Zainal Ajamain | May 4, 2014
It is no good claiming that other countries are imposing the same GST without really studying holistically the economic structure of those nations especially their wage model.
Prime Minister Najib Razak is of the opinion that the Goods and Service Tax (GST) is important for the government and good for the country.
But GST is a regressive consumption tax. This means that the more a person consumes the more tax that person has to pay.
This type of tax has been imposed by other countries throughout the world with diverse consequence.
Malaysia studied none of these countries before imposing such tax on its people.
Unlike other countries in the world about 80% of working Malaysians are wage earners.
This means they receive a fixed steady monthly income. Sadly, the value of this income is diminishing due to inflations and the decline of the ringgit.
The situation is exacerbated by individual income which has never been increased for more than 20 years.
Malaysians used to be praised as having the most savings but lately the number of households in debt has increased to more than 80%.
This could be perhaps due to declining incomes and increased prices in essential goods.
In such a case, the government is already using individual debt to offset the burgeoning national debt.
In short the people have to pay for the government’s extravagance and leakages.
As an economic strategy to help the government, this is simply not sustainable.
Input and Output GST taxes
The GST will impose additional financial burden on at least 80% of the Malaysian workforce especially to those earning less than RM3,000 a month.
The long list of people that need the BR1M handouts is one good example of the number of household that needs government assistance.
This is because each of these household will spend most of their fixed monthly income to purchase basic household items.
Such data may be collated from the Lembaga Hasil Dalam Negeri which vets those eligible for BR1M.
The figures of the people that do not pay tax is not included.
Once GST is imposed then the price of goods as we know it now will increase tremendously depending on the number of GST (Input Tax) imposed on the products.
In addition to this input tax, there is also the GST (Output Tax) that each consumer needs to pay the minute they purchase for the product.
It is no good using the excuse that the majority of the countries in the world are imposing the same GST without really studying holistically the economic structure of those nations especially their wage model.
Similarly there is no point in saying that GST is exempted on essential goods such as food stuff, flour and edible oil.
This is because these essential goods are inter-dependent on other factors along the business-chain before it reaches the consumers.
These inter-dependent factors which are not exempted from consumption tax will push up the price of a product.
For example, rice must be transported from the fields to the warehouse before it is again transported to the shops where it is stored for a while before consumer purchases it.
Even though rice itself is an essential item which is exempted from GST, but the logistics, storage and labour is not exempted from GST.
As a result, rice will become more expensive due to GST.
Therefore whoever is saying that GST is good for this country is delusional.