PUTRAJAYA, Dec 9 — Excess spending without raising tax revenue could send Malaysia down Greece’s path, Prime Minister Datuk Seri Najib Razak said today when clarifying previous remarks on the country’s need for the Goods and Services Tax (GST).
Dismissing reports that he said the country faced bankruptcy without the new tax, Najib said that GST was just one of several methods available to the government to increase its revenue collection, as his administration works towards paring down the country’s fiscal deficit.
“I did not say that, without GST, the country would go bankrupt. It’s the newspapers that caused trouble... this is what you call the hazards of being a politician,” he said at an appreciation luncheon with the Retired Senior Civil Servants Umno Club here.
“What I said was that if we keep spending and spending, and we do not collect on taxes, then we will end up like Greece,” he added.
Late last month, Najib was reported to have said that Malaysia runs the risk of going bankrupt if it did not implement GST.
In a report titled “Najib: It’s either GST or facing bankruptcy”, English language daily The Star reported the prime minister as saying that the new tax regime was needed or the country’s economy could go bust like Greece if it resorted to borrowing.
Najib drew immediate flak over the report, with the opposition claiming that the country will likely hit bankruptcy even with the implementation of GST.
Pakatan Rakyat MPs argued that Malaysia’s finances would break with or without GST, so long as the Barisan Nasional-led government does not take serious steps to deal with rampant corruption and leakages in the public service.
Najib today countered that while GST is not the only cure for the country’s chronic fiscal deficit, it is still an important part of the government’s strategy to strengthen the national economy.
“When we reduce the fiscal deficit, the economy becomes strong and that will help propel us to our goal of becoming an advanced nation. If our finances are not sound, how are we going to pay for everything?” he said.
Malaysia has run deficit budgets for over a decade now, beginning from the 1997 Asian Financial Crisis.
The country’s national debt now stands at around 53.5 per cent of gross domestic product, up from 43 per cent in 2008 and hovering very close to the government’s self-imposed debt limit of 55 per cent.
Najib intends to trim the budget deficit to 3.5 per cent in 2014, in attempt to return to a surplus budget by the year 2020 — when Malaysia aims to achieve developed nation status.
Greece plunged into a sovereign debt crisis in 2010 that later required euro zone states to collectively bail its economy out from a credit default.