Understand GST first before any protest

December 19, 2013

FMT LETTER: From Nadia Izzuddin, via e-mail

Taxation is a sensitive issue. Nobody likes it, but it’s necessary for the running of a country. Take the recently announced GST. There will be those who will protest against it, and that’s fine because we live in a free world. But what concerns me is if people hit the streets in protest after listening to “lectures” from “experts” who don’t seem to understand the truth or facts about this tax system.

Take, PKR’s Rafizi Ramli, for instance, who wants to start a series of talks to “teach” everyone about the GST. But when you listen to what he highlights as reasons why GST should be rejected, it sounds like he doesn’t understand the system.

For example , in the video Rafizi said the price of rice will go up because of the GST. He said while rice is zero-rated (not taxed), the plastic bag, required machines and related maintenance services used for packing rice is GST taxable. This, he says, will then be embedded into the price of the rice before being sold to consumers and cause it to rise.

In truth, with the GST in place, the tax on the plastic bag and machine maintenance services is in fact claimable as an input tax credit which technically means that the price of rice should not go up.

In my example, both the manufacturers and suppliers of plastic bags are assumed to have been registered for GST with the customs department. If, on the other hand, the factory buy from suppliers who do not register for GST (e.g. total sales less than RM500,000 a year), they are not subject to GST so, again, the price of rice should not go up.

Rafizi also claims the annual cost for businesses to file their taxes under the GST system will amount to RM15,000 (or RM1,250 per month). This he said, is a burden to small businesses such as single mothers who run seamstress businesses and don’t make much.

This is indeed a burden, so luckily for them, under the new GST system, only businesses making RM500,000 and above in annual sales are mandatorily expected to register and file their taxes. With that, these small traders and businesses can breathe a sigh of relief!

What makes me worry most is Rafizi is starting a series of roadshows/lectures all over Malaysia to “teach” people about GST. Worse still, from what we’ve seen in the video, we saw him invite people to the streets to march in protest of the GST. Hopefully he gets his facts right first.