Proposed GST will not burden the people, just a little rap on the knuckle

ARCHIVES 2009

By admin-s On Dec 18, 2009

The intention, mind set of the Barisan Nasional administration is exposed. Rakyat diutamakan illustrated.

By Lee Wee Tak

In drafting legislation, it is important to assess the intention and the problem the law seeks to address hence in interpreting legislation, British judges use certain approach, such as the Mischief Rule, to identify the reason for enactment of the relevant laws before making a fair and equitable decision.

So when I look at the penalty provisions of the draft GST, I wonder why the penalty imposed is so harsh, especially when compared to Income Tax Act, 1967.

Taken from China Press’s excellent report:

消費稅法案嚴懲逃稅初犯罰20倍重犯罰40倍

SEVERE PENALTIES UNDER GST; fine for first offence is 20 times the tax payable , 40 times the tax payable if repeated offence

（吉隆坡16日訊）2009年消費稅法案闡明，逃稅者或協助他人逃稅的人士，將面對相等于逃稅額10倍至20倍的罰款，或監禁5年，或兩者兼施。

According to the draft GST legislation, GST evaders or people assisting acts of evasion shall be fined 10 to 20 times the tax payable amount, of face 5 years imprisonment , or both. (note this is for first time offenders)

重犯者必須依據逃稅額重罰20倍至40倍，監禁不過7年或兩者兼施；如逃稅款額無法確定，罰款將介于5萬令吉至50萬令吉，另外也可能面對最高7年監禁或兩者兼施。

Repeated offenders shall be fined between 20 to 40 times the amount of GST evaded or imprisoned not more than 7 years of both. If the amount evaded cannot be determined, the fine shall be between RM50,000 till RM500,000, in addition to maximum 7 years imprisonment or both.

If you were to compare with the penalty provisions of the Income Tax Act, 1967:

Offences, Penalties and Compound

An offence is committed under the Income Tax Act 1967 under the following circumstances :

Failure to notify chargeability ( Subsection 77(2) or 77(3) )

Penalty imposed is 10% of the total tax payable subject to a minimum of RM 300 and a maximum of RM 5,000.

Failure to comply with Notice.
Offences Compound Payment
First – penalty shall be RM 200 to RM 300
Second – penalty shall be RM 300 to RM 500
Third – penalty shal be RM 500 to RM 700
Fourth – penalty shall be RM 700 to RM 1,000
Fifth and above – Minimum penalty is RM 800 and maximum penalty is RM 2,000

Failure by companies to submit estimate according to subsections 107C(2), 107C(3) and 107C(4)(a).
Estimate of Tax Payable Compound Payment
RM 500 and less – penaly shall be RM 300
RM 501 to RM 1,000,000 – penalty shall be RM 500
More than RM 1,000,001 – penalty shall be RM 1,000

In addition, there are other avenues such as appeal and settlement with the Inland Revenue Board, rather than being bunched together with murderers, rapists and other violent criminals.

An appeal may be settled :

a. By agreement between the taxpayer and the IRBM, or
b. By a decision of the Special Commissioners of Income Tax / the High Court / the Court of Appeal

Please note that if you are not satisfied with the decision of the IRBM regarding your appeal, it will be forwarded to the Special Commissioners of Income Tax. If you are dissatisfied with the Special Commissioners decision, you can appeal further to the High Court and the Court of Appeal.

Why such harsh penalties imposed on GST offence, especially when compared to income tax? (who is so desperate for $$$?)

Is this a good approach to create a business friendly environment and attract foreign investors?

What is the intention for such harsh penalties?

Regardless of whether this provision is amended or not, the intention, mind set of the Barisan Nasional administration is exposed. Rakyat diutamakan illustrated.

阿末胡斯尼也說，那些每年營業額不超過50萬令吉的公司，無須徵收消費稅，因此在這項條件下，國內將有超過70%中小型企業不受消費稅影響。

Ahmad Husni (Second Finance Minister) added that companies with annual turnover amounting to not more than RM500,000 will not be required to collect GST hence under this condition, more than 70% of the Small Medium Industries will not be affected by GST

Rubbish. SMIs purchase stocks, office supplies, incur repair and maintenance expenses and whatever not from wholesalers, service providers, financial institutions, factories etc which turnover easily exceed half a million a year.

SMIs who purchase something at RM10 now have to fork out RM10.40 and guess who they want to recoup from? Malaysian businessmen are great at raising prices and not so great at lowering them, remember the aftermath of petrol pump price drop after Badawi’s suicidal increase? Why give business people an excuse to raise prices?

Just for comparison purposes. Back in July 2008, the turnover threshold for food outlets which has to collect 5% service tax was increased from RM500,000 to RM3 million to ease the burden on rakyat. Now, barely 2 years later, we see a reversal of government decision without convincing evidence of economic recovery and increase of average income level. On what basis the Barisan Nasional administration is back tracking 1 of it’s really rakyat friendly amendments?