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Thursday, February 6, 2014

Put the interests of the rakyat first

Publication: NST
Date of publication: Jan 30, 2014
Section heading: Main Section
Page number: 019
Byline / Author: By P.C. Lee

AAN opposition leader recently released a video to "educate" the people on the impending Goods and Services Tax and its effect on the rakyat through the "Faham GST, Tolak GST" (Understand GST, RejectGST) campaign.

Some points were not just misleading but factually incorrect. This fear-mongering must stop.

It must be pointed out and reiterated that at present Malaysia is practising a dual-consumption tax system - sales tax and services tax (SST). Each are charged at 5-10 per cent and six per cent, respectively. The implementation of GST will see the abolishment of SST.

Some of the points in the video were based on broad assumptions:

IT was based on a GST bill that was tabled in 2009. It was not mentioned that GST will replace SST. The impression was that GST is an additional tax on top of the SST.

We should not jump the gun. Conclusions should be drawn based on the latest bill which will only be tabled in March;

THE list of items to be taxed under GST include food and drinks at mamak stalls and fast food outlets. But don't we already get taxed at fast-food outlets?

GST will replace SST. There won't be any additional tax charged for meals at fast-food outlets. GST will also prevent the cascading tax effect on prices we currently face.

On being taxed at mamak stalls, that would depend on their revenue. GST will be charged only to businesses with revenue exceeding RM500,000. The reach of GST will be broader, 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 per cent with modest consumer price index (CPI) increase;

THE people are burdened by the price hikes and GST implementation.

The price hikes on toll, petrol, electricity 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 backed the decision to introduce GST and lauded it to be timely; and

THE rakyat only pays SST on a few things. With GST, almost all transactions will be taxed, burdening the people.

Not true. We may not be aware of this fact, but the current sales tax at the rate of five per cent or 10 per cent is already included in the 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, intermediaries within production and distribution make tax payments but are able to claim back the GST incurred. As a result, GST isn't an additional cost to businesses. In fact, it may reduce the current cost of doing business. Consequently, prices of some items may even be lower compared with current prices under the SST system. For businesses, GST will, in general, be a zero-sum game.

Personal views are good and a call to understand GST is laudable. However, a video with such broad generalisation and based on assumptions bring to question if it was truly made in the interests of the rakyat.

If the interest is truly in the people's welfare, then let's paint a holistic picture without the biased facts.

P.C. Lee, Kuala Lumpur.

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