The new Customs director general, the glass ceiling and the regressive GST

Given the resentment towards this tax, it is no wonder any cheer that meritocracy might have been the criteria in the appointment of the new ‘GST supremo’ seems muted, writes Anil Netto.

When news broke that Subromaniam Tholasy had been appointed the new director general of the Royal Malaysian Customs, not a few Malaysians, especially those from minority groups, cheered.

After all, it is rare to see someone from a minority group breaking through the glass ceiling to head an institution of the civil service, which is predominantly made up of the majority ethnic group in the country. Had it dawned on the government that meritocracy has a role to play in a sea of affirmative action, many wondered.

My own late father worked in the Customs Department. Starting as an officer in the late 1950s, he rose through the ranks to eventually retire as state deputy director of sales tax. But growing up, I gathered enough to know that despite his slow but steady rise, several of his subordinates were being promoted over him and ended up as his bosses or seniors.

He never spoke to us about any frustration he might have felt and instead was dedicated to his job. One day when he was half-asleep, my mother asked him whether he had put the papaya in the refrigerator. He responded sleepily, “Dutiable or non-dutiable?”

It was only after one Christmas dinner at our place that I learned that my dad’s boss, who was one of the guests, had previously been his subordinate. Now, the boss might have been more competent, who knows – but doubts remain.

To be frank, I don’t think many of those who leapfrogged over my dad were any more capable or – equally important in the Customs – more honest in their work. Once in a while, I would hear stories at home of customs officers being hauled up by the ACA, as the then Anti-Corruption Agency was referred to.

But my dad slept soundly. When he retired, he only had a modest house away from the city, some small savings (not quite enough to cover his children’s education), and an old car to his name.

He was not alone in facing a glass ceiling of sorts. None of his friends made it to the upper echelons of the civil service at the national level. For instance, a good friend of his in a different department of the civil servce also ended up as state deputy director a few years before retirement. Many civil servants especially those from minority groups – retired or currently serving – can probably relate to this.

Meritocracy vs affirmative action

Don’t get me wrong; there is perhaps a need for affirmative action to ensure that the civil service reflects the diversity and is representative of Malaysian society, quite apart from the issue of competence. But once inside the civil service, the more competent – and the more trustworthy – should be promoted irrespective of other considerations. Otherwise, it is a recipe for low morale, resentment and a brain drain.

So does Subromaniam Tholasy’s appointment signal a breakthrough of sorts? A Customs officer told me Subromaniam was instrumental in paving the way for the implementation of the goods and services tax in the country. Apparently, he works long hours and knows his stuff and has been one of the key point-men in the Customs for matters related to the GST.

Few would doubt Subromaniam’s appointment was based on merit. Murmurs of protest at his impending appointment, purportedly by some Malay NGOs, went unheeded.

When my dad was in the Customs, oil and gas revenue and corporate taxes were probably more important revenue earners than the sales tax collection overseen by the Customs. So perhaps it was easier to pay less attention to meritocracy in the Customs.

But that was then. Today, the GST, which replaced the sales tax, is many times more crucial to the federal government, given the drop in oil and gas prices and the huge sums of public money lost in corruption. The Najib administration probably feels it can ill-afford to take chances with untested hands at the helm in the collection and enforcement of GST.

Last year, Subromaniam, then the deputy director general, announced the Customs had exceeded its RM27bn target for GST collection for the nine months of 2015 since its introduction on 1 April that year. Then, in 2016, the government collected a staggering RM41bn from GST.

This year, the government expects to collect RM42bn. That will be tough given the current economic slowdown. And with elections looming, the government will be loathe to increase the GST rate from its present 5 per cent.

For the Najib administration, much is riding on GST collection to keep the government’s fiscal deficit in check, and it is in this context that we should view the prime minister’s recent remarks about a proposal to corporatise the Customs Department.

Presumably, this will allow the government to raise the income of low-ranking Customs personnel and perhaps provide them with more incentives in the hope that it will motivate them to increase GST collection and step up enforcement.

A regressive tax

The downside to all this is that the GST is a regressive tax, especially in a country where millions of households are deemed to be low income and in need of BR1M cash handouts. Stepped-up efforts to collect more GST will only add to the misery and burden already felt by these households.

The proponents of GST say it has widened the tax base to include those who had previously escaped paying income tax. But it is also true that the introduction of a consumption tax like the GST has shifted the burden of taxation from the wealthy towards the majority of the Malaysian public who may not have been eligible to pay income tax because their income was below the threshold. In that sense, the GST is regressive.

So while some may cheer Subromaniam’s appointment as a sign of meritocracy – the appointment of the most competent irrespective of ethnic background – being practised, the flip side in this case is that that competence is being directed at collecting a burdensome tax from the public.

This is at a time when many are struggling to cope with the rising cost of living – a rise which was supposed to be short-lived after the introduction of the GST. Many businesses too are faced with a fall in consumer purchasing power. The GST has only aggravated the situation.

So given the resentment towards this deeply unpopular tax, it is no wonder that any cheer that meritocracy might have been the criteria in the appointment of the new ‘GST supremo’ seems muted.

The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.

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