A fairer tax plan than current one

Publication: NST

Date of publication: Jul 1, 2013

Section heading: Main Section

Page number: 018

Byline / Author: By Ta Kwok Chang

IN principle, the goods and services tax (GST) is a fairer tax than the current tax structure, where only one million income earners pay income tax out of more than the working population of six million.

It means that many are either not liable to pay tax or avoid paying their taxes.

The GST will be levied at every step of the supply chain and this will make avoidance difficult.

The other principle of taxing consumption rather than capital formation is good encouragement for people to engage in making profit.

Heavy taxes on income leads to the disincentive to earn more and could lead to expansion of the underground economy.

The GST widens the tax payer base and is fairer for all who consume and receive services, as they will have to pay their fair share.

If the GST is able to collect additional taxes through reducing the number of those who have been avoiding paying their taxes, then this should be well supported by the people.

However, the GST must not be used as an additional tool to collect more revenue.

Apart from indirectly collecting the rightful tax, its rate should also be set to revenue neutral.

This means that there should be a corresponding decrease in the income tax rates of individuals and companies to achieve revenue neutrality.

This will make the government more frugal, careful and accountable.

Ta Kwok Chang, Kuala Lumpur