KUALA LUMPUR – Malaysian Prime Minister Anwar Ibrahim on Tuesday ruled out reintroducing the goods and services tax or any new broad-based consumption tax, despite the country facing high national debt.
Addressing Parliament during his maiden Prime Minister’s Question Time, Datuk Seri Anwar said the government will instead focus on cutting subsidies “for the rich” and also curb wastage and corruption in his administration as it seeks to lower the debt levels.
“We do not plan to implement GST or any broad-based consumption tax. What we plan to do is reduce subsidies for the rich, like we have done with the electricity tariff,” Mr Anwar said while responding to a question from Taiping MP Wong Kah Woh.
“We will look at good governance to repair (wastages),” Mr Anwar added.
Shortly after coming to power in 2022, Mr Anwar dialled back on scheduled electricity tariff hikes for the public, but maintained the rate increase for international corporations.
He said on Tuesday that the national debt has reached RM1.5 trillion (S$459 billion), or 82 per cent of the country’s gross domestic product.
GST was implemented under former premier Najib Razak in 2015, but the move was unpopular and was scrapped by the previous Pakatan Harapan administration in 2018 after it won elections that year.
Calls and suggestions to reintroduce GST have gained traction since 2022, as the government seeks to boost its income to reduce national debt and also slowly move towards a targeted subsidy system.
Malaysia spent nearly RM80 billion on subsidies in 2022 – the highest in the country’s history.
Mr Anwar’s predecessor, Datuk Seri Ismail Sabri Yaakob, admitted then that a proposal to reintroduce GST was being studied by his administration, saying that despite the tax system being unpopular, the government had limited options in broadening its own income base.
In January, the Federation of Malaysian Manufacturers urged Mr Anwar to reintroduce GST at a rate of 4 per cent, in order to reduce national debt and help the state accumulate funds to weather a possible economic downturn.
Najib’s administration had introduced GST at a rate of 6 per cent, which was one of the factors that contributed to the Barisan Nasional administration losing the general election for the first time ever in 2018.
Analysts said the government’s credibility was more important than the debt figures, hence Mr Anwar’s anti-corruption agenda – which, if effective, could prove crucial.
“Debt is not necessarily a problem. It’s mainly the government’s creditworthiness, especially in the eyes of global finance houses, that is of concern,” said Dr Oh Ei Sun, a senior fellow at the Singapore Institute of International Affairs.
Dr Oh added that fighting corruption is a fundamental solution to the debt concern, as it gives confidence that money is well spent in Malaysia and not lost to graft and wastage.
In recent years, Malaysia has been rocked by several financial scandals – the biggest being the 1Malaysia Development Berhad (1MDB) scandal, which saw the country lose at least RM20 billion in public funds stolen from the firm.
Mr Anwar said on Tuesday that the government is still paying RM18 billion arising from 1MDB-related debts.
Najib is currently in jail after being convicted for 1MDB-related graft charges.
In 2022, a RM9 billion littoral combat ship scandal came to light, leading to the former managing director of a Malaysian shipbuilding company being charged with criminal breach of trust.
Malaysia is already dealing with inflationary pressures and also a sluggish economy following the impact of two years of the Covid-19 pandemic.
