Date of publication: Nov 7, 2013
Section heading: Main Section
Page number: 009
Byline / Author: By Hana Naz Harun
KUALA LUMPUR: IT is a misconception that the goods and services tax (GST) will increase the burden of the people especially those in the low- and middle-income group.
Finance Ministry's GST implementation office tax adviser, Datuk Kamariah Hussain, said yesterday some believed individuals earning below RM3,000 a month and not paying income tax would now have to pay tax under GST.
"This is a misconception. You pay for sales and services tax (SST), which is embedded into the products and services you pay for. It's just that you are not aware of it," she said during a GST briefing with New Straits Times Press senior executives here yesterday.
GST was part of the government's tax reform programme to find a more effective and business-friendly way of generating a more stable source of revenue, she said, adding it also addressed inherent weaknesses in the SST where there were cascading and compounding effects for consumers.
"For example, under SST, when the consumer pays for a service, he or she will also have to pay for the tax levied on the supporting services. Consumers may also be double-taxed when a retailer charges an additional six per cent service tax on top of the five or 10 per cent sales tax."
GST eliminated this, said Kamariah, by covering all levels of the distribution chain.
She said GST was a fair, efficient and transparent taxation system that depended largely on consumers habits.
It is efficient as the GST is self-policing, enhances tax compliance and is transparent. Consumers know what type of taxes they are paying for and how much.
Kamariah said GST, as the fairest method of taxing the public, served as a more broad-based revenue collection system that expanded the number of taxpayers.
On critics calling it a regressive tax that would affect the poor more than the affluent, she said: "This is not a regressive tax. We have done simulations which prove GST is progressive."
She said the GST model took into consideration the welfare of the people, especially the low-income group. Basic needs, such as staple foods, water and the first 200 units of electricity are zero-rated for domestic users, while mass public transport, education, health, tolls, residential property and financial services are exempted from GST.
"Some consumers lack understanding about GST, which is why we have the 17 months before its implementation to thoroughly explain it to the public."
Kamariah said a shoppers' guide would be distributed three months prior to the implementation to inform consumers on price changes before and after implementation.
When asked about the increase in tax collection, she said with GST, the government would be able to collect up to 90 per cent, compared with an average 70 to 80 per cent from SST.
"It will increase government tax collection by 20 to 25 per cent, better than what the SST collects."
GST, announced by Prime Minister Datuk Seri Najib Razak during the tabling of the 2014 Budget, will be implemented on April 1, 2015. It will include zero-rate and exempt items, as well as a sales threshold of RM500,000. Najib also announced measures, such as one-off cash payments of RM300 and personal income tax reduction of one to three per cent, to ease the transition. GST will replace the sales tax and services tax introduced in 1972 and 1975.
Present at the briefing yesterday were NSTP group managing editor Datuk Abdul Jalil Hamid, New Straits Times deputy group editor Abdul Rashid Yusof, Berita Harian group editor Mahfar Ali, Harian Metro group editor Datuk Mustapa Omar and Customs Department adviser Datuk Zaleha Hamzah.