Pakatan’s Alternative Budget: Cut GST, Trim Ministries’ Spending

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Pakatan Harapan (PH) released its Alternative Budget 2018 two days ahead of the Budget 2018 announcement by Prime Minister Najib Razak tomorrow.


Aiming for a deficit of 2.04%, the alternative budget involves an expenditure of RM258.52 billion for 2018, less than the RM260.80 billion in the ruling Barisan Nasional (BN) budget for this year. Of the RM258.52 billion, 77% will be operating expenditure and the remaining 23% development expenditure. 

Cut GST, back to SST

The main thrust of PH’s alternative budget is the abolishment of the goods and services tax (GST).

It estimated a reduction of RM25.5 billion in tax revenue by discarding the GST and resuming the Sales and Services Tax (SST).

PKR lawmaker Wong Chen, who headed PH’s budget drafting committee, said based on PH’s calculation, the shortfall can be filled with higher corporate income tax, real property gains tax, licences for motor vehicles, import, excise as well as stamp duties, and investment income.

“When this RM25.5 billion is returned to the market, there will be more economic activities, and it will increase the government’s other income streams,” he said.

Many economists have previously criticised the same propositions by PH as being populist and unrealistic in the current economic state.

Wong asserted that PH’s budget, including its proposal to dismantle the GST, may “sound populist” but was a transition budget based on realistic and achievable targets that would help ease the financial burden on taxpayers.

“It is a self-repairing, save-our-country budget. It may sound populist, but it is fundamental to put more money in the people’s hands,” Wong said.

He also claimed that in the prevailing economy, the public are being burdened by current policies made by BN.

“The elimination of GST will not result in a catastrophic revenue loss of RM42 billion, as alleged by Umno-BN (Barisan Nasional). Instead, the direct fiscal revenue loss is containable at RM14 billion,” PH said.

Reduce PMD’s budget from RM20.8b to RM8.4b

PH also said it would eliminate RM20 billion from wastage and corruption next year.

It seeks to do this by taking a leaf from the measure taken by former premier Tun Dr Mahathir Mohamad’s PMD allocation during his tenure in 2003.

“Part of this wastage and corruption includes the slashing of the Prime Minister’s Department (PMD) budget, bringing down the RM20.80 billion allocation to a more acceptable RM8.40 billion,” PH said.

The coalition noted that the PMD had a budget of RM5 billion in 2003 during Tun Dr Mahathir Mohamad’s administration, which would be worth RM8.4 billion today based on a “time value of money” calculation with an average CPI (consumer price index) of 3.5 percent.

“The calculations above clearly prove that in order to make the elimination of GST work to benefit the rakyat, we need to combat wastage and corruption.

“By carrying this out, we will not only be able to completely cover the revenue loss from elimination of GST, we will, in fact, record a surplus of RM6 billion,” the budget proposal read.

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Consolidation of ministries

PH proposed merging several ministries with overlapping duties to tighten federal spending. It would encompass the sharing of assets and resources among ministries but would not result in civil servants losing their jobs.

Upskilling civil servants

One area that would remain untouched is the civil service, despite comments against the number of civil servants – that it is bloated with a 1.6 million workforce.

The main focus was on upskilling and helping existing personnel to enhance productivity and to even give rewards similar to how the Penang and Selangor governments reward their state civil servants.

Retaining BR1M

It would continue with the People’s Aid Scheme (BR1M) but with conditions such as ensuring the cash handouts are used for positive purposes and not spent on frivolous items.

Other proposals

  • Raising the minimum wage rate to RM1,500 from the current RM1,000 in the Peninsula and RM920 in Sabah and Sarawak
  • Free tertiary education
  • Higher Education Loan Fund (PTPTN) borrowers only need to start repaying their loans once they earn above RM4,000 a month
  • Making it illegal to discriminate against female job applicants due to their marital status or pregnancy
  • Maternity leave to be increased to 120 days from the current 90 days
  • Ending highway tolls
  • Bringing back fuel subsidies for cars and motorcycles below 1,000cc
  • Giving 20 per cent oil royalty to Sabah, Sarawak, Kelantan and Terengganu
  • Creating a two-tier government contracts programme for Bumiputera entrepreneurs to encourage competition and prevent opportunities from being hoarded by a few

According to PH, it used data from the finance ministry in drawing up its budget.