Hartanah terkesan

Publication: HM

Date of publication: Sep 21, 2013

Section heading: Main Section

Page number: 061

Byline / Author: Oleh Syarifah Dayana Syed Bakri

Kuala Lumpur: Persatuan Pemborong Binaan Malaysia (MBAM) menjangkakan harga hartanah sama ada kediaman atau komersial akan meningkat sekiranya kerajaan melaksanakan Cukai Barang dan Perkhidmatan (GST) berikutan pertambahan kos sampingan.

Presidennya Matthew Tee berkata, bagaimanapun, MBAM tetap menyokong pelaksanaan GST berikutan ia antara langkah untuk membantu negara menambah pendapatan berbanding sistem cukai yang dilaksanakan kini.

"Kami tidak mempunyai masalah sekiranya kerajaan mahu melaksanakan GST kerana ia cara yang lebih baik untuk menjana pendapatan negara memandangkan dengan sistem yang ada kini, masih terdapat individu dan syarikat yang tidak membayar cukai.

"Maka, kami percaya dengan melaksanakan GST, kerajaan dapat menjana pendapatan daripada hasil cukai dengan lebih baik dan adil," katanya ketika dihubungi Bisnes Metro.

Beliau berkata demikian ketika diminta mengulas mengenai kesan pelaksanaan GST terhadap harga hartanah memandangkan ia akan membabitkan peningkatan kos tambahan.

Menurutnya, walaupun dalam sistem pelaksanaan GST tidak menetapkan cukai tambahan kepada pembinaan rumah kediaman, namun ia sedikit sebanyak akan memberi kesan kepada kos pembinaan secara keseluruhan.

"Secara kasar, projek pembinaan kediaman tidak dikenakan GST, namun kontraktor masih perlu menanggung GST yang dikenakan untuk pembinaan projek komersial.

"Sama ada banyak atau sedikit, ia akan memberi kesan kepada kos pembinaan secara keseluruhan dan kami percaya ia akan menyebabkan harga hartanah yang ditawarkan lebih tinggi namun, pada peratusan yang kecil dan tidak terlalu mendadak," katanya.

Tee berkata, pihaknya juga meminta kerajaan memberikan tempoh sewajarnya sebelum GST dilaksanakan bagi memberi ruang kepada kontraktor dan pemaju membuat anggaran kos.

"Sebelum kerajaan benar-benar melaksanakan GST, kami perlu sedikit masa untuk membuat anggaran kos baru dan berbincang sesama ahli MBAM bagi memastikan tiada kontraktor yang menawarkan harga terlalu tinggi atau terlalu rendah kerana ia pasti akan menimbulkan suasana yang tidak baik dalam industri," katanya.

Govt expected to focus on deficit during Budget 2014

Posted on September 21, 2013, Saturday

KUCHING: The government is set to lean towards consolidating its budget deficit further, which is deemed as necessary and positive for the capital market given rising twin deficit concerns in emerging market economies and following the downgrade of the country’s sovereign rating outlook to negative by Fitch Ratings late July.

RHB Research Institute Sdn Bhd (RHB Research) underlined this in its economic update report, adding that whilst the government would like to fulfill all its promises made during the general election in the forthcoming Budget 2014, it could potentially be constrained by its unfavourable fiscal position, after suffering 16 consecutive years of budget deficit and as the debt burden becomes heavier.

Nevertheless, the research firm highlighted that the government is already looking to bring down its budget deficit further to 3.5 per cent of gross domestic product (GDP) or RM37.6 billion in 2014, and has set a target to reduce it to three per cent of GDP in 2015. It has also aimed for a balanced budget by 2020.

“This will likely be done via both the revenue and expenditure sides. From the revenue side, the key focus will be on the announcement of the Goods & Services Tax (GST), although the implementation will likely begin from January 2015,” it added.

The GST is important to aid the government in broadening its tax base that will assuage the international rating agencies to not hurry into downgrading the country’s sovereign rating.

The research firm viewed that enhance its revenue, the government will likely announce during Budget 2014, the date to implement the GST, which will likely be in 2015 and at a rate of around four to five per cent.

“Also, we expect the government to carry out more stringent tax audits and investigations to ensure greater compliance and reduce tax evasion. Indeed, we understand that the income tax collection will likely surprise on the upside in 2013, after recording better-than-expected collections in the last two years.

“On the expenditure side, apart from the resumption of the rationalisation of fuel subsidies, what the budget will do is to emphasis the commitment to award contracts based on open tender that will save costs for the government,” RHB Research said, noting that the government could cut the subsidy and raise fuel prices again six to nine months down the road.

On developments in Malaysia, the research firm opined that the government may liquidate some assets (parcels of land bank for example) and lower equity stakes of government-linked companies (GLCs) to raise revenues.

At the same time, future projects will be planned based on the Public-Private Partnership (PPP) basis that will not require significant government spending upfront.

While there are doubts that the government may not achieve its budget deficit target of four per cent GDP or RM40 billion in 2013, given various handouts given to the public in the first half of 2013 (1H13), the research firm viewed that it will likely meet its target as planned, this year.

“This is because the government will likely reduce its expenditure elsewhere to foot the bill of the handouts and it has two good years of track record of achieving its budget deficit on target in 2011 to 2012.

“Already, the real public investment fell by 6.4 per cent year-on-year (y-o-y) in the second quarter (2Q), after surging by 17.3 per cent in the 1Q and it has been growing at between 13 and 27 per in the last three quarters of 2012,” it opined.

On the other hand, it added, public consumption saw a significant jump of 11.1 per cent y-o-y in the 2Q, after growing at a mere 0.1per cent in the 1Q.

Sufficient measures undertaken in the Budget 2014 that try to address the persistent fiscal deficit and high government debt as well as the rescheduling of some low multiplier and high import content infrastructure related projects to prevent the current account in the balance of payments from falling into a deficit are deemed necessary and positive for the equity market.

“This is despite it being a tight budget with the fiscal deficit projected to narrow further to 3.5 per cent of GDP in 2014, from four per cent of GDP in 2013, and potentially higher ‘sin taxes’ imposed to raise revenue for the Federal government,” RHB Research pointed out.

Read more: http://www.theborneopost.com/2013/09/21/govt-expected-to-focus-on-deficit-during-budget-2014/#ixzz2ffoFs6wh

Public says ‘Yes’ to GST but…

Anisah Shukry

September 21, 2013

Majority surveyed agree that GST will be a good source of income for the government but personal taxes and wastage need to be reduced.

Budget2014 Feature

KUALA LUMPUR: The controversial Goods and Services Tax (GST), which is expected to be announced in the 2014 budget next month and implemented in 2015, has received the nod from members of the public.

In a random survey by FMT, Malaysians conceded that the consumption tax was necessary to enhance the government’s revenue and rein in the budget deficit, which stands at RM 14.9 billion.

“My heart says no to GST, but when I look at it logically, GST can become a source of income for the country… as long as it doesn’t burden the rakyat to the point that we are unable to feed ourselves, then I can accept it,” said Nor Atiqah Mohd Zaini, 24, an account executive at a public relations agency.

The GST is a tax imposed on goods and services at every production and distribution stage in the supply chain, including importation of goods and services, according to the Finance Ministry.

First announced during Budget 2005, its implementation was deferred to allow the government to obtain more feedback from the public. It has since received mix reactions, with many fearing that the tax would burden the lower class.

But with the introduction of the GST appearing more inevitable, the public have apparently resigned themselves to the new tax system, which is set to replace the existing sales tax of between 5% and 10% and the service tax of 6%.

“I agree with this tax if it can reduce the budget deficit, and is not spent on something totally useless like ‘more projects to develop Malaysia’,” quipped Mohamed Hariz, 33, a lecturer at a local public university.

“We sometimes, as good citizens of Malaysia need to shoulder some of the burden… but the government needs to think of strategies first before desperately posing new taxes on the masses.”

Tan Lee Mei, 27, a massage therapist, said: “I agree with the tax because it can improve our economy. But I heard they’re starting with 6%-7%, which is too high for people with lower income. The tax should be lower.”

Reduce income tax

Across the causeway, Singapore’s GST rate currently stands at 7%, from the initial 3% in 1993, according to tax experts. But local experts have reportedly called for a lower rate of 4% to 5% for Malaysians, to encourage wider public acceptance.

On the Budget 2014 websites, netizens urged the government to implement the GST immediately, while simultaneously reducing the income tax rate.

“…Eventually it’s in every middle class tax payers mind to move to another country because the taxation system is flawed! Hope the government will introduce GST and lower income tax,” netizen “Rajesh” posted on the website.

But the government has yet to announce whether income taxes will be lowered in tandem with the introduction of the GST.

Nor Atiqah agreed that the GST would take a toll on peoples’ pockets, but pointed out that “if you can buy something, you can pay for it.”

“With the tax in place, there will be differences in how we spend: we’ll be calculating the tax, evaluating whether a purchase is really worth it. If you don’t feel it’s worth it, you have to work smart and find a cheaper alternative.”

Tan echoed her views, but Mohamed, who has a family to feed, was more cynical. “In the short term, I would definitely feel the ‘difference’ in paying more. In a long run, this will be tolerated because that’s how it works, isn’t it?” he said.

“We are going to be psychologically influenced and later on feel nothing, even numb, about this tax.”

Mohamed said before introducing the GST, the government should address unresolved issues that had cost taxpayers’ millions of ringgit, such as the National Feedlot Corporation scandal.

“The government needs to do their part, such as saving money, and to be seen as doing their part. Then only after that, the rakyat would feel this sort of taxes is needed to be imposed in order to save the nation’s economy.”

Tan urged the government to study the tax rates to ensure they were in line with the income of the lower to middle classes, as they would be hit the hardest by GST.

Meanwhile, Azhan Hasbullah, who works with Petronas, pointed out that the government, has to work on its communication skills with regards to the GST.

“The Malaysian government’s communication is awful, so, yeah, they have to improve on the communication. For example, be firm – not everything is political.

“If they think its good, which it is, go for it. We have experts to implement it and it is not rocket science, as many countries have implemented it.”

[This is part of a continuing series in the run-up to the Budget 2014 to be tabled by the Finance Minister on Oct 25.]

Discovering the dark and mysterious GST

Omar Mukhtar

Friday, September 20, 2013

The often misconstrued GST has led to heated debate on whether it should
or shouldn't be implemented.(Graphic by:Dayang Norazhar/The Mole)

In an email to the editor Omar Mukhtar wrote : 

"Human beings are always subject to the Fear of the Unknown. We are psychologically built to resist the unknown - hence the frowning on the introduction of Goods and Services Tax (GST), an animal we can hardly describe.

Recent announcements made by the authority are signalling that the enforcement of this unfriendly animal is imminent, yet no details have been unveiled.

Left in the dark, we scream of fear and annoyance, not knowing what to expect, not knowing how it would impact and/or change our lives – we reject, push back and retaliate. Quite common behaviour, actually.

Oh well, I guess for someone who grew up in a country where Value Added Tax (VAT) was first introduced in the world – ( VAT in France during the 80s was around 17.95 percent, GST does not seem to be a shocker at all.)

Everything I bought and consumed was about 20% more than the displayed price – I got used to it by just rounding the price to 120% instead.

I am guessing too that for frequent travellers, jetsetters and backpackers, GST is nothing new – as more than 170 countries have implemented this taxation system, and we as tourists get to enjoy the tax refunds before we board the plane back.

We then calculate the prices down to 80% instead, especially when purchasing big ticket items. We naturally then, forget to grumble about all the other VATs we paid during the entire sojourn. We forget about the 4 lines of taxes we paid at a hotel in New York, Rio or Bali. But, we are the first to belly ache about GST in Malaysia.

Most importantly, we ignore the benefits that far outweigh the costs.

Malaysia is indeed one of the last countries in the world to implement GST and being last signals that our taxation system is outdated and needs to be replaced.

However, several postponements to the implementation were made and it is perhaps due to the reticence on public and market reaction.

But right now, enough psychological preparation has been done, and time is about right for GST to head on to our shores. We should “Just Do It” !

In reading how the market is reacting to the initial announcements and how some sectors opined that the GST is the remedy for the current fiscal position and public debt – I am reminded of a conversation I had with a friend some three months ago.

He is an established businessman who recently sold all his three houses and now lives in Mutiara Damansara. As we were chatting, he blurted that his tax declaration is only 24,000 MYR a year, therefore he is exempted from paying taxes.

While he chuckles, I am thinking of his three children’s free education in public schools, and let’s not mention all the other benefits he and his family benefits from the country.

And guess what? I am only citing one example – and don’t we already know that only 1.7 million Malaysians are paying taxes for over a workforce of 12 million – to support a nation that is growing to a population of almost 29 million.

My maths is not great – but 1.7 over 29 seems like an unporportionate figure !

Now, with GST – there is no more escapism and no more laughing at how smart you are at evading taxes, right?

I must admit, that at least I am one of those rejoicing at the implementation of GST as I have heard and seen too many people just reaping benefits without having to pay a single cent of tax to the country. Very unfair, especially to those who have been paying taxes all these years!

Good news first – 40 basic items will not be included. Phew, in principle, our roti canais and nasi lemaks should not be affected. Health, education and toll roads are also exempted. Let’s now wait for the entire list to be unveiled to us. The GST rate is slated to be between 4-7 percent. 

Rather low, I reckon, compared to countries who have started off between 17-20 percent. Some countries have gone beyond 20 percent, and here we are ranting and raving about 7%.

Now, let’s get closer to this animal called GST. By definition, GST is said to replace the sales and service tax ( SST) and the main reason it has to come into place is to enhance the efficiency and effectiveness of the existing taxation system.

It is a proven system, definitely business friendly, which will spur economic growth and increase competitiveness in the global market.

Bad news is – like all other changes – there is a cost to development and progress. 

Consumers will feel the pinch in an increase of price for all other items that’s not included in the basket of 40. But then again, it really depends on our lifestyle and daily habits.

For example, the high taxation of cigarettes and alcohol only affect the addicted ones – and those who have clean lungs are not really bothered about the increasing taxes year after year.

If you don’t drive a fast car – you won’t be subject to a 300% tax. Get my drift? 

So, the rich won’t be affected – and the underprivileged will be assisted.

The introduction of the GST will likely lead to a one-off spike in inflation, depending on the level of goods and services in the basket of goods and services, but that will taper off with time.

Certain measures will also be taken into consideration to cushion the effect. In short, No man will be left behind.

The key to embracing GST is to view it from a positive angle, understand its mechanisms and accept it with an open mind. Being one of the last to come on board is definitely not good branding for Malaysia. 

Let’s just get on with it and be amongst the forward thinking nations that have cleverly shared the income generated for the well-being of its people.

Change is never easy - but that is the only way to move forward and keep progressing. If we keep doing the same thing over and over again, we cannot expect different results, can we?"

Source: http://www.mole.my/content/discovering-dark-and-mysterious-gst

Goods & Services Tax, is it time? - Veerinderjeet Singh

SEPTEMBER 20, 2013

LATEST UPDATE: SEPTEMBER 20, 2013 04:12 PM

The Government has done extensive ground work towards the introduction of a Goods and Services Tax (GST) with the Customs Department having invested time and money in getting itself GST-ready.

The Department has undergone intensive training and has engaged in dialogues with trade and business associations, professional bodies and various industry groups. The Department has also issued several draft GST guidelines.

The need for GST is predicated on the fact that the country has been running at a budget deficit for more than 15 years, and that it is important that a clear and sustainable alternative tax base be introduced as the corporate and personal income tax base is very narrow with a few paying taxes to fuel the nations' expenditure.

A GST is a consumption tax which is broad-based and thus spreads the tax burden across a wider segment of the working population. While GST will replace the existing sales tax (typically imposed at 10%) and service tax (6%), the initial indication from the Government some years ago was that GST would be introduced at the rate of 4%. 

There have since been rumblings that the introductory rate will be higher, and many are sceptical as to whether the introduction of GST at 4% will create an effective alternative tax base needed to ease the budget deficit. As has been the case in several countries which operate a GST (or value added tax (VAT)) system, the rate of GST will likely increase over time, particularly where the introductory rate has been low. 

For instance, Singapore introduced GST in 1994 at the rate of 3% and the rate is currently 7%. This rate is still low as compared with many other GST/VAT regimes. The United Kingdom's VAT rate has gradually risen from 10% in the 1970's to the current rate of 20%.

Should GST be introduced at the proposed 4% in Malaysia, it is fairly safe to assume that this rate will increase over time, probably within 5-10 years or so after its introduction. However, if that is the case, then there should be a lowering of the income tax rates as well. An effective tax revenue contributor such as GST will enable corporate and personal income tax rates to be reduced over time.

Issues

It is obvious that various matters need to be considered carefully before a comprehensive GST system can be introduced in Malaysia. These are summarised below:

Computerisation

The administration and enforcement of the GST system would require efficient and effective computerisation of the relevant department which will be administering the tax. It is important to ensure compliance with registration requirements, as well as to carry out internal checking and auditing of GST returns.

Accounting records

A comprehensive GST necessitates good business accounting records. At present, most small businessmen do not have good accounting systems. This would have to be considered in determining the exemption threshold for small businesses and in handling tax audits in the initial years of implementation.

Trained personnel

Effective administration and enforcement requires well-trained GST officers. Under the GST system, there is a need to have regular inspection of accounting records to counter tax evasion.

Treatment of exports

Exports should be zero-rated, i.e. the exports are covered by GST but the rate is zero. An exporter can, therefore, claim tax credit in respect of its inputs on which GST has been imposed. This has been confirmed to be the case by the Malaysian authorities in the various business consultations carried out over the years.

Exemptions

Small firms are normally exempted from GST, i.e. no GST is levied on their products but they are not allowed to claim any credit or refund for the tax imposed on their inputs. Otherwise, small firms may have difficulty in complying with GST legislation and their administrative costs would be increased. In addition, various necessities would also be exempted from GST. GST is a broad-based tax and exemptions and zero ratings must be scrutinised very carefully. Too many exemptions would result in the erosion of the tax base.

Rate of tax

This would depend on various considerations. GST could be levied at a single rate except for exports which are zero-rated. This simplifies administration while the provision for a zero rate is intended to encourage exports. It is possible that luxury goods may be subjected to a higher GST rate.

Impact on the general price level

It should be noted that the impact of GST on the general price level is part and parcel of its transitional phase. The general consensus in the literature is that while the introduction of GST may bring about a one-time increase in the cost of living, the probability of it leading to inflation is not high.

Government policies to inform the public and traders about the expected effect of the GST on prices, the use of price controls, offsetting adjustment in other taxes (if possible), the correct timing of the tax changeover, and generous provisions to ensure full credit for previously paid taxes on business assets and inventories should help to contain any potential inflationary effect.

Education

It is essential that the general public, in particular businesses and traders, are adequately informed about the features of the GST and the procedural requirements before the GST legislation comes into force. This is necessary to avoid unwarranted increases in prices of goods and services.

Transitional provisions

This refers to the changeover from sales tax/service tax to GST and the effect on stocks and capital equipment bought just before the implementation of GST. A decision would have to be made on whether the sales/service tax paid would be available as a credit, or be refunded to businesses.

Readiness

Is Malaysia ready for GST and more importantly are Malaysians ready for GST? Businesses are at various levels of 'GST-readiness' but on the whole it would be fair to say that most businesses have not committed the time and resources to getting themselves GST-ready in view of the frequent changes with regard to the introduction of this tax. 

It is hoped that the introduction of GST in Malaysia will see more smaller businesses voluntarily registering themselves for GST and gradually coming within the tax net, largely as GST operates a self- assessment mechanism whereby registering for GST will ensure that businesses will be able to claim input tax credits in respect of GST suffered on purchases of goods and services. 

Although many of these businesses may be sceptical as to the implementation and administration of GST, the Customs Department has indicated a clear level of confidence in its ability to administer the GST system effectively.

The Customs Department will be closely watched in this regard, particularly by organisations such as the Federation of Malaysian Manufacturers, with Malaysia being a net exporting nation. For exporters, cash flow will be significantly impacted by the speed and efficiency at which GST refunds in respect of exports are processed, and it is essential that the Customs Department be well equipped to ensure that exporters' needs in this regard are met.

The general consensus is that GST is likely to be introduced, but it has been a waiting game. Will this end in the 2014 Budget? Indications are that when the Government eventually commits to GST, there will be a 12 month period before the implementation of the tax.

Businesses should have some plans in place as to how they intend to prepare themselves in the event that GST is introduced as a 12 month implementation period is not long. For large entities with complex transactions, this time-frame will be a real challenge, if initial steps have not already been taken to prepare for GST. 

However, as GST implementation will potentially be a costly exercise, and given the uncertainty on the introduction of the tax, many are not willing to invest in a GST implementation exercise until there is certainty.

Is the average Malaysian ready for GST? GST as a consumption tax will ultimately affect the man on the street, and this is where the Government has felt the need to tread carefully.

It is estimated by the tax authorities that a GST at 4% would have a minimum impact on the Consumer Price Index (CPI). However, there is the possibility of traders not passing on their savings and some unscrupulous traders taking advantage of the introduction of GST. In reality, there could be a slight one-off increase for most products and services except for zero-rated items.

However we should note that any price movements in response to the introduction of GST would ultimately be decided by the market forces, levels of competition, and the pricing and positioning strategy of various market players.

As such, there would be a need for steps to be taken to mitigate the possibility of unscrupulous traders taking advantage. These can involve the following:

Heavier fines and penalties should be imposed to make sure businesses comply with the provisions of the law i.e. the Price Control and Anti-Profiteering Act. Shoppers' Guides have to be issued to make consumers aware of what the price increase or decrease is likely to be so that they will be paying a fair price. Assistance of hypermarkets and their suppliers' should be sought to act as price setters so that others will not unreasonably mark up their prices. Consumer Associations should be educated to act as the eyes and ears of the Government agencies to report excessive prices and consumers should be encouraged to exercise their rights.

GST has clear advantages and features in order to replace outdated consumption taxes; it can be applied to a broader spectrum of the economy; it will eliminate the tax-on-tax issue, etc due to it being a tax on final consumption.

Carefully designed, the GST would be more effective and equitable, and with a single low rate, minimum exemptions and zero rating will help simplify the tax administration in addition to enhancing tax compliance.

There is a need to broaden our tax base to secure a steady and predictable source of revenue to meet our future expenditure needs and to ensure a competitive tax environment for investment purposes.

Thus an overall tax reform with a GST being an important focus would be the most viable option to achieve our goals. This should not mean, of course, that the expenditure on Government projects can be incurred unabated - there must be a strict regime of cost-benefit analysis, cutting out the middlemen, instituting an open tender system for all public projects and a strict accounting on how taxpayer's funds are being spent. - September 20, 2013.

* Dr Veerinderjeet Singh is Chairman of Taxand Malaysia Sdn Bhd (a member of the TAXAND global organisation of independent tax advisers around the world) as well as a member of the Taxand Global Board and the Commission on Taxation of the International Chamber of Commerce based in Paris.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.

‘GST benefits outweigh drawbacks’

P Ramani

September 20, 2013

The Goods and Services Tax, when implemented, may cause a one-time price increase; though on long haul its benefits outweigh the drawbacks.

Budget2014 Feature

PETALING JAYA: Goods and services at present are subject to a one-time sales and service tax thus a low rate Goods and Services Tax (GST) may have differing impact on prices of goods and services offered, says Tan Eng Yew, executive director of Deloitte Kassim Chan Tax Services Sdn Bhd.

According to Tan, there are many factors to consider including if an item is presently taxed along the supply chain; on the basis of the present sales tax which is at 10% and service tax at 6%.

“Some prices may increase, some may remain and the zero rated items may get cheaper; provided the savings obtained with the implementation of GST is fully passed on to the public,” said Tan.

The GST is being proposed by the government to replace the current consumption tax i.e. the sales and service tax (SST).

The introduction of GST is seen as part of the government’s effort in reforming its tax structure towards a more efficient and effective taxation system.

GST will be imposed on all taxable goods and services consumed locally. Imported goods and services will also be subject to it.

Exemptions may be made by the government for essential items and the current proposed rate being speculated is 4% on the supply chain.

Tan also added that in reality, prices may show a one-time increase as experienced in countries that have implemented the GST system.

“The price increase should be at the full rate of GST as there should be savings in sales and service tax which will indeed be abolished with the introduction of GST,” said Tan

When asked whether GST will burden Malaysians, Tan stated that GST should be understood for what it is, as it is a more efficient consumption tax regime compared to sales and service tax.

GST does not discriminate

“GST is applied across a wide spectrum of goods and services, without discriminating who the consumer is. Nevertheless one may argue that it can burden the lower income group; which may be a reasonable argument,” said Tan

Tan also added that it is reasonable to say that the higher income group consumes more, meaning that they would be contributing to a larger proportion to the GST collections eventually.

“This would provide the government an opportunity to channel the larger contributions by the higher income group to helping the lower income group,” he said.

The tax expert also reminded that the success of GST should be assessed from the way the funds are collected and utilised to assist the lower income groups and fulfilling other governmental spending needs.

Tan also believed that the government is looking at restructuring the entire tax system and GST is part of the ongoing effort.

He also stated that the optimal time frame will be 12 to 18 months for preparation by businesses to prepare them to comply with GST requirements and believes Malaysia will follow the same strategy.

“The critical importance for businesses is to understand that GST should not be a tax on businesses; for GST paid can generally be claimed as credits against GST charged on sales made,” he said.

Therefore businesses should not increase prices unreasonably and equally important is a strong public education program to promote acceptance of GST, added Tan.

Tan also illustrated that prices of some non-essentials may reduce and as an example, a meal at a restaurant is presently subject to service tax of 6% and if GST is introduced at a rate below 6%, the public will pay less for the same meal.

Apart from introducing GST, Tan believes that it depends on the government’s objectives whether they’re merely looking into collection in short term; as from the tax consumption viewpoint, the government could simply increase the rate of sales tax or even broaden the scope of service tax.

Implement GST fairly

Meanwhile Malaysian Indian Business Association (MIBA) vice president (FT Chapter) and chartered secretary, S Kumarasen said that the introduction of GST will certainly affect the consumers, and the government should introduce a mechanism to check on the implementation of the GST.

According to him, certain goods’ prices need to be maintained at a ceiling rate and not allow suppliers to increase prices steeply and transfer the burden to consumers.

Kumarasen mentioned India as an example; when they introduced similar tax, they had a mechanism in place by putting the price as part of the package in the goods and services.

Apart from that Kumarasen also suggested that the government should announce the types of goods and services that will be subjected to the GST beforehand.

“Another important thing the government should remember is to provide clear awareness or education in terms of GST to the public or else they will have a misconception on how it’s being implemented,” he said

Kumarasen stressed that in order to have a level playing field; income tax should also be lowered for a more balanced tax system.

[This is part of a continuing series in the run-up to the Budget 2014 to be tabled by the Finance Minister on Oct 25.]