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Thursday, November 14, 2013

Putrajaya and its GST theory - Joe Taxpayer

NOVEMBER 08, 2013

"… the tax would affect mostly the rich as they are heavy consumers,” said Idris Jala.

Something bugs me with the above analysis, as reported by The Malaysian Insider – GST will hurt middle-class, youths, poor the most, says think tank.

You mean, the rich won't find a way to pass back their additional costs? Are they going to be whistling "Oh What A Beautiful Morning" on their way to work while GST eats into their pocket?

Pemandu’s analysis seems to assume that there is no cost pass – on effect arising from GST implementation. Let's say Ah Chong, who is a typical neighbourhood mechanic, now has to impose GST for vehicle repairs.

Ahmad, a government servant, whose income is certainly not as exciting as some of those in Pemandu as reported – goes to repair his motorcycle at Ah Chong's shop and has to pay GST on the repair invoice.

What do you expect Ahmad to do with the increased cost? Do you:-

a) Expect him to start selling nasi lemak at night to double up his income?

b) Blame his lot in life?

c) Line up for the next BR1M or wait for a “buy-election” to get a free crash helmet?

The government has been at pains explaining to us that basic items such as rice would be zero-rated and therefore has no GST. But our cost of living is not just going to be affected by the consumption of rice or other zero-rated items alone; our economic activities are so inter-connected that a price increase somewhere – whether you call it GST or subsidy rationalisation etc – will eventually impact the economic chain cycle with price adjustments.

Who says then, that the poor would not be adversely affected by GST? The rich may consume more – but that does not mean there's no passing of cost downwards.

Isn't that how they became rich in the first place? They always find a way to get someone else to pay on their behalf.

One of the outcomes from imposing GST is to ensure a fairer distribution of resources in society; just look at Singapore and see how efficiently and transparently they allocate their GST revenue to reach the lower income group, and Putrajaya will have an idea of the main purpose of GST.

GST is not meant to plug the holes created by a profligate Putrajaya that remains defiant and unrepentant despite being annually castigated by the Auditor General's report.

GST is not meant to reduce deficit spending arising out from annual budgets that baffle us with examples such as a finance minister who allocates proportionately more money for his department than for say, development expenditure.

GST is not meant to fund activities with diminishing returns such as sponsoring Psy or K-Pop concerts, BR1M... KR1M... Sport Rim....

The question is, could you trust Putrajaya to do the right thing with your GST revenue?

This is something that is sorely missing from the analysis of many Putrajaya friendly parties, including tax consultants.

When Tun Abdullah Ahmad Badawi was prime minister, he promised that the increase in petrol price in 2008 would enable the government to re-allocate the savings to improve public transport.

Well, we all know how that went – your city bus driver still doesn't come on time, and your cab drivers still haggle over taxi fares.

And Malaysians still need to drive, as a car is very much a need and not a luxury – courtesy of a messed up public transport system and safety concerns arising from increased crime rate.

So, really, where is your GST revenue going to go? The next “buy-election”? The next government procurement malady that we would be reading about in some future audit report?

The next white elephant project launched? The next satu-lagi-fuzzy jabatan – set up under the PM’s office?

What do you think? – November 8, 2013.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.

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