Published: Thursday October 24, 2013 MYT 5:41:00 PM
Updated: Thursday October 24, 2013 MYT 7:48:45 PM
BY MICHELLE TAM
PETALING JAYA: The proposed goods and services tax (GST) should not tax the poor for the benefit of the rich.
That is what some organisations fear, such as Parti Sosialis Malaysia's central committee member Dr Michael Jeyakumar who warned of GST-caused inflationary pressures and its impact upon lower-income groups.
“When sugar prices went up, everything went up. Unless the government is very careful, businesses would take the opportunity to raise prices,” said the Sungai Siput MP.
According to Dr Jeyakumar, 40% of Malaysian households earning less than RM3,000 already face trouble making ends meet.
And even if the GST starts low, “the only way is up like a hot air balloon.”
As the rich can afford to set aside their earnings for savings and investments, he termed the GST a regressive system as the poor will be spending their entire income and getting taxed accordingly.
His support of the GST is conditional on the Government including a clause in the consumption tax legislature to pay the 40th percentile a monthly Bantuan Rakyat 1Malaysia (BR1M) based on the rate imposed.
“If the GST rate is 6%, then those earning and consuming RM3,000 a month have to pay RM180 in taxes. That amount should be rebated into their bank accounts every month,” he said.
Dr Jeyakumar proposed that the same amount be disbursed to families earning below RM3,000, and that only those earning above the 40th percentile be taxed.
“If this feature is incorporated, it will shield the lower 40%. Then it is acceptable. It must be something that keeps giving in order to help the lower-income group,” he said.
To him, the problem lies with corporations: “The top 1% is making too much money. With the GST, you are purposely taxing the 99% to reduce corporate tax.”
As the general public is earning less money, the market for goods and services is not growing as fast as capital in the hands of the elite.
He also called upon the Government to decrease debt and address underconsumption in said market by increasing corporate tax and increasing minimum wage.
“The GST transfers money from the public to the Government. What we need to do is transfer money from the 1% back to the ordinary working people and the Government,” he added.
As for Jaringan Rakyat Tertindas (Jerit) coordinator S. Parames, it makes no sense to impose the GST on a population of 29 million people when only 1.7 million are active income taxpayers.
“If the aim is to increase income, then think of how to stop leakages instead of taxing the population. We’re not a high-income country yet - we’re still fighting for minimum wage!” said the workers rights activist.
As Malaysia has a large rural population, she expressed concern for the survival of lower-income groups like small-scale farmers and estate workers because "even RM10 makes a difference to some."
Neither is the middle class in the clear, she cautioned: “They will be hit by GST and income tax. Unlike the poor, they won’t get BR1M. What will be their purchasing power? Eventually, they will be pushed into the lower-income category.”
And benefits such as BR1M can stop anytime as they are not in legislature: “In Canada, they had cash handouts when value added tax (VAT) was introduced, but it stopped after two to three years.”
Asked about the GST’s benefits, such as improved Fitch Ratings by way of reduced corporate tax, Parames was unmoved.
“The Government should not be bothered with ratings from Western countries who wish to benefit from lower corporate tax. Instead, they should increase their ratings in the eyes of the rakyat.”
And while Malaysia may be following in the footsteps of 160 countries that have already implemented the GST, Parames said selective comparisons are unbeneficial.
“Most countries have also abolished the death sentence, so why aren’t we following that? Don’t compare only certain things. Now, the poor will be poorer,” she added.
Jerit also organised a series of protests against the GST on Wednesday and a #NoGST campaign on Twitter on Thursday.