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Friday, November 1, 2013

GST a common tax system

Posted on November 1, 2013, Friday

SIBU: Goods and Services Tax (GST) is a system adopted by almost 200 countries worldwide, Assistant Minister of Youth Development and Asajaya assemblyman Datuk Abdul Karim Rahman Hamzah said yesterday.

“Had the tax system been counter-productive, it would not have been adopted by a majority of countries in the world, whether developed or undeveloped,” he pointed out.

“GST is implemented in 160 countries in the world…definitely, there will be hitches here and there when it is implemented come 2015. But Malaysians would soon adjust themselves to this new system,” he said.

He was reacting to Gombak MP Azmin Ali who had said that Malaysia was seen as not ready to implement the new tax because more than 40 per cent of the people had household income of less than RM2,500 a month, with 80 per cent being Malays and Bumiputras.

Azmin was reported by Bernama as saying that GST would squeeze the low income earners and the poor.

He said the government must take a leaf from developed nations which only implemented GST after their tax infrastructure were strong and income taxes were reduced to avoid burdening the people.

Meanwhile, Kapit MP Datuk Alexander Nanta Linggi said: “I do agree with YB Azmin, MP Gombak. That the current tax infrastructure must be strengthened and consolidated so that the tax system is efficient and only hit the right target and objectives.

“We must not burden the poor and the nearly poor groups. However, I support the government’s move to gradually implement the GST system.

Nanta, who is Deputy Minister of Rural and Regional Development, added that it was timely to start to implement the GST.

Hopefully, the GST implementation would also compel the government to become more efficient, transparent, accountable, responsible, credible and conscientious in all her dealings.

“All these are virtues of a truly developed nation, for which Malaysia aims to be one even before the year 2020,” he said.

A councillor of Maradong District Council, Felician Teo, noted that the benefits of the GST would outweigh the drawbacks in the long haul.

Even though there would be a one-off spike in the prices of goods, these prices could be lowered in the longer term as manufacturers would be able to lower the cost of production with the abolishment of the 10 per cent sale tax and 6 per cent service tax, he rationalised.

This should cushion the impact on the lower income bracket on top of the 1BRIM handouts and the exemption of the GST on essential items, he pointed out.

“The sales and service tax (SST) not only results in higher business costs and distorted market prices but is also subject to a higher rate of tax evasion and fraud.

“Hence, it gives a lesser revenue yield for the government.

“Azmin Ali is right in supporting the GST as a more efficient and effective tax system as compared to the sales and service tax.

“With the government facing uncertain global economic conditions coupled with rising expenditure and widening budget deficit, the new consumption tax is necessary to widen the tax base in the country.”

A local businessman affiliated to a local chamber of commerce and industry, Dr Gregory Hii, opined that Azmin had a point by providing some figures as basis of his comments, adding that the government should evaluate them.

Dr Hii lamented that companies were also faced with problem to implement GST.

“I suggest government should provide free training for all companies required to implement them at all towns. Above all, government should also provide free software and hardware to SMEs who are required to collect these GST. It is fair to expect that,” he said.

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