Will the proposed 6% Government Services Tax (GST) have a ripple effect on our economy? Pakatan Rakyat has criticised BN’s plan to implement the GST in 2015. Here are three things that Barisan Nasional (BN) doesn’t want you to know about the tax.
#1. It will increase the price of goods!
The Serdang MP explained that the notion that the introduction of GST will replace two taxes (the Sales Tax and Services Tax) was a fallacy.
“The truth is that the items taxed under the Sales Tax and the Service Tax are far less than what is taxed under the GST. What BN has not told the rakyat are that many items are currently exempt under the sales tax.
“For example, in 2012 the list of items exempted under sales tax was 250 pages long. However, the list of items exempted under the GST is only 21 pages long,” Ong said.
He warned that the prices of the majority of goods and services would increase after GST despite the removal of the Sales Tax and Services Tax.
The DAP Election Strategist gave a list of non-luxury items which were not charged under the sales tax but will be charged under the GST. These items include milk, coffee, tea, mineral water, canned fruit, newspapers, stationary, school bags, as well as electricity consumption above 200kwH.
#2. BN will waste the extra money it gets from GST
DAP National Publicity Secretary Tony Pua said that without any attempt to instill financial spending discipline in the government, it would not matter how much additional revenue was generated from GST. Pua said that the extra money obtained from GST would be spent by the government and not saved or invested.
“Worse still, the money will be spent on wrong priorities. The biggest beneficiary is the Government’s expenditure on supplies and services, which will enjoy a RM2.0 billion increase in allocation to RM36.6 billion for 2014,” Pua said.
He noted that the budget for government supplies and services in 2010 was only RM23.8 billion. This showed a 53.8% increase in spending for supplies and services in 4 years.
With the dismal performance of many government agencies as reported in each year’s Auditor General Report (see report on pages 22 & 23), one fears that the additional money allocated for “supplies and services” will not be well spent. Will we see more scandals of NFC proportions?
Pua, who is the MP for Petaling Jaya Utara, also revealed the real reason behind the introduction of GST. “It’s a desperate move to take the easy way out to fill the government coffers, so that it does not have to cut down on its excesses,” he said.
#3. It will tax those who cant afford to be taxed
GST will tax those who can’t afford to be taxed, i.e. 60% of Malaysians who are eligible for BR1M, says DAP National Political Education Director Liew Chin Tong.
With 60% of Malaysian households eligible for BR1M government aid, Liew says they are already struggling to make ends meet, and hence “deserve” to be below the tax-paying threshold.
“While some may argue that the daily necessities of the poor are not subject to GST, I would like to ask, how do we differentiate between daily necessities for poor people and for normal people?”
The MP for Kluang explained that Malaysia’s proposed GST is not like in the UK, Australia and other developed nations where top income tax rate were 50% and above before the introduction of the GST.
“For those nations, tax cuts were the natural course of action after the introduction of GST. In Malaysia, there is little room to manoevre when the percentage of taxpayers is relatively low,” Liew said.
GST may usher in inflation
Echoing Liew’s sentiments, DAP National Organising Secretary Anthony Loke said that the introduction of this tax would shift the tax base from the current 15% to 85%.
“We are concerned that in the lack of enforcement, unscrupulous traders will take the opportunity to raise prices and make a profit. Everyone, particularly the lower income group, will suffer with the rising cost of living,” Loke said.
The Seremban MP said that Singapore had introduced its GST in stages since 1994, starting from 3%, gradually increased to 7% in 2007. Prime Minister Najib Razak announced that the GST to take effect in April 2015 will be set at 6%.
“Singapore is a nation that has maintained a constant budget surplus. However, in Malaysia, we have operated under a deficit budget since 1998. It is feared that the introduction of GST will lead to the beginning of an inflationary cycle,” he said.
