Will the GST be another nail in the coffin?
SAKMONGKOL AK47
A long time ago, I have written about the government’s plan to implement GST. I am not going to bother looking at what I wrote. Maybe what I write then did not make sense at all.
But to me, the plan to implement the GST will be another nail in the coffin for the BN government. In almost all cases where the GST was introduced, it has raised a lot of discontent. Governments have fallen because of the GST and finance ministers have resigned.
Remember this: governments have fallen. Finance ministers have quit.
I hope, the government’s tax package is not an attempt to trick workers into thinking that they will be better off after the proposed tax cuts. I also hope it will not trick people on government benefits that they will be better off after the so-called “compensation”, despite the introduction of a goods and services tax (GST).
Consider this. Our tax base is perhaps only 15%, i.e. only about 15 percent of the population pays tax. The balance have nor or were not paying taxes- kampong people, self-employed, ordinary folks outside the tax bracket. Now, all are caught in the tax trawler net and pay consumption tax. Never mind says the government; we will compensate the ordinary people.
Ok. So we ask, what then is the size of the compensation and its value? Will it be larger than the revenue the government collects after implementing GST? Then the government ends up spending more after all.
What is the purpose of the GST? The GST, levied at a rate of x %, will replace the government’s wholesale sales tax and other indirect taxes. How much will the abolition of these taxes cost and how much will the GST raise?
I don’t have the figures but I am sure the reasoning by the government is that the GST will increase the amount of tax collected. Meaning the GST will increase government revenue by X amount. Revenue will likely to increase over time because of the expansion of the service sector.
Here is an interesting question. Somebody will make money as a result of introducing and implementing the GST. Ask this question- who will collect the revenue? It will be collected by some companies already proposing or about to propose further privatization of government services.
Who is actually paying the excess revenue that government collects after GST? If we study carefully, we can know who is NOT going to pay: big business- the tax burden on Malaysian business will be reduced by more than the GST revenue collected. How so? Because business which export a lot will be treated to a substantial decrease in costs because they will be eligible to have GST they pay on business inputs refunded.
So if business doesn’t pay, who pays? If businesses won’t be paying the extra GST revenue, then it means that workers and people on government benefits will subsidize business.
Cilaka punya government! We subsidize these people? Because, really the GST is not a tax on business as input tax credits ensure that businesses effectively do not pay GST on their inputs.
GST paid by business on raw materials, tools, electricity and rent is refunded. Business is exempt from paying the GST.
