The news that China Communications Construction Company (CCCC) which is building the controversial East Coast Railway Link (ECRL) was given an estimated RM3 billion GST exemption hit the public like a bombshell.
Government spin doctors tried to make light of the whole issue but for ordinary Malaysians trying to make ends meet, it was a bitter pill to swallow. It reeked of unfairness: Malaysians have to pay GST on almost everything while a super-rich well-connected PRC multinational gets a RM3 billion gift.
And they were not the only ones who were upset. The president of the Class F Bumiputra Contractors Association questioned why smaller companies have to pay GST on all their construction costs while a big company like CCCC is exempted. The Malay Economic Action Council also considered the exemption unfair to local firms.
Concession after concession
Clearly, the government has an obligation to explain why taxpayers, local companies and even state-governments are obliged to shoulder the burden of GST while a well-connected foreign corporation gets preferential treatment. It cannot simply dismiss these concerns by saying that it is for the benefit of the people or to reduce costs or that Dr Mahathir also did it.
What is worse, CCCC’s GST exemption comes on the heels of already highly favourable terms extended by the government to the company. In exchange for soft loans (not investments, mind you, but loans which must be repaid) to build the railway project, China gets to design, construct and supply all the materials and rolling stock for the project. It even gets to bring in its own labour force from China.
Of course, the government keeps insisting that the ECRL is a viable project that will somehow magically transform the east coast into an economic powerhouse but it has yet to provide convincing data to support its claims. In fact, the available evidence suggests that the ECRL will never be able to support itself, and like KTM, will come to be dependent on the taxpayers to stay afloat.
Why we keep giving China concession after concession is a mystery, to put it mildly, part of the madness that we find ourselves in with so many of these China projects.
Increase in GST?
One thing is sure: these massive projects will invariably lead to greater indebtedness and ultimately yet higher GST or other taxes to pay for it.
Already, our debt situation is worrying. According to an Edge Markets report [06 January 2018], debt servicing charges are projected to reach RM30.88 billion or 13% of government revenue this year – that’s 96% of the estimated personal income tax collection or 71% of the estimated GST collection for this year. How long can we sustain such high debt servicing levels without raising taxes further?
The government says it won’t increase GST, that rising oil prices will be more than adequate to fund government liabilities as well as development expenditure but that is always what they say when they need our votes; what happens after the election is a different story.
In the meantime, the government keeps throwing all kinds of statistics at us, quoting anyone anywhere who has anything good to say about our economy, but the reality on the ground is starkly different: rising costs and greater hardship for the people. It’s a harsh reality for many Malaysians that no amount of sweet talk can change.
When they introduce GST, they say it’s for the people’s benefit; when they give exemptions to well-connected foreign corporations, that too is apparently for the people’s benefit. Either way, it is the people, not the politicians, who have to bear the burden.
In order to mitigate growing public unhappiness with GST, the government has resorted to throwing more and more handouts to the people – BR1M, petrol vouchers, special half-price food markets, discount food stores, etc. For hard-pressed Malaysians every bit helps, of course, but it is hardly a viable solution. All it does is make more and more Malaysians dependent on government handouts to survive.
Indeed, the recent spectacle of hard-working Malaysians stampeding (and even injuring themselves) for discounted food items and petrol vouchers being handed out by smug, self-serving government ministers shows how increasingly difficult life has become for the man on the street.
It might give politicians an inflated sense of importance seeing themselves surrounded by a sea of people eager for the handouts they offer but it is sad that Malaysians have to endure such humiliation just to put food on the table.
There is no reason why the people of a country that is willing to spend billions on dubious foreign projects have to wait for the next government minister to come along with handouts and cash just to get by. If this is what our people have been reduced to after more than 60 years of BN rule, isn’t it time for a change?
[Dennis Ignatius | Kuala Lumpur | 22ndApril 2018]