Cheaper goods under GST an ‘empty lie’ by Putrajaya, DAP rep says

OCTOBER 27, 2013

Ong also said in a statement that the government’s claim that tax collection
under the GST would improve while the rakyat would pay less tax
was ‘misleading and dishonest’. — Picture by Choo Choy May

KUALA LUMPUR, Oct 27 — Putrajaya’s assurance that the price of daily essentials would not rise under the new Goods and Services Tax (GST) is an “empty lie”, a DAP lawmaker said today, pointing out that the new taxation system has a wider coverage area than the Sales and Services Tax (SST).

Serdang MP Dr Ong Kian Ming noted that the number of items taxed under the SST were far fewer than those listed under the GST, which will include many non-luxury items like milk, coffee, tea, mineral water, canned fruit, stationary, school bags and even newspapers, to name a few.

Electricity bills will also see a hike after the GST is implemented in April 2015, the lawmaker said, as those who use anything more than 200kwH worth of power, or more than RM50, would also be affected by the new consumption tax.

“Ultimately, the argument that the raykat will be paying less tax under the GST compared to the SST is an empty lie,” Ong said in a statement here.

“If this was the case, then why introduce the GST as a revenue raising measure in the first place?

“How can the government say that tax collection under the GST will improve and at the same time say that the rakyat will pay less tax? This is misleading and dishonest,” he charged.

To further illustrate his point, Ong pointed out that the list of tax-exempt items under the SST runs for a staggering 250 pages while items marked under the GST as “zero-rated” or are listed as not taxed at any point of the supply chain, run for only 21 pages.

The current SST, he added, is also restricted to certain restaurants and professional services provided by accountants, architects, motor vehicle service and repair centres, telecommunication services, security services, estate agents, parking space services operators and other service firms.

But under the GST, Ong said it was possible that some of these services might get taxed.

Furthermore, he said that although the Najib administration did list some items as tax exempt (instead of zero-rate) under the GST, such as residential properties, financial services, healthcare and transportation, this only means that the end product is not subject to the GST.

The production process for these goods and services, however, would still be taxed, he pointed out, adding that this would ultimately mean their prices would still rise because of the GST charges at the supply stage.

“The truth is that the GST will increase the prices of a majority of goods and services even after the removal of the GST and that the financial burden to the rakyat will be increased,” he said.

When tabling Budget 2014 on Friday, Prime Minister Datuk Seri Najib Razak finally confirmed previous speculation on the impending implementation of the GST to help widen the government’s tax base and slash its chronic deficit.

“The fact is the government has taken a few years, sufficient time to run a detailed and comprehensive study, and has taken into account the views of every strata of the public,” he had said, in defence of the move.

“Thus, based on the principle of putting the people first, the government has decided for a taxation system that is comprehensive and fair, which must quickly be implemented to benefit all Malaysians.”

According to Najib, the timing was right to roll out the GST as Malaysia’s inflation rate has stayed at a relatively low rate of between 2 and 3 per cent.

The GST, which will replace the current SST at a rate of 6 per cent come April 2015, comes, however, amid public concerns that it will increase the cost of living through a hike in the inflation rate, especially after a fuel subsidy cut in September.

To offset the new tax, Najib announced that personal income tax would be reduced by 1 to 3 percentage points, depending on the income bracket.

Najib said the 26 per cent maximum income tax rate would be reduced to between 24 and 25 per cent, effective 2015.

He also said that a one-off payment of RM300 under the 1 Malaysia People’s Aid (BR1M) cash aid programme will be made following the implementation of the GST scheduled for April 1, 2015.

The prime minister added that the GST will not be imposed on essential food items like rice, sugar, salt, and cooking oil; piped water supply; government services like the issuance of passports, licenses, healthcare services and school education; or transportation services like buses, trains, LRTs, ferries, boats, and highway tolls.

Sales, purchases and rentals of residential properties, as well as selected financial services, are also exempted from the GST.

The prime minister pointed out that Malaysia’s GST rate of 6 per cent is among the lowest in Asean countries, noting that the GST is fixed at 7 per cent in Singapore and Thailand.

The GST is a consumption tax, meaning all Malaysians will be taxed according to their level of spending, regardless of income. This differs from income tax that is only applicable after a certain salary level is exceeded.

The tax was first announced during Budget 2005 and was originally scheduled to be implemented in 2007, before it was deferred.

The GST Bill was then tabled for the first reading in 2009 for implementation in late 2011, but was withdrawn during the second reading in 2010 following fierce public resistance.

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