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Friday, January 24, 2014

GST: Stop the fear-mongering, Rafizi

January 24, 2014
FMT LETTER: From Phang Chong Lee, via e-mail

PKR’s Rafizi Ramli released a video to ‘educate’ people about the upcoming implementation of Goods and Services Tax (GST) and its effect on the rakyat through his #fahamGSTtolakGST campaign. It’s no surprise that a video anchored by a strong personality such as Rafizi Ramli would garner visibility on social media.

At this juncture, it is noteworthy to reiterate the following:
Currently, Malaysia is practicing a dual-consumption tax system: sales tax and services tax (SST).
Each are charged at 5%/10% and 6% respectively; and

The implementation of GST will see the abolishment of the current SST.

In viewing the video, I feel that some points were made based on broad assumptions. Let’s chunk it down and address them.

Rafizi’s POV: The video was based on a GST bill that was tabled in 2009

Shouldn’t conclusions be drawn based on the latest bill which will only be tabled in March especially when it concerns the welfare of people? Let’s not jump the gun.

That aside, he did not mention that GST will replace SST. The impression given here is that it is an additional tax – on top of the existing SST. The fact remains that it is not. It is a replacement of the dual-consumption tax system.

Rafizi’s POV: The list of items to be taxed under GST include food/drink at mamak stalls and even KFC

Don’t we already get taxed under the current system for KFC? Well, I just had KFC and they charged me 6% service tax. Not only was it finger licking good, but it made me wonder:

Wouldn’t the implementation of GST be a replacement of SST? In effect, there won’t be any additional tax charged for my future snack plates. To add, wouldn’t the replacement of SST with GST prevent the cascading tax effect on prices we current face?

To the point on being taxed when at the mamak stall, wouldn’t that depend on their revenue? GST will be charged to businesses only when business revenue exceed RM500,000. Hence, whether or not GST will be implemented in mamak stalls is still subjective. Again, jumping the gun.

The reach of GST will perhaps be broader than that of SST – encompassing haircuts and even biscuits. Inflation will no doubt occur. But our findings on Australia, a country that has implemented GST a while ago, showed an inflation increase of only 2-3% with modest consumer price index (CPI) increase.

Rafizi’s POV: The people are burdened amidst the price hikes and GST implementations

The price hikes on toll, petrol, electric and sugar are a result of a number of factors such as subsidy cuts. The implementation of GST is separate from this exercise. In fact, The International Monetary Fund (IMF) has backed the decision to introduce GST in Malaysia and has lauded to be timely.

Rafizi’s POV: Rakyat only pays SST on a few things currently. With the implementation of GST, almost all transactions will be taxed, burdening the people

In our daily lives, we may not be aware but the current sales tax at the rate of 5% or 10% is already embedded in prices we pay for goods purchased. Sales tax is charged at both the manufacturer level and at point of import. These items include clothing, appliances and even electrical items.

GST is a broad-based consumption tax, where more items will be taxed. Due to its nature of being multi-stage tax, intermediaries within production and distribution make tax payment but are able to claim back GST incurred. As a result, GST isn’t an additional cost to businesses and in actual fact it may reduce the current cost of doing business. Consequently, prices of some items may even be lower compared to current prices under the SST system. For businesses, GST will, in general, be a zero-sum game. It won’t increase the cost of doing business dramatically, if at all.

Is it then fair to generalise and say that the implementation of GST – a tax system that prevents the existing cascading tax effect on prices – will burden the rakyat?

Personal point of views is of course respected and a call-out to understand GST together is laudable. However, the video with such broad generalisation and statements made based on assumptions brings into question if it is truly made in the interest of the rakyat.

A recent Merdeka Centre Survey revealed that as many 55% of Malaysians did not understand GST, while 20% saying they absolutely knew nothing about the tax. Further, a survey ran by Bernama showed that there is worry amongst the rakyat that the implementation of GST may be a burden.

With this in mind, isn’t it more imperative that we be more careful about the statements made in advising the Malaysian people? If the interest is truly in rakyat’s welfare, let’s paint a holistic picture and present them with unbiased facts.

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