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Wednesday, April 2, 2014

‘Govt succumbed to corporate greed in introducing GST’

In The Edge Financial Daily Today 2014
Written by Jaqueline P’ng, (contributor to 
Tuesday, 01 April 2014 09:26

KUALA LUMPUR: The member of parliament for Sungai Siput Michael Jeyakumar has chided Putrajaya for pushing through the bill for the goods and services tax (GST), saying that the government is “caving in to corporate greed”.

Deputy Finance Minister Datuk Ahmad Maslan tabled the controversial bill yesterday, which is expected to come into effect in April 2015.

According to the Budget 2014 announcement last October, the 6% GST rate will replace the existing sales and service tax of 6% and 10% respectively.

Jeyakumar noted that the bill does not specifically mention the said 6% rate.

“The 6% is only an introduction rate. Europe’s GST rates are as high as 17% to 25%, so there is a lot of room for the government to raise it.”

He added that the specific rate is not written in black and white, and ministers have the power to amend the rate if Parliament passes it. This can spell trouble for consumers.

Under Part 3 - Imposition and Scope of Tax of the bill, section 10(2) states the minister may by order publish in the gazette:

(a) fix the rate of tax to be charged on the supply of goods or services; and

(b) vary or amend the rate of tax fixed under paragraph (a)

“If you look at the bigger picture, the government is actually being bullied by the corporate sector. They lobby for lower corporate tax and the government bends in fear of losing potential investments to neighbouring countries,” Jeyakumar said.

Instead of allowing the corporate sector to ignite a “tax war” in the region, he added, Asean should be united in setting a firm cap together.

“It seems like nobody has thought of fighting back. We are so divided. If Asean countries come together and agree on a corporate tax rate, we can hold the bottom line.”

Moreover, he pointed out, the basket of goods exempted from GST and those classified under zero-rated supply are also not written in the bill, and will possibly be available only when it is gazetted. “The list can be adjusted anytime according to needs. Those items under exemption and zero-tax rate can also move in and out of the category when seen fit. But it has to be passed by Parliament.”

Zero-tax supply items as opposed to exempted items, he said, will benefit consumers more as the government does not receive any tax revenue — in other words, no input and output tax — whereas the latter is subject to output tax.

Jeyakumar, who is a member of the Socialist Party of Malaysia, noted that the hefty punishment for not complying with the tax system may incriminate medium-sized businesses. “The big corporations have no problem adopting the new tax system as they are capable of hiring professionals.

“But what about those slightly bigger family enterprises? They are taxable but don’t have the money to invest in human resources or software and such to adapt. It’s a very complex process for ordinary people to understand.”

Jeyakumar felt that if the people are punished so heavily for such mistakes, the government should match that when dealing with corruption involving civil servants. Under section 91(1), anyone found guilty of tax evasion is subjected to a RM30,000 fine or three years’ imprisonment, or both, as well as a penalty of two times the tax.

PKR lawmaker Rafizi Ramli opined that the bill has been vaguely worded. “No surprises apart from what gets taxed, what doesn’t get taxed. But it’s very vague because the details are in the gazette,” he told in a text message.

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This article first appeared in The Edge Financial Daily, on April 1, 2014.

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