Expand income tax definition – don’t reintroduce GST

Prior to the introduction of the Goods and Services Tax (GST), there were massive waves of protest including 2015 Anti-GST Rally when police arrested 50 anti-GST protesters. PSM leaders were also arrested.

Proponents of GST largely consist of neo-liberal economists who argue that the GST is necessary to increase Malaysia’s tax base. However, they refuse to acknowledge Malaysia narrowing tax definition.

According to World Bank, Malaysia was among the 50 richest countries (in terms of GDP per capita) but had some of the highest poverty rates in world in the 1960s.

Perikatan policies increased inequality and misery of the poor while the hyper-rich elites gambled their way in newly-opened Genting Highlands in the late 60s.

Thus in the 1969 election, Perikatan lost their 2/3 supermajority after a strong performance by leftist parties, ending up with a slim majority in parliament. Due to Perikatan’s refusal to accept the results graciously, a “race riot” was triggered to suspend parliamentary democracy and impose a dictatorship. The early leftist parties were forced into the coalition by UMNO to form the Barisan Nasional before parliamentary democracy was allowed to function.

These 60’s leftist, socialist and progressive stalwarts had brought socialist policies such as free public healthcare, universal education and food security (FELDA, FAMA, MARDI) to Malaysia. For the record, Malaysia had free public healthcare and universal education until it was dismantled by Mahathirsm in mid-90s onwards.

Between 1972 until mid-80s, Malaysia had taxed income broadly allowing us to redistribute national wealth and improve quality of life tremendously.

Of course, these “leftist parties” in Barisan Nasional look very different today as the retiring socialists were systematically replaced by self-centric career politicians and race bigots.

The tax definition was slowly made narrower from 1990s onwards starting a drop in the tax to GDP ratio. The government’s financial struggles triggered a wave of privatisation and austerity measures causing inequality to rise sharply until the introduction of Minimum Wage Act.

Large Fixed Deposit interest used to be taxed at personal tax rates in the 1980s and was then given a 5% rate in the 1990s before eventually becoming fully tax exempted. In 1990s, the inheritance tax was also dismantled allowing multi-generational wealth accumulation.

Today, Malaysia’s income taxes are largely derived from the working class but provide excessively generous grants and tax breaks to the super-rich.

Malaysia needs to revert to our previous tax system by expanding the taxable income definition to enable capital gains taxes, secondary income taxes, asset income taxes, inheritance taxes and windfall taxes.

Central Committee
Parti Sosialis Malaysia (PSM)
State Secretary
Parti Sosialis Malaysia Negeri Melaka (PSM Melaka)

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