KUALA LUMPUR: Attorney-General Tommy Thomas said channelling goods and services tax (GST) refunds into the government's consolidated revenue account was a breach of fundamental trust law principles and trust accounting requirements.
In his opinion stated in the Public Accounts Committee (PAC) report on the GST refunds tabled in the Dewan Rakyat today, Thomas said the action contravened Section 7 of the Financial Procedure Act 1957 and Section 54 of the GST Act 2014.
Thomas said the Barisan Nasional government’s practice of transferring the funds to a consolidated account was a “radical departure” from Parliament's intentions.
“The GST regime is based on the fundamental precept that taxpayers will receive a refund for the amount of GST they pay in the course of producing taxable supplies.
“Parliament's intention is that taxpayers receive this refund. The statutory entitlement to a refund and the creation of the GST Trust Fund are evidence of that intention.
“By failing to ensure that taxpayers received their refunds, the former government failed to give effect to Parliament's intention,” he said in the report.
Following that, Thomas suggested for the government to pay the beneficiary taxpayers, including interest, as the government profited from the improper use of GST monies.
However, there was no mention of criminal liability in the report.
“The question whether criminal liability attaches to the breach of trust is not addressed here, but must be further considered.
“Apparently, they are the subject matter of criminal investigations by the police.”
In the report, PAC concluded that while “no money was missing”, the GST Trust Fund was insufficiently funded because it was used for other purposes.
The committee also concluded that the previous government violated Section 54 of the GST Act for paying GST monies into the consolidated revenue account.
Meanwhile, former prime minister and finance minister at the time, Datuk Seri Najib Razak in his testimony said he had complied with the GST Act 2014, although the PAC failed to find proof in regard to section 54(5) of the law.
Under Section 54(5) of the Act, it is stated that the finance minister has the power to authorise payments from the GST refund account into the government's consolidated revenue account.
According to the PAC, it was not given any documents or written proof that the authorisation was given by Najib.
However, the committee said Najib and former Treasury secretary-general Tan Sri Dr Irwan Serigar Abdullah concurred that the former prime minister had acted in accordance with Section 54(5).
Najib explained that he had acted on the accountant-general’s advice and in accordance with Section 54(5) when he decided that all GST revenue would be channelled to the consolidated revenue account.
“This was to prevent potential cash flow problems for the government.
“If there was a pressing need in terms of expenditure involving the needs of the rakyat, we likely used the money to fund projects.
“It is a cash flow problem because of the demand by other services for the government that we need to settle, and also development expenditure,” he said.
The Pekan Member of Parliament told the PAC that the current government could have afforded to pay the GST refunds if the tax was not repealed.
“But when you cancelled GST and you give a tax holiday, that is when your problem started. That is the real cause of the problem,” he said.
The PAC launched its investigation after Finance Minister Lim Guan Eng told Parliament on Aug 8 last year that RM19.4 billion in GST refunds had been delayed, and suggested that the money had been “robbed”.
Following this, the federal government sought a special dividend of RM30 billion from Petronas to pay for the refunds.