Unionist tags GST as regressive tax

Published: Wednesday October 9, 2013 MYT 12:00:00 AM 

Updated: Wednesday October 9, 2013 MYT 3:43:16 PM

KUCHING: The state Malaysian Trades Union Congress (MTUC) is not convinced that the Goods and Services Tax (GST) is the way forward for the country as it would have a greater impact on the lower income group.

Its secretary Andrew Lo (pic) called the GST a “regressive tax” as it had more pronounced effect on the poor and working class given that it consumed a higher proportion of their income.

Reacting to the possibility that the GST would be announced in the 2014 Budget to be tabled in Parliament this month, he said in a press statement: “This (GST) goes against the ‘high income nation for everybody policy’.”

He said the GST was a move from tax on income to tax on consumption and that those who promoted it claimed that lower corporate and income tax would generate investment and jobs although experience in the past 30 years showed that companies would resort to all means possible to avoid tax, even setting up shell companies in tax havens.

“As a result, the government tax revenues are squeezed and these same rich powerful people are pushing for the Government to further reduce corporate and income tax and to push for the introduction of GST,” Lo said.

He added that there were claims that Malaysia needed the GST because only 10% of Malaysians paid income tax and that 90% of Malaysians did not do so because their income was too low.

In this respect, he felt that the GST was an attempt to get them to pay more tax without raising their income.

“Supporters of GST argue that the more you consume, the more you pay. Sounds fair? However a person who earns 1,000 times more than the average Malaysian is not going to buy 1,000 more pillows, or eat 1,000kg more rice or buy 3,000 more watches.

“He will buy a gold and diamond Rolex but not in Malaysia but overseas, exploiting the GST loophole that allows tourists to claim GST refund.

“Experience has also shown that most countries that introduce GST also experience widening income disparity.

“It serves well to remind the Government that when Japan raised their GST in 1995, it was widely blamed for plunging the country into the longest ever recession from which they have yet to recover,” said Lo.