October 3, 2013
COMMENT By Omar Mokhtar
The key to embracing GST is to view it from a positive angle, understand its mechanisms and accept it with an open mind.
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 Addaed 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 four 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is indeed one of the last countries in the world to implement GST and being last signals that our taxation system is outdated and needs to be replaced.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 RM24,000 a year, therefore he is exempted from paying taxes.
No more escapism
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.
Change is never easy
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?
Omar Mokhtar believes in setting the record straight. He has a curious mind that helps him search for factual truth and once found, he loves sharing them with the public.
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