The IMF’s call for Malaysia to expedite a goods and services tax (GST) and slash subsidies is part of its larger – and now widely discredited – neo-liberal agenda. The IMF itself is struggling for relevance now as many developing countries especially in Latin America have shunned its advice after seeing the damage done to the national economies of that continent.
The neo-liberal agenda, part of the “Washington Concensus”, is to cut taxes for the rich and the corporations, slash subsidies on social spending, and promote privatisation of essential services or “user-pay” models that benefit large corporations, including MNCs.
The GST is a regressive tax that will hurt the poor, who are now outside the income tax bracket. If a tax on spending is introduced, the poor will bear a disproportionately higher tax burden (in terms of their spending compared to their income) than the rich.
What Malaysia needs is progressive tax system that will narrow the gap between the rich and the poor and provide more funds for public spending (minus all the corruption, skimming off, rent-seeking and cronyism) for essential services such as health care and education. Look how our under-funded general hospitals are struggling to cope with H1N1 and how many patients have to wait for ages to see a specialist.
The IMF should keep out of Malaysian affairs. It is a failed body that is irrelevant – and indeed, harmful – to developing countries.
This excerpt from the Singapore Straits Times (17 August):
KUALA LUMPUR – THE International Monetary Fund (IMF) has cautioned Malaysia not to delay plans to introduce a goods and services tax (GST) and to remove subsidies to ease pressure on its budget.
The taxes were proposed in 2005 but were shelved due to political and inflationary pressures and since then, Malaysia’s budget deficit has surged and will hit 7.6 per cent of gross domestic product this year.