After much anticipation surrounding the introduction of a new Goods and Services Tax (GST) regime in Malaysia, the GST Bill 2014 was finally tabled in the parliament last Thursday. The raging debate is on.Much to the chagrin of the opposition MPs, despite their gallant fight to debate this bill, it is a fate accompli. The Barisan Nasional government will pass this bill regardless. A simple majority is all it takes to replace the existing Sales and Services Tax (SST), to this new consumption tax.
Since this writer is no longer an MP, let him debate the BN, nay the entire nation here. Let us be honest and call a spade a spade, shall we? Avail yourselves to debate with me, here and now? There are obviously many facets to this issue. Let us consider only one for today.
When the government bragged and bandied around in almost all their advertisements, that because the BN is gracious and care for the rakyat (People’s First), they now have replaced 2 taxes, i.e., the SST, with one tax, the GST.
Besides, they also claimed that (blissfully ignorant and oblivious perhaps), while the SST is 16% (Sales-10% and Services-6%), lo and behold, it is only 6% for GST now!
A deeper reflection on this ‘battle cry’ unfolds its pathetic lie quite evidently. It wouldn’t allow a discerning Malaysian to be easily fooled. If truly the rakyat-cum-tax-payers are to be better off with one GST than two SST, and 6% GST than 16% SST, i.e., paying less tax hence generating less income for the government’s coffers, would the government ever embark on replacing the existing tax system? Caught lying through their teeth again!
So, what is the logical conclusion? Doubtless, the BN government is in to make a handsome and an enormous tax income from the new GST as compared to the SST! How?
And more importantly, who are paying for that? Would it be the animals in the zoo or the birds in the sky, or the machines and robots in the factories?
Nope! You know that. The taxes collected are coming from you. Yes, you the rakyat! And because it is a "consumption tax" as opposed to an "income tax" regime, it is indisputably a broad-based tax, insofar, as not differentiating your wealth or income. It cuts across the board.
Besides, it doesn’t differentiate you by way of age; whether you are an infant, a toddler or in your twilight! If those goods and services" are not in the "Gazettes" (to be announced later, as mentioned in the bill), as zero-rated or tax-exempted, regardless of who you are or how old or young you are, you PAY!
Furthermore, it is broad-based because they are collecting a lot more in GST than SST. Well, because a lot more items are going to be taxed!
The Gazette, to be published by the Finance Minister, will tell us exactly how many items are to be taxed. Lest you are still ignorant, GST is a negative list approach, while SST is a positive one.
In the GST negative list system, all goods and services not in the "Exempted and Zero-Rated" categories, are taxable. While in the older system of SST, all sales and services are not taxable except what have been listed as taxable.
So, you the rakyat of Malaysia are to be taxed for all goods and services, you, who once upon a time, were not taxed under the old SST. The taxable goods and services will be a lot longer list. Exactly how long and what items are to be taxed would only be made known when the Gazette is released by the minister!
If the PM’s Budget 2014 speech is to be relied upon, the "exempted" would include essential food items, transport services including toll payments, purchase and rental of residential properties and selected financial services. But personally, I will wait and see before rejoicing.
Coming back to my contention, why are they able to collect a lot more income from this GST? Simply because there are a lot more goods and services that will be taxed! Period. (Not only because that there will better compliance and less leakages in SST, which is arguably true).
I could be more complicated and convoluted in explaining this, because truly GST is one complex tax system. And I have my anxiety still that you have not understood GST until you truly understand the mechanism of charging a 6% at every level of the supply chain, when there is an actual "value-adding activity". There is also a thing called "input tax" and an "output tax" that will entitle you to a rebate (input tax-output tax). In all fairness, that’s the good side of GST.
To illustrate, if you, as a GST entity (revenue above RM500,000 per annum), and assuming you are the manufacturer of a good (say, coffee), is charged a 6% input tax (say, RM100), you are entitled a rebate should your supplier (of coffee), the one earlier to you in the supply chain has been charged 6% (say RM40), hence a tax of RM100-RM40, i.e., RM60.
You actually get a rebate of RM40. Yes you are happy enough to get back RM40 as rebate and for that you should be eager to pay because every time you pay your input tax, you are entitled for a rebate, should your earlier supplier pay less tax than you.
While that may be well and good, the important thing that I would like to stress, in light of our discussion or debate, is that the GST is a multi-staged tax system. The SST is actually a single-step tax system, hence only giving the government, say 10%, at sales, while in the case of GST, it generates income at all level of supplier chain where there are "value-adding" activities.
So what, you may ask?
Well, the government will surely generate a lot more income from a multi-staged tax system as compared to a single-step tax. Given the fact that it is a broad-based, cutting across income and age and now multi-staged, little wonder, that the Minister who once talked about this country going bankrupt, is now gloating that this BN government is in to make a cool RM27 billion (as per reported). GST is the saviour but the rakyat are the direct victims, especially the lower income groups.
Time and space are not permitting to rebut more claims of the BN government. I rest my case here.
Pakatan Rakyat not only opposes the GST but has offered concrete approaches as to raise the revenues of the federal government from alternative sources. We are not against GST per se, as we know exactly when we thought it would be justifiable and pertinent to implement this new consumption tax system.
That, inter alia, has to do with the rakyat's income and disposable income. It will be less regressive, and perhaps we would overcome its regressive impact, through targeted help and coupon-system or what have you.
Meanwhile, rest assured that I would surely come to debate this diabolical GST as it is implemented now. There are other pertinent issues of GST rate, income and corporate tax reductions, etc. Not the least is the MyEG contract; it alleged crony practices and its AES-like profit-sharing system, above a certain hurdle rate of collection. It begs answers and clarifications.
The rakyat will be protesting on a national scale on the 1st of May to tell the nation of a new Malay Reformasi Lexicon for these abuses in GST: Gasak Sampai Tumbang!
Down with GST! Down with TPPA! Down with BN Barang Naik! – April 6, 2014.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.