economy as their advocates promised.

But since we’re talking the GST in particular, consider one relevant example. In 2008, the UK government cut the country’s VAT (their version of GST) rate, but an uptick in consumer spending didn’t materialize. Early the following year, a poll of UK small businesses found that a whopping 97% of them said the cut has no effect on their trade at all (see the BBC report here).

 

Accordingly, even if Pakatan abolishes the GST, consumer spending and business activity aren’t likely to surge in response – with that, forget about seeing additional tax revenue. Pakatan will say, ahh wait, we’re also going to compensate by cracking down on wastage and corruption – RM20 billion can be gained in this way, they claim. Of course, their own record in political office demonstrates they have zero credibility when it comes to cutting corners.

 

Since Pakatan took over Penang and Selangor, state operating expenditures (OPEX) have not shrunk, but grown by leaps and bounds. The Penang government’s OPEX grew from RM252.3 million in 2007 to RM825.9 million in 2015. For Selangor, those figures are RM1.15 billion and RM2.34 billion respectively. So, who are you kidding? They’ve proven themselves to be big spenders, not big savers.

 

Predictably, they intend to make the government spend even more by raising the minimum wage to RM1,500. For three years, the government would pay for half the increase, the businesses the other. It’s a stupid idea: Putrajaya would be saddled with more debt, while many businesses – punished by the additional operating costs – would be forced to close, retrench existing workers, or put off hiring. Unemployment would rise, the economy would slow, and tax revenue would fall even further – how were they supposed to pay for abolishing GST again?

 

And as they say, there’s no free lunch. Most businesses would just pass the cost of the pay raise on to you, the average consumer. Newsflash: businesses aren’t benevolent entities. Whatever consumers gain by GST’s removal and a higher minimum wage would be lost once the prices of (everyday) goods and services go up. That’s certainly a curious (read: schizophrenic) way of attacking the rising cost of living.

 

One wonders if Pakatan even understands the basic principles of economics. Their approach to fiscal responsibility, economic revival, and consumer relief is akin to caressing a baby and then smothering it to death with a pillow. Sure, that’s plenty of change – if national bankruptcy is your goal. But then again, how is Pakatan going to ‘save’ Malaysia unless they first bankrupt it? What an ingenious plan.

 

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