Malaysia’s government put off a politically risky plan to enforce a 4 percent goods and service tax, cheering opposition critics yesterday who claimed it would burden the poor.
Malaysian Prime Minister Najib Razak’s administration had previously planned to debate legislation in parliament later this month to impose the tax by 2011, in an effort to boost revenue by about 1 billion ringgit (US$300 million) annually.
The plan stirred fierce criticism from social activists, who insisted the tax would cause inflation to rise and unnecessarily burden poor and middle-class earners.
Second Finance Minister Ahmad Husni Hanadzlah said on Saturday the government will indefinitely delay plans to debate the legislation until it can convince people that the tax would aid the country’s economic well-being.
“It will depend on our engagement with the public and acceptance of the people on its implementation,” Ahmad Husni told the national news agency, Bernama. “We do not want to put a time frame on that.”
Opposition activists, who had threatened to stage a protest against the sales tax outside parliament today, urged the government to completely scrap the plan.
“Perhaps the tax is not being imposed now because [the government] does not have a solid hold in Parliament,” said Mahfuz Omar, vice president of the opposition Pan-Malaysian Islamic Party.
Analysts have said the sales tax might spur public dissatisfaction against Najib’s ruling National Front coalition, which is expected to call for elections in a large state on Borneo island sometime over the next year.
The broad-based consumption tax is supposed to replace a narrowly applied 10 percent sales tax and 5 percent services tax. It is meant to be levied on transactions at all stages of the production of goods and services.
The plan comes as the government seeks to cut its budget deficit and reduce reliance on income from state oil company Petronas, which contributes 40 percent of its revenue.
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