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SINCE 2008, the DAP has been a pillar of Pakatan Harapan (PH), consistently delivering the highest number of seats to the coalition led by Prime Minister Datuk Seri Anwar Ibrahim.

The party’s leaders were part of the federal government between March 2018 and February 2020. After the November 2022 general election, the party was back as part of the federal government and its leaders formed part of Anwar’s cabinet.

Being part of the government, it cannot be denied that DAP is also party to the decisions made by the Anwar administration, including on tax policies, which are now a thorn in DAP’s side.

There are several reasons for the trouncing of peninsula-based parties in the just-concluded Sabah elections. Among them is the fact that Sabahans prefer to vote for Sabah-based parties, a voting pattern that is also being seen in Sarawak. Moreover, there is strong opposition in the state in the form of Parti Warisan.

So, there really was no need for voters to bank on DAP to voice the woes of the Chinese community in the state.

Within DAP, the fear is that the party’s rout in Sabah will extend to Peninsular Malaysia if nothing is done to defend the interests of the business community, particularly in regard to the tax policies of the Anwar administration.

The complaints are mainly about the expansion of the sales and service tax’s (SST) scope and the increase in the rate of the service tax from 6% to 8% from July this year.

The expanded SST includes a service tax on private education institutions whose fee collection exceeds RM60,000 per year. This would affect a lot of non-Malays who send their children to private schools from primary up to university level.

Although the Anwar administration has adequate exemptions in the implementation of the SST, especially for businesses with a revenue of less than RM1 million a year, the cost of the tax is passed on to the man in the street and to businesses.

For instance, the extra service tax on rents and leasing fees is passed on to the businesses, which, in turn, pass it on to the customer. This makes the small businesses less competitive, especially when the government does little to protect them from enterprises set up by foreigners.

Apart from the SST’s expansion, the introduction of e-invoicing in phases since 2024 has made things more difficult for the small and medium enterprises.

The idea behind introducing e-invoicing is to plug leakages and improve tax compliance. However, small businesses that tend to under-declare their profits to evade paying full taxes do not see e-invoicing as suitable for their operations.

They feel that the government is only making it more difficult for small businesses that face stiff competition and are compliant and declare their taxes regularly.

DAP’s core strength has always been in defending matters that are related to education and issues that affect the business community. These two matters largely relate to the non-Muslim voters who are the bedrock of support for DAP.

But it is felt that since becoming a part of the government, the party has not been as vocal as before, even on matters that are not related to business and education.

The party is seen as not doing enough to protest the corruption involving Parti Keadilan Rakyat (PKR) leaders and to press for the persons responsible for Teoh Beng Hock’s death to be brought to justice. The proposed Urban Renewal Act is another issue that has not gone down well with this group.

When the grievances are not handled well, the view is that the top leaders of DAP are becoming arrogant.

DAP went into the Sabah polls as the incumbent in six seats. When the last vote was counted, the party had not won any. It was beaten even in its traditional strongholds of Luyang and Likas.

DAP stalwarts such as Lim Guan Eng feel that the anti-DAP sentiment in Sabah will be reflected in Peninsular Malaysia if nothing is done to address the challenges faced by businesses.

Lim, a former finance minister and the person responsible for introducing the SST in 2018, has been vocal in urging the government to review the scope of items covered by the tax, including private education, and to implement e-invoicing. The DAP ministers in the cabinet have been silent on the matter so far.

Secretary-general Anthony Loke has said the party leaders will look into the reasons for DAP’s failure in Sabah and address these with Anwar. He admits that the party’s wipeout in Sabah has shaken its confidence and that of PH.

The difference in the stance taken by Loke and Lim is glaring. While Lim has put the blame for DAP’s defeat in Sabah on the federal’s government’s policies that are deemed unfriendly to business, Loke has alluded to working together with Anwar to address the issues at hand.

It is easy to fathom why Loke has not put DAP’s debacle in Sabah squarely on Anwar’s shoulders. He is part of the government and cannot blame the prime minister for decisions collectively made by the cabinet. Also, it is not only DAP that got a beating in Sabah. All the peninsula-based parties failed miserably. The Barisan Nasional (BN) coalition saw its representation drop from 14 seats in 2020 to six in 2025. By the next state elections, BN may not win even a single seat in Sabah.

In Sabah, the voters, especially the non-Malays, have choices. In contrast, there is no credible alternative to DAP in Peninsular Malaysia.

But the party knows that it cannot count on loyalty when it is seen as not being the defender of the non-Malays, especially on issues related to business and education.

The question is, will DAP force Anwar to roll back some of the policies, especially the SST and e-invoicing?

A cornerstone of Anwar’s reform agenda is to rationalise the subsidies and improve tax collection. He has made it clear that he will not revert to the goods and services tax (GST) regime.

In the last three years, the revenue from SST has increased. It was less than 2% of the gross domestic product (GDP) in 2023. With the expansion in SST and e-invoicing, the revenue is expected to be close to 3% of GDP.

The collection from SST as a percentage of GDP is about the same as that had the GST regime continued.

So why would Anwar want to tinker with the SST regime, especially when the government needs funds to keep its deficit low?

M Shanmugam (m.shanmugam@ bizedge.com) is a contributing editor at The Edge

The views expressed here are the views of the writer and do not necessarily reflect those of the Daily Express. If you have something to share, write to us at: Forum@dailyexpress.com.my