OCTOBER 22, 2013
GST, also known as value added tax in many countries, is a multi-stage consumption tax on goods and services. - The Malaysian Insider file pic, October 22, 2013.Reducing income taxes to implement the Goods and Services Tax (GST) will be a "double whammy" burden to the lower income group, said an opposition lawmaker today.
"This means that the government will be effectively reducing the tax of the workers who earn enough to pay tax today, while correspondingly increasing the taxes paid by those who don't earn enough to pay taxes," said DAP national publicity secretary, Tony Pua.
He was responding to a statement by Minister in the Prime Minister's Department Datuk Seri Idris Jala, attempting to "dispel the myth about the GST", in which he said Malaysia's tax base was too narrow as only less than two million people, out of the 29 million population, pay income tax.
"We cannot afford to go back to these same people and corporations and ask them for more and more tax - we can only hope that as their income increases, they will pay more tax. In fact, if we don’t widen the tax base, there is absolutely no room to cut income taxes further," Idris said, adding that it was only one of the few measure being undertaken to overhaul the financial system.
Pua, who has been critical of the GST, pointing out that Putrajaya's proposal to impose the GST was a "direct result of the BN administration's waste, extravagance and leakages".
"Of all the rationale provided by those in support of the immediate implementation of the GST, this must be the most unacceptable one," he said, referring to Idris' statement.
"Under such policies, the poor would be hit by a double whammy in tax burden. Firstly, the poorer income groups will be forced to bear the burden of the reduced income tax of the higher income groups.
"On top of that, they will be hit by a regressive tax regime which taxes the poor proportionately more than the rich," Pua explained.
He said as such, the GST was "diametrically" opposite of the current structure of the income tax, which raises the percentage of taxes paid in higher income groups.
The government would be abdicating its obligations of social justice and wealth redistribution should it be insistent on imposing the GST, he argued.
"The GST and reduced income tax rate will only worsen the already worrisome income inequality in the country.
"Because only approximately 15% of the working population pay tax today, the Government should be asking why are the balance of the 85% not earning enough to pay taxes after decades of so-called rapid growth and economic development?" he added.
The Petaling Jaya Utara MP also hit out at Idris, who lamented on those who failed to declare their real incomes, resulting in tax evasion.
"Why should the failure of the authorities to enforce tax on these evaders justify the Government's decision to tax all these Malaysians who are struggling to make ends meet with income less than RM2500?" he asked.
"Despite the chest-thumping over the government's ability to manage the economy, we now find ourselves in persistent deficit while the federal government's debt has ballooned to RM546 billion, without taking into account another RM150 billion of known contingent liabilities. The panacea lies in the Government's political will to cut wastage, patronage, extravagance and corruption in its expenditure."
Until Putrajaya learns and proves that it knows how to manage the country's wealth, it "has no right to raise more taxes from the people, especially from the middle-income and the poor", stressed Pua. - October 22, 2013.