FIRST NINE MONTHS: Inflation likely to rise initially and moderate at one to two per cent level in 2016
THE government is expected to collect RM23.1 billion in goods and services tax (GST) from April to December in 2015 and RM32 billion for the whole of 2016.
Treasury secretary-general Tan Sri Dr Mohd Irwan Serigar Abdullah said if the government were to continue with the sales and service tax in 2015, it would collect RM14.8 billion.
"After corporate tax, BR1M, refund of sales tax under GST, the net effect of the GST would be RM3.8 billion and RM9 billion in 2015 and 2016, respectively," Mohd Irwan told delegates at a post-budget dialogue, here yesterday.
Last Friday, Prime Minister Datuk Seri Najib Razak announced that the implementation of the GST will be effective April 2015.
Mohd Irwan said he expects the inflation rate, which is currently at between one and two per cent, to spike to above three per cent once the GST is implemented.
This is because, in a knee-jerk response, manufacturers, traders, wholesalers and retailers are expected to take advantage of the situation and jack up prices. However, the panic effect will taper off once the effects of the GST are normalised.
"But this is normal, as happened in Canada which saw higher inflation rate right after the GST was implemented. But I expect inflation to moderate at the one to two per cent level in 2016 or 2017," Mohd Irwan said.
He also expects a slew of positive upgrades by various international rating agencies in reaction to the 2014 Budget, which is seen as serious in tackling the fiscal deficit, reduce subsidies and maintain a steady economic growth.
Mohd Irwan also defended the government's overspending in 2009, which caused the budget deficit to rise to seven per cent compared with 4.5 per cent in 2013, as the government at that time had to spend to buffer the effects of the US subprime crisis which dragged the global economy down.
"The government had to spend then as some in the private sector were not helping and only thinking of profit, profit, profit and not the nation. The government had to step in to boost spending and drive the economy," he said.
Panelists at the dialogue included World Bank economist Dr Frederico Gil Sander, Petaling Jaya Utara Member of Parliament Tony Pua and Youth and Sports Minister Khairy Jamaluddin.