The accusation made against the former Prime Minister Datuk Sri Najib Razak’s administration has yet again reached a new height on Wednesday (Aug 8) when Finance Minister Lim Guan Eng alleged that the former Barisan Nasional government had “stolen” RM18 billion in parts of the Goods and Services Tax (GST) collection since it was introduced in April 2015.
According to The Edge, Lim exposed the “rompakan” (robbery) while the Parliament was tabling Sales Tax Bill 2018 in the Dewan Rakyat. The Finance Minister alleged that the previous administration had used “creative accounting” to “steal” input tax credit under the GST.
GST, unlike the imminent Sales and Services Tax (SST), was imposed on every level of trading. The manufacturers paid GST when they sold their products to dealers, so as the dealers when profiting from retailers. In the final tier as consumers, we paid the GST when we bought the product. On each level of trading, 6% was paid to the government but business owners were entitled to reclaim the money back. According to Lim, the “creative accounting” here is that the previous administration didn’t pay back that portion of the tax.
“According to records of the Royal Malaysian Customs Department on the GST input tax, there was a total of RM19.4 billion input tax credit (to businesses) till May 31 this year since 2015 but only RM1.5 billion remained in the trust fund (where GST refunds were supposed to be deposited by the government),” Lim revealed. Meaning, about RM18 billion tax is not returned to business owners (RM19.4b – RM1.5b = RM17.9b).
Lim asserted that the arrears were dragged from two weeks to two years, which even caused some businesses to shut down.
“What was supposed to be paid in two weeks was not paid for two years, because the money which was paid as an advance was not put into a trust fund, but into a consolidated fund as revenue. Because it was taken as revenue, it was used by the former government.
“I want to say here, it was not robbing GST, but robbing from GST refunds,” Lim said, as quoted by Malaysiakini.
The Finance Minister said the RM19.4 billion undispersed input tax credit wasn’t because GST guidelines were unclear but it served an opportunity for Najib’s administration to misappropriate the fund.
“The refund delay was due to weak federal government cash flow because of low fiscal discipline, widespread wastage and growing debts. What actually happened in the previous administration is a forgery of accounts and misappropriation of the refunds for other uses or to close the deficit,” he alleged.
Lim was shocked when he first heard that GST input tax refunds were put into a special trust fund which was later “stolen” to be placed into a consolidated fund to be spent “freely”.
“The money was paid as advance by businesses. It was to be put in a trust fund but it was deposited into a consolidated fund and recorded as revenue. Since it was acknowledged as revenue, it was instead utilised first by the previous government,” he told reporters outside of Dewan Rakyat.
Previously, he said that the unreturned money to business owners was the reason why prices of goods hiked exponentially. Such mismanagement had affected business owners’ cash flow when the refund took months (or indefinitely) to return, all of which hurt the end-consumers because businessmen had to increase the prices to sustain their businesses.
“This is not the government’s money. The delay in refunding gives a negative effect to the country’s competitive edge. We will look at ways to raise funds to pay back because it is the people’s money,” he said in the Parliament
Lim added that despite the constraint in the government’s account, the money would be given back beginning next year because it was rightfully theirs, saying it is a “morally imperative” to do so.
Sticking his nose further on the issue, he claimed that the purpose of GST was to recover the losses made by the scandal-ridden state investment company 1MDB. Lim claimed that the misappropriated RM18 billion was used to pay BN cronies and 1MDB officials “freely” through this loophole.
“1MDB and GST are closely connected. 1MDB gave birth to GST. Without 1MDB, there would have been no GST. It was not introduced to help people but for BN cronies such as Jho Low (fugitive businessman Low Taek Jho) who is on the run from police now,” he said.
When Lim made the shocking exposé, Rembau MP (BN) Khairy Jamaluddin questioned Lim how many were because of the amount was non-compliance with GST regulations, or it’s subject to ongoing customs audits and how many unpaid because of the “robbery,” Lim replied that the ministry didn’t have the answer yet.
Khairy warned such “robbery” was a huge allegation and speaking about it Parliment wasn’t enough. He suggested that an investigation should be carried out to bring the perpetrators to justice. Lim said an “internal inquiry” would be conducted to map out the issue, to which Khairy replied the next day that such investigation should be made transparently so that the public could understand the progress.