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Thursday, October 24, 2013

GST only to replenish govt coffers?

Selena Tay | October 23, 2013
The GST is going to burden the poor and the man-on-the-street thinks the government has overspent and now taxing the public to replenish its coffers.

The Budget 2014, which will be presented on Friday, promises to be an exciting one. Many in the low-income group are keen to know how much they will be getting from BR1M.

Besides BR1M, another hot topic will be the Goods & Services Tax (GST). The government wants to broaden its tax base in order to collect more revenue, hence the GST.

Sixty people interviewed in Kepong revealed that while most low-wage earners are unhappy with the GST, most agreed that it has to be implemented sooner or later.

The general consensus is that the GST should start at 3% and then gradually be increased two or three years later. A neighbouring country started theirs at 3%.

One vegetable seller said the government should not burden the citizens as they can always use the oil money to settle the national debt because he thinks that the GST is connected to the national debt.

He also commented that the nation’s exports from its vast resources have brought in huge profits which in turn can be used to settle the national debt if the country is well-managed.

All those interviewed are not angry with the implementation of the GST per se but are angry with the reason for the implementation of the GST which they perceive as the government needing money to replenish its coffers.

The respondents opined that the government is now seeking money from the rakyat due to its own careless spending habits and this is deplorable because the burden of overspending is placed squarely on the shoulders of the citizens – it is as if the citizens must now compensate the government.

“The government simply spends while we simply pay them to waste our money,” said a motorcycle mechanic.

This is definitely unacceptable. All the 60 interviewed questioned why despite our vast natural resources, our national debt is soaring.

“Our country is rich, why are many of the ordinary rakyat still poor?” asked an elderly soup noodle seller in Kepong Baru, fondly known as Uncle Goh while a grocery shop worker thinks that there is something wrong somewhere pertaining to the government administration.

Obviously mismanagement is the reason for the present malaise and the cause of the soaring debt.

Debt problem

Malaysia has great exports, Malaysia has foreign direct investments coming in and yet there is no end to the debt problem.

Not only the nation’s debt but household debt of 83% of the GDP (Gross Domestic Product) is the second highest in this region. Are we aiming to be the highest?

Cost of living is going up while the value of the ringgit is going down and the ordinary citizen is getting less money in his pocket.

A person earning RM3,000 a month can still be struggling with his monthly expenses because goods are expensive.

In Singapore, one can still get a bowl of soup noodles for RM3 but in Malaysia you can get that in Taiping perhaps but certainly not in KL. In Kuala Lumpur, it is RM4.50 minimum and that is only in Kepong Baru.

What all this means is that the ringgit is weak. What can you do with RM10? Breakfast for RM5 (soup noodles in Kepong Baru plus Chinese tea) and then the remaining RM5 for petrol for a motorcycle.

If you reload your mobile phone with RM10 and then you pump RM15 petrol, that is already RM25 gone. Plus having a meal in KL will set you back by another RM6 or more. One can easily spend more than RM30 in a day.

In Britain, 60 pounds can last a few days but in Malaysia RM60 can only last two days and that, too, if you really stint.

And with the implementation of the GST, the poor will become poorer.

Former PAS Kuala Selangor MP Dzulkefly Ahmad, who is now the current PAS research director has given a calculation based on GST at 4%:
A low wage-earner, who earns RM1,000 per month and spends RM900, will have to pay RM36 in GST which is equivalent to 3.6% of his salary.
A high-income earner, who earns RM20,000 per month and spends half of it, will need to pay RM400 in GST, which is equivalent to 2.0% of his monthly salary.

“This clearly shows that GST burdens the poor much more than the rich. Therefore GST is unfair and regressive.

“In GST, too, everything is taxed except those which are zero-rated whereas under the current system of SST (Sales & Service Tax), everything is zero-rated except for dining in restaurants, hotels and certain services. GST is broad-based and gets everyone into the dragnet – you even get taxed for buying a pencil,” said Dzulkefly.

The massive wastage and leakage in the Auditor-General’s Report is a sore point indeed. The report released on Oct 1 revealed a wastage of more than RM6 billion. These days even those who are not highly educated know that the government has spent too much and wasted a lot of money.

An assam-laksa stall owner in Kepong Baru summed up the feelings of the urban poor by saying that “people are not stupid. We know that we are paying for the government’s overspending.”

Soon the ordinary citizens especially the low-income group are going to feel the pinch with the next round of price increases.

BR1M is a temporary painkiller that does not solve the problem. The long-term solution is for the government to curb its own spending and plug the wastage and leakage. But will the government do it?

Selena Tay is a DAP member and a FMT columnist.

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