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Thursday, May 8, 2014

Is GST to prevent tax evasion, or reform taxation?

MAY 05, 2014
The GST issue is going to be a battleground for Malay votes as
evident from the overwhelming Malay crowd at the anti-GST rally in
Kuala Lumpur last week. – The Malaysian Insider pic, May 5, 2014.
With three out of five Malaysians against the Goods and Services Tax (GST) in a recent survey, it is surprising to hear Prime Minister Datuk Seri Najib Razak say today that it is widely accepted and will prevent tax evasion.

The greater surprise is to insinuate that there are supposedly poor people who are sending their children abroad for further studies, possibly because they are under-declaring their income.

The prime minister and his government is playing a dangerous game by playing the rich against the poor in justifying the consumption tax.

Yes, only one million people pay personal tax in Malaysia but isn't that due to government policies which keeps raising the income tax bar?

"There are many tax evaders in Malaysia, the GST is a system which is fair and progressive and accepted by the public," Najib said today.

So, is the prime minister trying to make up the shortfall in tax collection by taxing the poorer ones? Or does he believe that everyone is rich enough to pay tax?

If that is the case, can the prime minister explain the need for Bantuan Rakyat 1Malaysia (BR1M)?

After all, the expected RM22 billion revenue from the the 6% GST imposed from April 1 next year is only some RM8 billion more in revenue than the sales and service tax (SST) imposed now. Of that, some RM5 billion goes to BR1M.

"The revenue from the GST will enable Putrajaya to build more infrastructure in both urban and rural areas," Najib said, adding that without modern infrastructure, Malaysia would lose its competitive edge.

"We also need to build more hospitals, purchase the latest medical equipment," he said, adding that the welfare of the 1.5 million civil servants had to be taken into consideration.

"In order to take care of our civil workforce, a strong and rising revenue channel is required. GST will enable us to lift Malaysia to greater heights," he added.

Is that what the GST is all about then, more money for the government to spend? What about the petro-dollars that has been earned through the years and paid to Putrajaya? Where has that pile of money gone?

The GST issue cuts deep in Malaysia because it widens the tax base among the 30-million population, most of whom are Malays.

That means this is going to be battleground for Malay votes as evident from the overwhelming Malay crowd at the anti-GST rally on May 1.

Can Umno and Barisan Nasional (BN) afford to ignore ground sentiments and further erode its Malay base from the past two general elections.

There is no question that the GST is to reform taxation. But it should not be used to justify going after tax evaders.

The question about evading and avoiding tax is best directed at well-connected businessmen, cronies, ministers, deputy ministers, etc., who seem to have bigger residences and powerful luxury cars despite salaries that cannot account for such extravagance.

The poorer sections of society are working hard to send their children for a better education, because whatever tax money being used to fund state education does not seem to bring in the results - as seen by international surveys.

They should not be paying for the state's inability to collect tax from those who evade or avoid tax. – May 5, 2014.

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