‘GST will benefit the rich, hurt the poor’

Anisah Shukry
| October 22, 2013

The government’s duty is to cut wastage, patronage, extravagance and corruption, and not to further tax those who barely earned enough to weather the ever-rising cost of living, says Tony Pua.

KUALA LUMPUR: The proposed goods and services tax (GST) would benefit the rich at the expense of the poor due to its disproportionate taxing, DAP publicity chief Tony Pua said today.

In a statement issued today in response to the Minister in the Prime Minister’s Department Idris Jala’s statement yesterday that the GST was necessary as the current tax base was too narrow as it “depends too much on income tax”, Pua claimed that while the introduction of the GST reduces income tax, the move would burden the low-wage group who were not eligible to pay tax.

“For example, a person who earns RM1,000 will be spending practically the full amount of his monthly earnings without any savings. This expenditure will be taxed at an assumed five percent GST,” said the Petaling Jaya Utara MP.

“A person earning RM20,000 per month, on the other hand, may spend RM12,000 of his income while saving or investing the balance. He will pay five percent of his RM12,000 expenditure, which works out to RM600.”

Pua said this meant that the wealthy would pay about three percent tax on his income, proving that the impact of the GST would be harsher on the poor than the rich.

Idris, who is the chief executive officer of the Performance Management and Delivery Unit (Pemandu), recently announced that the government could not keep increasing income tax rate to boost revenue.

“Of the 29 million people in Malaysia, less than two million pay income tax. We cannot keep going back to these people and corporations and ask them for more and more tax,” he said yesterday.

Idris had also said reducing the income tax rate would be impossible without widening the tax base.

“If the government were to impose the GST as an excuse to lower income tax rates, then it is effectively abdicating from its obligations and role of social justice and wealth redistribution,” Pua argued.

“Instead, the GST and reduced income tax rate will only worsen the already worrisome income inequality in the country.”

He said the government should instead probe on why 85 percent of the Malaysian population were not earning enough to pay income tax despite decades of “so-called rapid growth and economic development.”

Pua also reiterated that it was the government’s duty to cut wastage, patronage, extravagance and corruption, and not to further tax those who barely earned enough to weather the ever-rising cost of living.

“Until this government learns and proves to the people that it knows how to manage the rakyat’s hard-earned money in an honest, professional and efficient manner, it has no right to introduce more or raise taxes for those especially in the middle-income and the poor to shoulder,” Pua said.