PAS proposes two taxes under Islamic law to replace GST

KUALA LUMPUR — Opposition Parti Islam Se-Malaysia (PAS) will introduce two taxes prescribed by Islamic law to replace the goods and services tax (GST) if it is given the mandate to govern the country.

The Islamist party’s information chief Mohd Khairuddin Aman Razali said the two taxes are corporate savings tax and shares trading tax, which would only be levied against the wealthy. He said the proposed taxes not only have the benefit of being sanctioned by religious law, they are also more profitable than the GST.

Malaysia first imposed a GST of 6 per cent in April 2015, despite the idea of a new tax being unpopular. Consumers have felt the pinch, especially with a weakening ringgit, and opposition parties have held anti-GST rallies. The government collected RM38.5 billion (S$12.4 billion) in GST last year, and expects to collect RM40 billion this year.

Prime Minister Najib Razak has characterised the GST as a “saviour” of the Malaysian economy, helping to make up for lower revenue from cheaper crude oil exports.

Citing corporations as an example, Mr Mohd Khairuddin said most of these companies have savings in banks, whereby they will be taxed at a rate of 2.5 per cent.

“Bank Negara Malaysia data shows that there are RM1.6 trillion in savings, and we assume that a third of that is corporate savings,” he said in using the Malay name for Malaysia’s central bank.

“If a 2.5 per cent tax were levied on that amount, the country will get RM13 billion in revenue,” Malay daily Sinar Harian quoted him as saying.

As for the proposed shares trading tax, Mr Mohd Khairuddin said his party will impose a tax on the buying and selling of shares after a year.

However, he did not elaborate whether he meant a year after the party takes over the government, or a year after rolling out the corporate savings tax.

“Bursa Malaysia data shows that RM1.8 trillion worth of shares was bought and sold last year,” he said, referring to Malaysia’s stock exchange. “If a 2.5 per cent tax were levied on the transactions, the country will get RM45 billion in revenue. This is not inclusive of the immediate sales tax.”

Regardless, PAS is unlikely to take over the federal government because it does not contest enough seats to attain a simple majority of 112 out of the total 222 parliamentary seats. In the last general election in 2013, the party only won 21 out of the 73 parliamentary seats it contested.

Malaysia’s general election must be held by August next year, but it could happen by the end of this year as Mr Najib seeks to capitalise on an opposition in disarray and expectations that economic growth may slow next year. AGENCIES