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Thursday, October 24, 2013

Pakatan: GST to affect lower income group most

Posted on 23 October 2013 - 03:13pm
Last updated on 23 October 2013 - 10:54pm
Soo Wern Jun

KUALA LUMPUR (Oct 23, 2013): Amid expectations of the Goods and Services Tax (GST) being introduced in the 2014 Budget, Pakatan Rakyat (PR) has reiterated its reservations to it, saying the low- to middle-income group will bear the brunt of it.

Regardless of steps to make the GST a more progressive or less regressive tax, it will not lessen the tax that these groups pay, said PKR Investment and Trade Bureau chief Wong Chen at a press conference on the PR shadow budget in Parliament today.

It could also be abused by the federal government as a short-cut to increasing its revenue, “since raising GST rates appear less obtrusive than a rise in income tax rates”, he said.

According to Wong, the possibility of the GST becoming a major source of inflation during the first few years of its introduction may see misuse of this tax as justification to indiscriminately raise prices, charges or tariffs of retail goods and services.

“This will happen because of the weakness of enforcement of the Anti-Profiteering Act, the Competition Act or other laws that are supposed to protect consumers,” Wong said.

There is also an uncertainty as to whether the sales and service tax (SST) will be abolished to make way for the GST.

Wong also pointed out that the GST implementation may also begin in a recession year since the “business cycle” seems to have shortened in recent times to seven from 10 years previously.

“The last recession hit Malaysia in 2009, thus there is a chance that the next recession may occur in 2016 – within a year of expected GST implementation.”

He reiterated PR’s commitment to a progressive taxation regime from the perspective of fairer sharing of the burden of fiscal adjustment, to be borne more by the rich.

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