GST will cause inflation

Putrajaya is misleading Malaysians into believing the prices of goods and services will fall when the consumption tax rolls out in April 2015, PKR’s Rafizi Ramli said today.

The first-term opposition lawmaker claimed the federal government is prescribing a simplistic view that does not consider the overall inflation that will come with the cost of doing business.

In singling out Deputy Finance Minister Datuk Ahmad Maslan for perpetrating the claim, the Pandan MP argued that retailers and manufacturers would have no choice but to raise their prices as the controversial good and services tax (GST) would affect every stage in doing business, thereby ending with consumers picking up the tab.

“Ahmad Maslan and the Barisan Nasional simplistically believe that just because retailers and manufacturers can claim a refund on GST paid on their costs, that this will automatically lower their production costs and allow them to lower prices,” Rafizi told a news conference at the PKR headquarters here.

“It’s a given that inflation will rise with the implementation of GST. The costs borne by businesses will go up because inflation goes up, and when the cost of doing business goes up, that means profits will go down.

“Even if businesses can claim on the cost of GST, the refund won’t be enough to offset that due to the overall hike in costs of goods,” he said.

Last week, Ahmad Maslan was reported to have claimed that the contentious new tax regime — which is scheduled implementation in April 2015 — is a cost-cutting measure by the government.

The deputy minister was quoted by news portal The Malaysian Insider as saying that the opposition Pakatan Rakyat coalition are merely using the planned GST as fodder to attack the government.

“Why don’t they want GST? Because when prices of goods and services fall, the opposition will not have any fodder to hit out at the government,” he was quoted as saying.

the Mail