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Thursday, May 8, 2014

Getting to know the GST

Publication: NST
Date of publication: May 3, 2014
Section heading: Main Section
Page number: 014

THE demonstration on Thursday to protest against the Goods and Services Tax (GST) commanded quite a good turnout, which was trumpeted by the opposition as being a resounding rejection of the government-proposed GST. That many people were unhappy with the GST was obvious, if attendance at a rally is any measure. Most who attended lamented the fact that, as a result of the GST, prices would go up. But, what would have added fuel to the fire must surely have been that many among those randomly polled were actually unclear on what exactly the GST entailed. And, while it would not be so unexpected for a political opposition to seize the opportunity to mislead the public on the matter, the fact is that even without political intervention, the people's ignorance on the new tax would be more than sufficient to stoke the fire of discontent.

The GST, as the prime minister has explained, is a rationalisation of existing consumption taxes and is intended to overcome the problem where, in effect, only one in 10 of eligible working Malaysians is paying their personal income tax. The consequence will be that those who do not declare their earnings will be taxed, albeit indirectly. Given that every person is a consumer, this method of taxing better spreads the national burden. Numerous examples around the world paint a scenario that suggests that in actuality, life will go on as usual after the tax's introduction, which, in Malaysia, will be in April next year. This would be especially so, since the GST will replace the current sales and services taxes. There are also extant examples worldwide, which have discredited claims that it is necessarily regressive. If not carefully tailored, it can indeed be regressive, but it is generally in the interests of a government to ensure that in introducing such a consumption tax, it achieves its intended objective without penalising the economically unfortunate. Any notion that the GST would further impoverish the poor will depend on the exemptions given. But, as with the British Value-Added Tax, the list can be exhaustive to guarantee social justice.

The government has said it would go ahead with the GST, regardless of the protests. Certainly, no government would be able to get any work done if it backed down upon every single protest. Nevertheless, it is always more preferable to get the populace on board with any new policy and, especially, with this one, since it will affect every citizen. For that to happen, it is crucial that the government utilise the 11 months counting down to the GST's implementation to prepare the public for it. Since part of what drives fear is the unknown, it is incumbent upon the proposer to convince the public that its fears are unfounded. Without this effort, it would be too easy for such a fear to be exploited.

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