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Friday, November 1, 2013

The GST's lower-cost gambit

Publication: NSUNT
Date of publication: Oct 27, 2013
Section heading: Main Section
Page number: 022
Byline / Author: By Azmi Anshar

EMBEDDED within the 2014 Budget's impressive numbers, initiatives and records is the maligned, thoroughly misunderstood but much-needed Goods and Services Tax (GST), which will get a definitive April 1, 2015 enforcement date.

Actually, that's too long, but the 17-month grace period is somewhat deliberate - the GST is sensible and essential, in that it decimates the long-time but oppressive 16 per cent sales and services tax - to educate confused consumers and sceptics, mostly the "everything-the-government-does-is-bad" politicians with theatrical flair.

Almost eight years in the making, the GST, first sounded out by the Abdullah administration in Budget 2005, had this long gestation because of superficial worries that the GST might burden the poor.

With the GST, that's not the case economically but politically, it is something opposition politicians are smacking their lips - a new toy to play with that sizeable impressionable crowd they control.

The GST's regressive flat rate of six per cent, to put it simply, means that one, the Treasury has cut back on their revenue, and two, it compels consumers in Malaysia, local or foreign -- because they are economically challenged - to pay six per cent tax for all "non-essential" stuff they consume.

On the nice, flip side, consumers don't pay GST for piped water and electricity supply, at least for the first 200 units but they will pay more for sugar, now that subsidies have been removed but only to discourage diabetics from guzzling the commodity.

Also, bus, train, LRT, taxi, ferry, boat, highway tolls, education and health services are exempted from theGST. So, where is the higher cost originating?

Since the non-essential stuff are already fixed in price, the economically-challenged don't pay anything more than they should, unless they want the aesthetically tasteful, pleasurable and eye-catching, like a new smartphone and corresponding telco plans, cosmetics, perfumery, high-end electrical goods and exotic six-course Chinese dinners and alcoholic drinks, and petrol to feed those high-performance cars.

This you pay through your nose, with or without taxes. But the GST demands only a six per cent across-the-board payment, which is certainly fairer than that 16 per cent sales and service tax which had been a high cost the well-heeled had paid, which is really a reflection of the Malaysian middle-class and the range of their spending power.

But Malaysians were unwittingly blindsided by the 16 per cent SST that they even hand out generous tips to establishments raking in the extra six per cent service tax, when customers should have been forewarned that tipping was unnecessary since free money were already embedded in the bill.

So, with the GST, we can assume that tipping will not only be complimentary but also altruistic to the average service and hospitality worker, who will rely on tips to make ends meet since their establishments won't enjoy that fantastic six per cent.

A crucial bugaboo is how village shops and restaurants play the GST card. Right now, these village shops slap the 10 per cent SST but don't actually label them: prices are simply marked up to overcome tax costs.

But with the GST, suddenly such a tax is transparently labelled in receipts, all because it goes directly to the government and not the proprietors. Might it be that the resistance to the GST is due to selfishness, that these proprietors will soon lose their cut?

Prime Minister Datuk Seri Najib Razak had to be tough to push the GST agenda but even he has not been hard on its timeline.

In fact, he is being generous, outlining practical concessions: one-off RM300 cash aid to BR1M recipients, lower individual income taxes and perhaps increasing maximum chargeable income from RM100,000 to RM400,000.

With the GST's execution, he has to take the sword to the opposition crowd bent on undermining this policy, only because they cannot stand the idea of Najib gaining ground on practical policies.

Najib has 17 months to bite the bullet as he goes ahead with the GST, perhaps at the expense of his or his government's popularity, something his brethren in the opposition will lap up: the protests lined up against the GST will be on the same hysterical par as Lynas or any inane protest-for-the-sake-of-protest dilettantes.

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