Tuesday, May 19, 2015

2647) MALAY MAIL - 17/05/15 - Despite Apparent Bite, Consumer Groups Say GST Not Hitting Poor Harder

KUALA LUMPUR, May 17 — For lower income earners unaccustomed to direct taxation, the past month has made them acutely familiar with three letters: GST.
With the Goods and Services Tax (GST) appearing on bills that were not visibly taxed before — such as in coffee shops and sundry stores — the new tax burden is palpable.
For those more accustomed to outlets where the GST supersedes the Sales and Service Tax (SST) at the same rate of 6 per cent, the change has been less demonstrable.
But despite the seeming difference between how the new consumption tax is visibly affecting businesses frequented by the lower-and higher-income classes, observers say the GST is not necessarily regressive as its critics contend.
Regressive taxation refers to a tax system in which lower income earners bear the brunt of the tax burden.
According to Datuk Paul Selvaraj, the secretary-general of Federation of Malaysian Consumer Associations (Fomca), the impact of the GST on the poor cannot be measured solely based on their expenses when eating out.
Instead, he said the tax must be judged on its effects on the gamut of household spending, which include healthcare services, education, transportation and more.
“You must look at the basket of goods. Because of zero-rated items, the poor are paying less. So then you are paying tax only on standard-rated items.
“So that makes it a progressive tax because the rich are paying more tax,” he told Malay Mail Online when contacted recently.
According to Paul, as the tax burden is based on consumption, higher-income earners who tend to spend more on standard-rated items instead of zero-rated goods would contribute more under the system.
Under the GST, goods and services fall under three categories: standard rated supplies where consumers bear the full tax burden, zero-rated supplies where firms cannot charge customers for tax on inputs but may claim these from government, and exempted supplies where businesses are essentially expected to absorb the GST.
Paul suggested that consumer choices would also dictate how GST affects their expenditure, stating that they could mitigate its burden by opting to, for example, cook at home more frequently instead of eating out.
Datuk Nadzim Johan, president of the Muslims Consumers Association of Malaysia (PPIM), believed that GST’s impact on consumers would be minimal in the absence of profiteering, noting that the tax rate was only at six per cent.
He disagreed that the lower-income group was taxed more than under the old SST regime, stating “most of the items for the poor are not taxed” with Putrajaya’s list of over 4,000 items where GST is not imposed.
“I don’t think the six per cent should be a very big issue. You can see every festival, chicken prices went up 100 per cent… life went on as usual,” he told Malay Mail Online, claiming that fluctuations in prices happened daily and that Malaysians had largely not observed prices until recently when GST came into effect.
“I think if we don’t have much money, we got to control the budget, can’t simply spend, go and buy what’s cheaper,” he said.
Both Nadzim and Paul pointed at traders’ alleged profiteering as the factor that would hurt Malaysian consumers more than the GST.
Nadzim said traders should have been educated on ethical practices before Putrajaya rolled out GST.
“If it had not been for unscrupulous business organisations, traders and profiteering effect of these groups, I don’t think we would have any problem with GST,” he said.
Former World Bank senior social scientist Dr Lim Teck Ghee said, however, that the GST will “definitely” impact the poor more owing to their “fixed or irregular small incomes”, adding that it was unclear how the rise in living costs could be offset by any new subsidies or exemptions.
“Although there is an exemption list, government has little control on how it is implemented at the ground level. All sellers will use it as an excuse to push up their prices.
“Moreover the confusion as to what is taxed and what is exempted is adding to the inefficiency of the new system. Anytime you have inefficiencies, you will find the poorest and least powerful paying the price,” the Centre for Policy Initiatives executive director told Malay Mail Online recently.
Observing that the GST has raised living costs instead of lowering it, Lim warned of the risk that prices may continue to rise in the long term instead of being a temporary phenomenon, attributing this to a poorly thought-through new taxation system with implementation by inefficient government agencies.
Public unhappiness continues to manifest over the new tax that is seen as welcome reform by economists but widely panned by critics and opposition politicians as a purportedly regressive system.
On May 1, an estimated crowd of 10,000 Malaysians rallied in Kuala Lumpur to protest the GST, leading to the arrests of at least 32 people including several activists and opposition lawmakers.

Sumber : http://www.themalaymailonline.com/malaysia/article/despite-apparent-bite-consumer-groups-say-gst-not-hitting-poor-harder

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