Spend more, pay more

Publication: NST

Date of publication: Nov 8, 2013

Section heading: Main Section

Page number: 020

IT is human nature to fear what we do not know. And this is precisely the reason why the proposed introduction of the goods and services tax (GST) struck much fear in ordinary Malaysians. The general misconception is that GST, scheduled to be implemented in April 2015, will translate into a higher cost of living for Malaysians, especially for the low- and middle-income groups, as the prices of goods will escalate.

Some also have the notion that those who are exempted from paying income tax now, that is, individuals earning less than RM3,000 a month, will be taxed.

Such misconceptions, fuelled largely by critics of the government's reformatory initiatives, need to be corrected and the authorities have started on the right foot by embarking on a nationwide programme to educate the public on the benefits of the new taxation system.

Contrary to popular belief, the GST will not favour the rich and burden the poor. In fact, there will be sufficient compensation for the low- and middle-income group to offset the effects of the new system.

These include ensuring that basic needs, such as staple foods, water and the first 200 units of electricity, are zero-rated for domestic users, while mass public transport, education, health, tolls, residential property and financial services are exempted from GST.

In addition, there are programmes, such as the 1Malaysia People's Aid (BR1M), for the low-income group and personal tax reduction for middle-income earners.

As Finance Ministry's GST implementation office tax adviser Datuk Kamariah Hussain notes, GST is a fair, efficient and transparent taxation system that will depend largely on consumers' habits.

In essence, it means that GST is targeted at those who can afford to spend. The more you spend, the more you pay.

It is a better system of taxation compared with the existing sales and service tax (SST) as it is more transparent and enables consumers to know what type of taxes they are paying for and how much.

In fact, experts believe that with the removal of the five per cent sales tax and six per cent service tax, prices can even be lowered because with the elimination of taxes, manufacturers will be able to lower the cost of production and get rebates and pass the savings on to consumers.

To put their fears to rest, Malaysians would do well to educate themselves on GST by attending the roadshows and forums organised by the Finance Ministry and its agencies.