Nam Seok Kim, Korea Institute for International Economic Policy (KIEP): Introducing a tax policy reflects various constraints faced by a government. Economic constraints are directly related to government budget issues, and the proper management of tax revenue is required for sustainable public finance. The political constraint of tax policy mainly comes from the welfare loss caused by tax policy implementation. The degree of impact transmitted to each individual from this welfare loss is very heterogeneous within society. Furthermore, in many cases, some citizens can even enjoy welfare gains while others face welfare loss. Consequent cleavages become prominent through election (Drazen 2002),1 strategic lobbying competition across special interests (Grossman and Helpman 2001),2 and regional differences in the attitudes toward public policy (Persson and Tabellini 2002).3
The discussions on the Goods and Services Tax (GST) in Malaysia also reflect the aforementioned policy constraints. This paper elaborates...