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Thursday, October 24, 2013

GST: The working class betrayed?

OCTOBER 24, 2013
Praba Ganesan is chief executive at KUASA,
an NGO using volunteerism to empower the
52 per cent. He believes it is time to get involved.
You can contact him at
or follow him on Twitter @prabaganesan

OCT 24 — My dad comes home at 3am on weekdays after he returns the taxi to the yard. He had two jobs: government driver by day, taxi driver by night. He put in those two shifts because life was hard, and those wanting to get a better life for their families had to dig in.

I am reminded of that because the prime minister may be announcing the goods and services taxes (GST) tomorrow. This will be an active attempt to tax more of those not in the taxable income brackets, in absolute numbers the low-income people, the nation’s poor.

Many fathers and mothers will need to supplement their incomes, because low wages are no longer going to save people from paying taxes. Life in the present is about to get a whole lot tougher.

But that desperation may be realised too late, as there is a concerted effort to lull the population into believing that this is only a rebranding of two already existing levies, the sales tax and service tax. The pitch is made along these lines: Most Malaysians are aware that the difference between the price on display on the McDonald’s menu and receipt price is the service tax, so they have come to terms with it over the years. The GST is not going to be that much different.

So is this just paranoia from the left? But if it is so, then why is the Pemandu minister, Idris Jala, always repeating his mantra that the country cannot go on without GST? Would the learned minister trained in the largest energy company in the world lobby hard only for a rewording of taxes to solve the country’s fiscal woes?

And various pundits are plugging that the treasury will gain another RM5.4 billion from the introduction of the GST; how can the same thing with a different name earn the country phenomenally more?

The proponent’s best sell of the GST is that less than a quarter of the population pay income taxes. A slew of people are avoiding taxes by not declaring income. Corporate taxes have to be left alone because they have to be competitive in order not to let neighbouring countries to outflank Malaysia and lead companies to their shores instead.

The government spends too much in a year and has to earn more to have a balanced budget, and avoid further national debt. But the country cannot cut spending, therefore, the GST instead is expected to plug the gap.

Those shirking from the tax duties will now be paying because GST collects for the Treasury when things are bought, retail or business to business, not on income declaration.

However, along with those they target for new revenue collection, the taxman inevitably burdens fixed low-income earners thus the suggestion that the part-time employment market is about to be over-subscribed.

To me it’s simple, the working class is about to be thoroughly betrayed by the system.

Watching wages, trying to be the right Jones

The market purist is likely to tell me that those in a system, a country, should pay for what they enjoy as members of that system. Asking people to pay their fair share is only fair.

I’m tempted to point out about taxation without representation, but without digressing let’s look at income, for it is difficult to assess taxes without examining the population’s earnings.

A trip to the 80s and 90s is necessary. In seeking a strategic economic position, Malaysia intended to be a low wage destination compared to neighbours Thailand and Indonesia. And then later catch up with Taiwan, South Korea and Singapore; that was the game-plan.

The government went about to depress wages in the country and never stopped. Wages — relative to what inflation and GDP growth would have naturally produced and relative to the profits of companies — would have been much higher today if the government did not play its hands.

From emasculating trade unions, bulldozing legislation to flooding the employment market with foreigners to meet labour price needs not skills needs and championing the capitalist class over the working class, today the worth of the Malaysian worker has been severely undermined.

Nothing exemplifies the plight of workers as much as the long-drawn debate to force a minimum wage, which was watered down to RM800 in Borneo and then through the power of implementation rendered stillborn because almost all firms can get exemptions.

Wages are artificially low for the poorest in this country.

The government did offset the disadvantage by pursuing a subsidy regime for food and petrol. However the GST coincides with a period of actively abandoning the subsidy allowances. So the Klang Valley clerk and storekeeper couple have to pay substantially more for things because of the double-whammy at one go; both the disappearing subsidy and the new kid on the block, the GST.

Disposable income is about to be become an urban myth for many Malaysian homes.

To systematically and diligently keep millions of Malaysians in a low income bracket and then chucking out subsidies while implanting a consumption tax into the ecosystem without having a clear and deliberate plan to hike up wages is not only unfair, it is inhumane.

Living, a burden rather than a right

The argument that not all subsidies have been removed yet and it is a restrained GST not linked to necessities sinks very quickly. Essential food prices are already escalating, and this is before the GST has kicked in.

Essential goods may not face the GST, but their transport, storage and promotion will be, and in an economy where consumers are dictated to the costs will be passed to them, as they have over and over in the past.

My local chicken seller, who operates from an illegal construct opposite the front gate of the Police’s General Forces camp and serves a fair number of cops openly prices his white meat above the published controlled price. He says frankly that the price set by the domestic trade ministry is ignored because it is impossible. Caught between the price his suppliers present him and a margin he is tied to, he yields to reality. The GST will affect him, and by that meaning will affect me.

There are other costs that have appeared for the working class. Public education, the poor’s silver bullet, has turned partially into day-care centres — they are places to leave your children while you are out working, learning is optional. Parents have to make up for the deficit using tuition centres and technology. Healthcare is free to a point, check out the prices at the National Heart Centre — full care is only possible with insurance. The poor walk about hoping they only get the listed maladies. Evaporating parks and playing fields, means even getting exercise is paid for, and let’s not start on social and care programmes for senior citizens and infirmed. 

The GST may finally be the straw that breaks the camel’s back.

The view from crowded flats

The contention of this column remains, there is an administration that asks for fiscal discipline from a large segment of its population without recognising the income deficit they have had to cope with for decades and will continue to struggle with under a new tax regime.

While an equitable tax system is an ideal without demolishing progressive taxation, it has to with or without a GST done conscionably. The timeline must be fair to all.

This might be in demanding for less waste in government expenditure as evidenced in the auditor-general’s report. Curing corruption will increase the government’s coffers, and the silence from Pemandu’s KL Sentral offices over the report is palpable.

This might be in demanding that which is spent is done judiciously so that it actually improves the lives of the taxpayers across the board and not just bailout for example defence contractors.

I’ll wager that the government’s inconsistency and willingness to readily zero-in on low-income earners will hurt it, it’s only a matter of time. While the poor may lack disposal income, but they do have one thing in abundance, votes.

* This is the personal opinion of the columnist.

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