Freedom, GEABSOLUTE POWERS CORRUPT ABSOLUTELY, General Election (GE15), Malaysia, Politics, polling Nov 19: Destroy Umno for the betterment of Malaysia, race, religion, Solidality, support Aliran for Justice

Share This

Showing posts with label Goods and Services Tax (GST). Show all posts
Showing posts with label Goods and Services Tax (GST). Show all posts

Saturday 11 August 2018

Implications of the 'RM19bil GST collected, RM18bil taken’ and RM19.4bil shortfall !

https://youtu.be/Ew5Fk-ml6Mo 

The immediate concern is the budget deficit for 2018 spiking to 4% if the GST refunds are made this year


ON May 31, when Finance Minister Lim Guan Eng announced that the new government would be able to meet the budget deficit of 2.8% for this year, the sum of RM19.4bil that is to be refunded to companies since the goods and services tax (GST) was discontinued, never came into the equation.

Now, since that money is not in a trust account that was specifically set up to meet the refund obligations, does the government need to borrow more to ensure it meets the refunds? In doing so, would it incur a bigger budget deficit than had been envisaged?

There are wider implications on the shortfall of the RM19.4bil, assuming the refunds are to be done this year.

The biggest challenge for Lim is to cover the shortfall to maintain the budget deficit for 2018 at 2.8%.

The hallmark of the Pakatan Harapan government’s first 100 days of rule is to bring down the cost of living and cost of doing business. Towards this end, it has subsidised the price of petrol and diesel and removed the GST.

The cost of keeping up with the Bantuan Sara Hidup and subsidy for petrol and diesel is estimated to be about RM6.2bil between June and December.

Revenue loss due to discontinuing the GST from June 1 onwards is estimated at RM21bil.

The shortfall is made up of cutting down government expenditure by RM10bil, increasing dividends from government agencies such as Khazanah Nasional Bhd and Petroliam Nasional Bhd, a higher petroleum income tax of RM5.4bil and proceeds from the implementation of the sales and service tax from September onwards.

Nowhere was the RM19.4bil figure that is to be paid back to companies under the GST that was discontinued mentioned.

Lim has said that the money was supposed to be in the trust account, but is not there and has gone “missing”.

Former Finance Ministry secretary-general Tan Sri Mohd Irwan Siregar Abdullah has said that all proceeds from the GST went into the consolidated fund of the federal government. The amount to be refunded is allocated to the trust account monthly based on the requirements of the Customs Department and the financial position of the government.

Customs director-general Datuk Seri Subromaniam Tholasy has revealed that since the GST was implemented on April 1, 2015, the total refunds amounted to RM82.9bil and the amount allocated to the trust account from the federal government consolidated fund was only RM63.5bil – representing a shortfall of RM19.4bil.

Generally, refunds for the GST are to be done within 14 days. But the amount allocated is less because not all refunds are paid within the two-week period.

At times, refunds are held back up to one year, pending investigations. Hence, the cash allocated to the trust account maintained by the Customs and the Inland Revenue Board (IRB) is less than the total amount due for refunds.

For instance, in 2017, the amount allocated to the IRB trust account for refunds was RM7bil when the total amount to be refunded was more than that.

In the case of the Customs, the outstanding refunds for 2017 was RM15bil, but the amount allocated was less.

Under the previous government, the GST provided a steady flow of cash every month. The thinking was that the money for refunds should be allocated when it comes due to best manage the cash-flow position of the government.

However, the view of Lim is that money meant for refunds should have been put into the trust account, irrespective of whether there is a need to pay immediately or otherwise.

Hence, the issue is not really the question of the RM19.4bil meant for refunds going “missing”.

It is whether the money is still in the consolidated accounts or whether it has been utilised. If it was utilised, did the government have the right to use it for other purposes in the name of cash-flow management?

The bigger implication for the Pakatan government is how it is going to cover this RM19.4bil shortfall.

One of the ways the government can cover the RM19.4bil hole without increasing the deficit is to cut more of the excesses.

On this score, the Pakatan government has so far handled public funds in a more judicious manner compared to the previous government. It has cut down the budget for inflated infrastructure projects and stopped unnecessary spending.

The light rail transit 3 and East Coast Rail Link projects are only some examples. It has stopped prestigious projects such as the KL-Singapore high-speed rail and the less glamorous mass rapid transit line 3 project. The government of today has earned full marks for being transparent and diligent in handling public finances.

Despite declaring that the federal government debt is at RM1.07 trillion, business sentiment is at a seven-year high, while consumer sentiment is at a 21-year high.

The stock market is looking good so far, much better than the likes of China and Hong Kong, although the improved sentiments are likely to be temporary.

As for the ringgit against the US dollar, its performance is better against many of the Asian and emerging-market currencies. The tumbling of the Turksih lira and Russian rouble is testimony that the ringgit is not that bad after all.

The government can probe, produce a White Paper or do anything else to look into the RM19.4bil shortfall, but the bottom line is that Lim and Prime Minister Tun Dr Mahathir Mohamad will have to face the reality of making up for a RM19.4bil shortfall in government finances for this year.

Economists are predicting that the federal government budget deficit would be higher than the 2.8% estimated on May 31 this year on the assumptions are made this year. Some are looking at the budget deficit to be as high as 4%

Would there be an impact on Malaysia’s credit rating and the ringgit?

Yes, a spike in the budget deficit would have an impact for the short term.

However, the government of the day will score brownie points in its drive to bring about reforms and governance in the management of public funds. Rating agencies would appreciate any government that promotes transparency and improves on its finances purely by spending within its means.

So far, the government has done away with the GST and taken measures to put more cash into the hands of the people and business to improve domestic spending. The stabilisation of petrol prices and threemonth (June to September) tax-free period between the implementation of the GST and SST has put RM20bil into the hands of the people and businesses. This should help improve the domestic economy for a few months.

However, for the longer term, investors and rating agencies will be looking at how the RM19.4bil hole in the federal government finances will be covered. What are the government assets that will be sold?

Certainly, we are not looking at an expansionary budget come November this year.

Source:  The Alternative view by M.Sshanmugam The Star

RM19bil GST collected, RM18bil taken’




KUALA LUMPUR: The previous government has not been able to refund companies their tax credit that came about following the implementation of the Goods and Services Tax (GST) because 93% of the money was not placed in the correct account, Finance Minister Lim Guan Eng revealed.

He said some RM18bil of the RM19.4bil input tax credit under the GST system since 2015 was “robbed” by the previous administration.

“I was very shocked when informed that this happened because the previous government had failed to enter the GST collection in the trust account specifically meant for the repaying of GST claims.

“Instead, the Barisan Nasional government pilfered the trust account and entered cash GST collection directly into the consolidated fund as revenue to be spent freely,” he said when tabling the GST (Repeal) Bill 2018 during its second reading in Parliament yesterday.

He said that as of May 31, the outstanding GST refund stood at RM19.397bil whereas there was only a balance of RM1.486bil in the repayment fund.

Lim said from the total input tax credit, RM9.2bil or 47% was recorded between Jan 1 and May 31 this year, RM6.8bil or 35% in 2017, RM2.8bil (15%) in 2016, and RM600mil (3%) in 2015 (from April 1 to Dec 31, 2015).

Under GST, the input tax credit allowed businesses to reclaim credit for taxes paid on purchases, subject to filing of input tax documents.

In his winding-up reply, Lim said a comprehensive investigation would be carried out to determine the cause of the missing funds.

When debating the Bill, Lim also said he had asked for documents to show how the input tax had ended up in the consolidated fund.

“I asked the Chief Secretary to the Government for the Cabinet papers on the matter.

“However, he told me he could not remember anything of such,” he added.

Lim said former Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz, when told of the missing funds, said it was imperative that the money was returned to the claimants as it was fiscally moral to do so.

Later, at the Parliament lobby, Lim said a former Treasury secretary-general may have been aware of the missing RM18bil.

The previous government, he said, had committed wrongdoing over the missing funds.

“I would assume the previous KSP (ketua setiausaha perbendaharaan/Treasury secretary-general) would have known about this.

“We want something definite because we want to look at the circle of decision-makers,” he said.

By martin carvalho, hemananthani sivanandam, rahimy rahim, and loshana k shagar The Star

Khairy urges gov't to bring 'GST robbers' to book




BN MPs want Najib, RM18b GST 'robbery' claim investigated





Related 

GST refunds should be in trust account: ACCCIM - theSundaily

 

RM18b input tax credit under GST system robbed ... - The Straits Times

 

Related posts:

 

What concerns Malaysians most ? 

 

Jobs ahead for Pakatan's first 100 days fiscal reform

 

Singapore budget 2018: hiking its sales tax, but not until 2021 or later

 

Monday 5 June 2017

What concerns Malaysians most ?

Supermarket shopping food

THE biggest concern among Malaysians, as we head towards the general election, is the cost of living. It’s as simple as that.

There have been plenty of political and religious side shows, but for many Malaysians, regardless of race, settling the many bills each month is what worries them the most.

Although Malaysia remains one of the cheapest countries to live in, its citizens have been spoilt for too long.

We are so used to having so many food items subsidised, including sugar, at one time, to the point that some of us have had difficulties adjusting ourselves.

Our neighbours still come to Malaysia to buy petrol, because ours is still cheaper than theirs.

But, as in any elections, politicians will always promise the heavens to get our votes. One of the promises, we have already heard, is the abolishment of the Goods and Services Tax.

No doubt that doing away with GST would appeal to voters, but seriously, even the opposition politicians calling for this are aware that it is a counter-productive move.

In the words of Tan Sri Mohd Sheriff Mohd Kassim, a highly-respected retired government servant, “it is too much of a fairy tale.”

The danger, of course, is that populist electoral pledges are always appealing, even if they are not rational.

Malaysia cannot depend on just about two million tax payers to foot the bill in a country of over 30 million people. It is unfair and unsustainable.

Taxing consumption gives more stability to revenue because income tax is regarded as highly volatile, as it depends very much on the ups and downs of businesses, according to Mohd Sheriff. When the market is soft, revenue collection always sees a dip.

For the government, which has already been criticised for having such a huge civil service, without GST, it could even mean its workers may not get paid when there is a downturn in the economy.

In the case of Malaysia, we have lost a substantial amount of revenue following the drop in oil price.

So, when politicians make promises, claiming plugging leakages is sufficient to end GST, it is really far-fetched and irresponsible.

The Malaysian tax system needs to continue to be more consumption-oriented to make it recession-proof, and, more importantly, the tax net just has to be widened. The bottom line is that, it is grossly unfair for two million people to shoulder the burden.

The government has done the right thing by widening the tax base and narrowing the fiscal deficit. The move to implement GST, introduced in 2014, has been proven right.

GST is needed to provide a strong substitute as a tax consumption capable of off-setting revenue loss from personal and corporate tax.

Beginning next month, India will join nearly 160 countries, including Malaysia, in introducing GST. Like Malaysia, when GST was first introduced, plenty of loud grumblings and doubts have rolled out.

Unlike Malaysia’s flat 6% across the board, India is introducing a more complicated four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and highest for luxury and demerits goods that would also attract additional cess. In Singapore, GST was introduced on April 1, 1994, at 3%. The rate was increased to 4% in 2003, then 5% in 2004. It was raised to 7% on July 1, 2007.

Some politicians came under fire recently for purportedly calling for the abolishment of GST, however, some others clarified that they had merely called for a reduction in the tax’s percentage.

Another top opposition politician has come out as the strongest opponent of GST, reportedly saying the claim that Malaysia needs GST is false.

Some other politicians have described GST as regressive, but have not come out with clear ideas on how it should be tackled.

Nonetheless, the ruling party should not make light of these electoral promises.

For many in the urban middle class, they feel the squeeze the most.

They have struggled against the rising cost of living, paying house and car loans, and earning deep levels of debt, as one report aptly put.

The middle class, consisting of over 40% of Malaysians, is also in the income tax bracket, it must be noted.

Last year, an economist was quoted saying that 2016 was a year of a shrinking urban middle class and a happy upper class.

Shankar Chelliah, an associate professor at Universiti Sains Malaysia, said that the Malaysian middle class shrank in metropolitan centres across the country, and that most of its members would end the year almost 40% poorer than they were in 2015.

He said this would be due to the withdrawal of cooking oil and sugar subsidies, depreciation of the ringgit, decrease in foreign inflows and increase in outflows, among other factors.

For many in this middle class range who do not qualify for BR1M handouts, the government clearly has to come up with a range of programmes which can relieve them of these burdens.

It isn’t race or religious issues that will appeal to voters – they want to know how they can lead better lives, and if the opposition thinks contentious issues will translate into votes, they will be in for a surprise.

It is true that the heartland will continue to deliver the crucial votes, and the ruling party will benefit from this, but Malaysia has also become more urban and more connected.

At the end of the day, it is the bread and butter issues that matter most. Let’s hear some solid ideas and programmes which will reduce the burden of Malaysians.

By Wong Chun Wai On the beat, The Star

Wong Chun Wai began his career as a journalist in Penang, and has served The Star for over 27 years in various capacities and roles. He is now the group's managing director/chief executive officer and formerly the group chief editor.

On The Beat made its debut on Feb 23 1997 and Chun Wai has penned the column weekly without a break, except for the occasional press holiday when the paper was not published. In May 2011, a compilation of selected articles of On The Beat was published as a book and launched in conjunction with his 50th birthday. Chun Wai also comments on current issues in The Star.

Related posts:

Prized job: While long-term security like the pension scheme free healthcare and easy loans have been among the perks of joining the ...


Money games, Earn money nothing can replace the old-fashioned hard-work, honesty; learn Jack Ma's way 

 

For the love of Datuk titles 

 

Many Malaysians are too obsessed with politics & race instead of expanding economic cake 

 

Yes, right to comment on Perkasa Chief Ibrahim Ali, selective non-prosecution by A-G!

 

The real fight of Malaysia is at the capital markets, not the racist card or silat !



Money games, Earn money nothing can replace the old-fashioned hard-work, honesty; learn Jack Ma's way


PUTRAJAYA: The entry of a major Chinese carmaker into Proton Holdings Bhd will not only ease its financial woes, but also bring fresh ...
 

Mereka Rasuah Kita Bayar! 3J drive: Jangan Kawtim, Jangan Hulur, Jangan Settle! 

 

Mind your words, please! 

 

YBs, please lend us your ears

Some of our lawmakers should re-focus their attention and find ways to help ease the cost of living. IT’S disturbing, to say the lea...

Tuesday 20 January 2015

Malaysia revised budget 2015: cuts RM5.5 bil, deficit target 3.2%, focus on manufactured goods

Prime Minister Datuk Seri Najib Razak delivers his speech on the revision of the Budget 2015 at the Putrajaya International Convention Centre today. He said a slew of cuts amounting to RM5.5 billion will take place as part of Putrajaya’s proactive measures. – The Malaysian Insider pic by Nazir Sufari, January 20, 2015.



Prime Minister Datuk Seri Najib Razak today announced a slew of budget cuts amounting to RM5.5 billion as part of Putrajaya’s “proactive measures” to align itself with plunging global oil prices and revised world economic growth projections.

The cuts would come from the Budget 2015’s operational expenditures that were initially set at RM223.4 billion, while the RM48.5 billion for development would remain untouched, Najib said in his speech today at the Putrajaya International Convention Centre.

Also, the fiscal deficit target of 3% of the Gross Domestic Product (GDP) for the year has been revised to 3.2%.

Najib said this was still lower than 2014’s fiscal deficit of 3.5%. The "proactive measures" to achieve the RM5.5 billion savings are:

“(The government will) optimise outlays on supplies and services, especially overseas travel, events and functions and use of professional services. This will result in savings of RM1.6 billion.

“Second, defer the 2015 Program Latihan Khidmat Negara (National Service) to enable the programme to be reviewed and enhanced, with savings expected at RM400 million.

“Third, review transfers and grants to statutory bodies, GLCs, Government Trust Funds, particularly those with a steady revenue stream and high reserves. This measure will result in savings of RM3.2 billion.

“Fourth, reschedule the purchase of non-critical assets, especially office equipment, software and vehicles, with an expected savings of RM300 million.”

Najib said Putrajaya’s revenue would be enhanced by encouraging companies to register with the Royal Malaysian Customs to enable them to charge and collect the goods and services tax (GST).

He estimated that broadening the tax base would contribute an additional RM1 billion.

Putrajaya would also realise additional dividends from GLCs and GLICs as well as other government entities amounting to RM400 million, said Najib.

He added that the revisions to the budget were necessary as Putrajaya would otherwise face a revenue shortfall of RM8.3 billion due to falling crude oil prices, despite savings of RM10.7 billion after doing away with fuel subsidies.

“Without any fiscal measures, the deficit will increase to 3.9% of GDP against the target of 4% for 2015.

“This requires the government to take measures to reduce the deficit, in line with the government’s commitment towards fiscal consolidation.”

Najib said the GDP growth target between 5% and 6% had been revised to between 4.5% to 5.5%.

To ensure economic growth remained strong, he said Putrajaya would boost exports of goods and services, enhance private consumption, and accelerate private investment.

Among its strategies are postponing the scheduled electricity tariff and gas price hike, and increasing nationwide mega sales.

Meanwhile, Najib announced an initial allocation of RM800 million for the repair and construction of basic infrastructures affected by the recent floods, and another RM893 million for flood mitigation projects.

These included building eight-foot high stilt houses for those who have land and whose homes were damaged by the floods, and handing over 1,000 units of low-cost homes in Gua Musang, Kelantan.

As he concluded his speech, he told Malaysians the country was not in a financial crisis or recession, but simply taking pre-emptive measures.

“We are neither in recession nor a crisis as experienced in 1997, 1998 and 2009, which warranted stimulus packages.

“The strategies announced by the government are proactive initiatives to make the necessary adjustments following the challenging external developments which are beyond our control.

“This is a reality check following, among others, declining global crude oil prices,” he added. – January 20, 2015.

By ANISAH SHUKRY The Malaysian Insider

Focus on Malaysian-manufactured goods




PETALING JAYA: The impact of the reduction in global oil prices from US$100 to US$40 per barrel can be offset by a rise in demand for Malaysian-manufactured goods, said Prime Minister Datuk Seri Najib Tun Razak (pic) on Tuesday.

Najib, who announced revisions to the 2015 Budget which was tabled in October 2014, said that this could be done as crude oil only makes up 4.5% of the nation's total exports.

"The reduction in the price of crude oil will indirectly increase demand in Malaysia-made products. We will actively promote 'import-substitution' to reduce our dependency on external sources to obtain goods and services," said Najib.

He added that the Government initiatives would be created to increase the use of the private sector.

"We will give priority to local Class G1 (Class F), G2 (Class E) and G3 (Class D) contractors registered with the Construction Industry Development Board to carry out recovery works in their local areas affected by the east coast flood," said Najib.

He added that the Government would intensify promotions encouraging the public to buy made-in-Malaysia products.

"We will increase the frequency and duration of mega sales throughout the nation, and intensify domestic tourism promotions by offering competitive airfares," said Najib.

He also said that the Government would encourage the private sector to reap opportunities created by the Asean Economic Community.

"We will also intensify programmes to boost exports of Malaysian goods in 46 nations across Asia, Europe, the Middle East and America," said Najib.

In his speech, Najib said the adjustment to the 2015 Budget was necessary to "ensure our economy continues to attain respectable and reasonable growth, and development for the nation and rakyat continues" as the 2015 Budget was based on the price of crude oil remaining at US$100 per barrel.

"Based on a crude oil price of US$100 per barrel and taking government saving measures and retail price controls into account, the Government was expected to have a fiscal profit of RM3.7bil. However, with the current price of oil at US$55 a barrel, the government will lose RM13.8bil in income," said Najib.

By Tan Ti Liang The Star/Asia News Network

Related:

Budget Revision: Government postpones electricity tariff hike

Related posts:

Najib, who is Finance Minister, had presented his budget speech at 4pm in the Dewan Rakyat on October 10, 2014  Here are highlights: ... 


PETALING JAYA: With the oil and gas (O&G) sector being the hardest hit in the current market rout, tycoons who own significant stake...

Crude oil prices fall: subsidy needless, ringgit weaken, fiscal health affected
Malaysia's iconic Twin Towers are seen in the background of the Malaysian oil and gas company Petronas logo at a petrol station in Ku... 


American shale oil enterprise WBH Energy filed for bankruptcy on January 4, 2015. This could be the beginning of a shakeout of shale oil ent...

Saturday 11 October 2014

Malaysian Tax Budget 2015 Highlights and Snapshots


Najib, who is Finance Minister, had presented his budget speech at 4pm in the Dewan Rakyat on October 10, 2014  Here are highlights:




While Prime Minister Datuk Seri Najib Razak described Budget 2015 as being a balance between the capital economy and people’s economy, analysts said the budget contained little to move markets either way.

This, according to analysts, should be a relief for a country where around 47% of the government’s bonds are held by foreigners.

“I would say probably largely a non-event from the market perspective,” said Wellian Wiranto, an economist at OCBC Bank in Singapore.

“It’s not highlighting anything new…but in many ways the lack of surprises is actually a good thing.”

* Najib announces the theme for this year's budget as "Budget 2015: The People's Economy".

* The allocation for Budget 2015 is RM273.9 billion, an increase of RM9.8 billion from the last budget.

* Government aims to lower fiscal deficit to 3.0% in 2015 from an expected 3.5% this year

* Operating expenditure RM223.4 billion, development expenditure RM50.5 billion.

* Payments to civil servants of RM65.6 billion is largest operating expenditure item.

*Federal government revenue collection estimated at RM235.2 billion in 2015, an increase of RM10.2 billion from 2014.

* From an economic perspective, when we achieved independence 57 years ago, we developed the country based on agriculture before progressing to a modern industrialised economy. Next, we moved into the upper-middle income phase. We are now moving towards a services-based economy.

* In brief, the objectives, principles and thrusts of the three Outline Perspective Plans, 10th Malaysia Plan, New Economic Policy, National Development Policy, National Vision Policy and since 2010, the National Transformation Policy, have all focused on poverty eradication, increasing income and restructuring of society. This is with the aim to achieve socio-economic goals; diversify the commodity-based economy; human capital development; enhancing competitiveness of the public and private sectors; higher value chain; inclusive development; as well as transformation of the government, economy, social and politics.

* Clearly, our former leaders in their wisdom have carried out responsibilities to develop Malaysia in their own mould. The struggle started with Tunku Abdul Rahman, followed by Tun Abdul Razak who had implemented development and restructured society, to Tun Hussein Onn who maintained peace and unity. Tun Dr Mahathir Mohamad modernised the country while Tun Abdullah Ahmad Badawi emphasised human capital development.

* Further, the present Government is committed to driving growth with a broader approach to place Malaysia on a strong foundation.

* This is my sixth budget since I assumed leadership of the administration, and the country’s 56th budget. The 2015 Budget completes the 10th Malaysia Plan.

* Further, in May 2015, the 11th Malaysia Plan (11MP) will be launched. At the same time, a new approach known as the Malaysian National Development Strategy (MyNDS) is being formulated.

* MyNDS will be a key basis to planning and preparation of programmes and projects under 11MP. The emphasis is on using limited resources optimally, with focus on high-impact projects and programmes at low cost as well as efficient and rapid implementation. This means Budget 2016 will be the trigger to the final five years of Malaysia’s progress to a high-income advanced economy by 2020.

* Many countries such as Korea, Germany, Japan, Taiwan and China began their economic progress based on agriculture and have since moved to an economy that emphasises high level of knowledge, skills, innovation and expertise.

* To remain resilient and competitive, Malaysia must move to an economy based on knowledge, high skills, expertise, creativity and innovation.

* Indeed, from the economic perspective, a rapidly developing country typically generates wealth through capital economy activities. However, the rakyat voice their grievances and complaints through blogs, letters, meetings, interviews and dialogues over the millions spent, billions allocated and various mega projects questioning the benefits to the people.

* In 2015, with the implementation of the Goods and Services Tax (GST) government revenue is estimated at RM23.2 billion. However, as a caring government, we have exempted several goods from GST amounting to RM3.8 billion.

* With the implementation of GST, the Sales and Services Tax (SST), will be abolished resulting in revenue foregone of RM13.8 billion. This means that after deducting RM13.8 billion and RM3.8 billion from a revenue of RM23.2 billion, the Government will have a balance of RM5.6 billion.

* Of the total, RM4.9 billion is channelled back to the people through assistance programmes such as the increase in Bantuan Rakyat 1Malaysia (BR1M). Finally, net revenue collection from GST will only amount to RM690 million.

* Goods and Services Tax (GST) : RON95 petrol, diesel and liquefied petroleum gas (LPG) exempted from GST.

* Revenue from GST in 2015 estimated at RM23.2 billion.

* Exemption of GST on several goods amounting to RM3.8 billion.

* Abolishment of SST will see RM13.8 billion in revenue forgone.

* Net revenue collection from GST will only amount to RM690 million.

* Establish another 20 KR1M in Peninsular Malaysia.

* Set up price watch team comprising consumer associations.

* Strengthen GST Enforcement Unit with 2,270 personnel, Price Monitoring Unit with 1,300 personnel and Consumer Squads with 202,800 volunteers as well as involve 579 mukim and village heads.

* Electricity consumption not subject to GST increased from the first 200 units to 300 units, move to benefit 70% of households.

* Income Tax: Income tax rates to be cut by one to three percentage points. Families with monthly income of less than RM4,000 will not have to pay tax

* From 2016, the corporate tax rate will be reduced by one percentage point from 25% to 24%, and for small and medium sized enterprises to 19% from 20%.

* Infrastructure: LRT3 linking Bandar Utama, Shah Alam and Klang: RM9 billion

* 45-km second MRT line from Selayang to Putrajaya: RM23 bilionThe subsidies rationalisation will continue, Najib said today. - The Malaysian Insider graphics by Heza Kamaruddin, October 10, 2014.The subsidies rationalisation will continue, Najib said today. - The Malaysian Insider graphics by Heza Kamaruddin, October 10, 2014.

* Upgrade of East Cost railway: RM150 million

* 36-km East Klang Valley Expressway (EKVE): RM1.6 billion

* 47-km Damansara-Shah Alam Elevated Expressway: RM4.2 billion

* Subsidies: Government plans to reduce the overall bill for subsidies and cash assistance by 7% to RM37.7 billion in 2015 from RM40.6 billion in 2014.


* Govenment will reform the petroleum subsidy regime soon, to adopt a system that benefits the lower income group.

* Highspeed Broadband: Total of RM2.7 billion will be spent over the next three years to build 1,000 new telecommunications towers and laying of undersea cables.

* Property: Budget extends 50% stamp duty exemption for first time home buyers and increases the purchase limit from RM400,000 to RM500,000. The exemption will be given until the end of 2016.

* A 10% loan guarantee to enable borrowers to obtain full financing including cost of insurance. Borrowers can also withdraw from EPF Account 2 to top up their monthly installment and other related costs.

* This guarantee is offered on a "first come, first served basis’ for 20,000 units only.

* Ceiling of household income for PR1MA homes increased to RM10,000, RM1.3 billion to be allocated to build 80,000 units PR1MA homes.

* Education: RM325 million to be allocated for the 1Malaysia Book Voucher Programme, benefitting about 1.3 million students.

* RM100 schooling assistance to all 5.4 million primary and secondary students to continue.

* A total of RM1.2 billion will be allocated to increase student intake in vocational colleges and community colleges as well as upgrading colleges.

* RM1.05 billion allocated to develop and maintain education facilities, and for school upgrade programmes.

* RM3 billion allocated for education sponsorship via the Public Service Dept (JPA) , Education Ministry and Health Ministry.

* RM30 millon fund set up for training and technical assistance of youth from low income Indian families.

* Health: Tax relief for medical expenses and treatment for serious illnesses such as cancer, kidney failure and heart attack increased to RM6,000 per year.

* 30 more 1Malaysia clinics and a health clinic in Cyberjaya will be built. The Government will station 30 doctors in these clinics.

 * Sports: An allocation of RM103 million to implement a Sporting Nation Blueprint.

* Identify sports talent starting from primary school through Malaysian Talent Identification programme. The programme involves testing, screening and talent specialisation among students.

* Improve the quality of high-performance sports for six selected fields in the first phase - Football, Cycling, Badminton, Sepak Takraw, Swimming and Athletics.

* Public transportation: Provide intercity bus services to those residing outside Kuala Lumpur (KL) but work in KL. The service will be offered with a discounted monthly fare of 30%. For a start, three bus routes will be operational namely the Rawang-KL, Klang-KL and Seremban-KL.

* Provide Electric Train Service (ETS) for Ipoh-Butterworth route starting April 2015.

* Upgrade stage bus services in several states through a contracting system with existing bus companies. The programme will be implemented in phases in Kuching, Ipoh, Seremban, Kuala Terengganu and Kangar.

* Tourism: RM316 million set aside for various programmes under Tourism and Culture Ministry.

* Entrepreneurship: In 2015, TEKUN to provide additional funds of RM500 million, of which RM350 million allocated for Bumiputera entrepreneurs, Young Indian Entrepreneurs Financing Scheme (RM50 million), Young Professional Women Entrepreneurs Development Programme (RM50 million), and Armed Forces Veteran Entrepreneur Development Programme (RM50 million).

* Soft loans totalling RM50 million for SME entrepreneurs from Chinese community, and RM30 million for hawkers and petty traders.

* To attract more expatriate entrepreneurs establish startups in Malaysia, the paid-up capital for startups is set at RM75,000.

* Eligible expatriate startup entrepreneurs will be given work pass for one year.

* Additional allocation of RM30 million to entrepreneurs under programme Skim Usahawan Permulaan Bumiputera (Superb), with participation to be enlarged to include East Malaysian entrepreneurs.

* RM30 million to be allocated through Amanah Ikhtiar Malaysia, to inculcate the spirit of entrepreneurship among Indian women.

* BR1M for those earning RM3,000 and below will be increased to RM950 from RM650.

* For those earning RM3,000 to RM4,000, BR1M increased to RM750 (from RM450).

* For the above two categories, payment will be made in three instalments - January, May and September.

* For those aged 21 and above, with income not exceeeding RM2,000, BR1M increased to RM350 (from RM300) in one-off payment early next year.

* Civil service: Half-month bonus to all civil servants with a minimum payment of RM500 to be paid in January 2015.

* Pensioners to receive special financial assistance of RM250.

* Women now represent only 38% of the total workforce in the country. To enhance the contribution of women in national development, women's opportunities to return to the workplace via 1Malaysia Support for Housewife.

* The government will help also professional women return to the workplace via Program Women Career Comeback.

* Women, Family and Community Development Ministry will get RM2.26 billion to enhance contribution of women.

* Student loans: For students with an outstanding amount in their PTPTN loans, a 20% discount will be given if they make a total repayment of their loan, on or before March 31, 2015.

* NGOs: A one-off grant of RM50 million to creditable NGOs, including uniformed bodies that are involved in community development programmes, unity, social welfare, consumerism, health and security.

* National security: RM17.7 billion allocated to Angkatan Tentera Malaysia, RM9.1 bil to the PDRM, and RM804 mil to Maritime Enforcement Agency Malaysia to strengthen maritime enforcement.

* RM660 million allocated for Eastern Sabah Security Zone for increased security.

* A sum of RM117 million will be allocated to strengthen the role of RELA under the Ministry of Home Affairs for training and capacity building. – October 10, 2014.

‘Goodies’ not enough to offset rising living costs, say consumer groups

Despite more cash handouts, lower income tax and a multitude of items exempt from the goods and services tax (GST), consumer groups said Budget 2015 was not enough to offset rising living costs for Malaysians.

Federation of Malaysian Consumers Association (Fomca) CEO Datuk Paul Selvaraj said consumers would still had to pay a premium for housing as well as petrol because of the lack of public transport.

He also said the lack of government enforcement would give rise to profiteering once the GST was implemented April next year at a rate of 6%.

“It looks like the government has taken certain measures to minimise the impact of GST, many are zero-rated, while there is no tax on petrol.

“But our concern is profiteering. I am concerned that sellers will take advantage of the GST and increase the actual price, so zero-rated items will be sold at inflated prices,” Selvaraj told The Malaysian Insider.

“We feel that all items should be labelled – what is zero-rated and what is taxed. The government should also set up a hotline for consumers to turn to if they are unhappy with their purchase.”

Prime Minister Datuk Seri Najib Razak announced yesterday when tabling the budget that the GST was expected to raise RM23.2 billion in revenue. But RM3.8 billion in zero-rated goods would be deducted from this amount.

Selvaraj also said that despite petrol prices having gone up from last week’s subsidy cut, the government did not address alternatives for the rakyat to wean them off their fuel dependency.

On October 2, the government reduced the fuel subsidy of the RON95 petrol and diesel by 20 sen. Petrol now costs RM2.30 a litre compared with RM2.10, while diesel costs RM2.20 compared with RM2 previously.

“The bus system is not being addressed, and it’s to the point that there is no choice for the ordinary people except to rely on their cars to commute.”

Another issue for the average consumers, said Selvaraj, was housing, with homes either being beyond their means or located too far from the city centre that they would have to pay a premium on petrol for their daily commute.

“There have been many efforts to create affordable housing,

but the government hasn’t done enough to make it difficult for speculators to enter the market. The market should have stronger regulators.”

Consumers Association of Penang (CAP) president S.M. Mohamed Idris said he was sceptical that prices would go down once the GST was implemented, despite the long list of exempted items, including RON95 petrol, diesel, noodles, coffee and tea.

“Even if those are exempt, input cost will go up. Transport cost, the cost of raw materials… in the end, you will still pay more,” he told The Malaysian Insider.

“CAP has never agreed with the GST because we say it’s a regressive tax. They should have implemented the more progressive inheritance tax.”

Mohamed also shrugged off the government’s decision to lower income tax by one to three percentage points, noting that this would not benefit the lower-income groups who did not make enough to qualify for income tax.

“We’re talking about only rich consumers benefitting from this. Can you imagine how many millionaires will now be taxed even less? They should have introduced different income tax rates instead.”

He added that the government made a mistake in not implementing the sin tax, noting the economic and social costs alcohol and cigarette consumption had on Malaysians.

“The BR1M is not likely to offset extra costs. I don’t think anyone has done any research on how effective it is for the people. It’s just one-off,” he added, referring to the 1Malaysia People’s Aid cash vouchers.

Najib announced yesterday that BR1M for the lower-income group would be raised from RM650 to RM950 next year, while households earning between RM3,000 and RM4,000 a month would now receive RM750.

Single people aged 21 and above and not earning more than RM2,000 a month are entitled to BR1M worth RM350, an increase of RM50, said Najib.

Datuk Nadzim Johan, an activist from the Malaysian Muslim Consumers Association, said BR1M should not be permanent.

“Our people are not able to appreciate it and we are afraid that it may not be used effectively. It is a liability,” he said.

Unlike the other consumer groups, Nadzim said the budget was too consumer-friendly to the point that it was counterproductive.

“For example, about 1,000 products are exempted from the GST, it’s almost like most products are not taxed. I also think the margin between the present tax and the new tax is too small.

“All in all, I feel that the budget is too soft and Malaysians can’t appreciate it. There shouldn’t be anything for consumers to complain about.” – October 11, 2014.


- The Malaysian Insiders

Related post:

Malaysia's petrol price hike when global crude oil prices declined to 3 years low, a reflection of poor financial management..

Sunday 21 October 2012

Breaking the Goods and Services Tax (GST) taboo for a fairer Malaysian tax system


Tax-free necessities: People are still not aware that their basic needs will be protected under the proposed GST regime because essential food items like rice, meat, fish, seafood, chicken, vegetables, cooking oil and salt will be ‘zero-rated’, which means there will no GST imposed.
Tax-free necessities: People are still not aware that their basic needs will be protected under the proposed GST regime because essential food items like rice, meat, fish, seafood, chicken, vegetables, cooking oil and salt will be ‘zero-rated’, which means there will no GST imposed.  
 
When the Finance Minister tabled Budget 2013 and reduced personal income tax rate by 1%, some quarters have asked if this brings us one step closer to the GST.

EVER grumbled about having to pay the RM50 government tax for your credit card each year?

Well, the good news is there will be no more such tax if the proposed GST (goods and services tax) is implemented. And you will pay GST on the credit card only if your bank charges you for the card.

“These days, banks are offering credits cards for free and giving waivers on annual subscription. If the card is free, there will be no GST on it,” says Customs Department director-general Datuk Khazali Ahmad in an interview.

He stresses that key sectors like the financial services, public transport, healthcare, education and residential housing will be exempt from GST.

This essentially means that education, medical care, bus and train tickets as well as highway tolls will still be just as affordable as today. Thus, the lower income groups will not be burdened by the GST.

When it comes to insurance, Khazali says, if it is a life policy (including education, investment-linked and endowment), no GST will be imposed. But if it is a general insurance policy for medical, fire, motor, burglary, then the normal GST rate (proposed at 4%) will apply.

Despite the GST being a fairer, more effective and transparent taxation system and one that has been successfully implemented in 146 countries, it has not been easy to push the idea through in Malaysia.

In fact, the government has been talking about the GST for more than two decades now (even when Datuk Seri Anwar Ibrahim was the Finance Minister in the 1990s).


In December 2009, the GST bill was tabled in parliament for first reading but it was withdrawn on April 19 this year for amendments.

The Finance Ministry on its website has asked the public for views and feedback on the proposed GST.

With public awareness still very low on how GST works, it might be years before it actually comes to fruition.

People are still not aware that their basic needs will be protected under the proposed GST regime because essential food items like rice, meat, fish, seafood, chicken, vegetables, cooking oil and salt will be “zero-rated”, which means there will no GST imposed.

Critical services like schools, financial services, hospitals, roads and public transport will be “GST-exempt”, which means the consumer will be exempted from paying GST on them.

And if you buy a flight ticket to a destination abroad, you will not have to pay GST.

“You will be charged GST only on goods and services (which are not zero or exempt-rated) that you consume in the country what you consume outside the country will not be subject to a local GST. A flight ticket abroad and overseas travel is consumption outside Malaysia, so you don't pay GST here on it,” says Khazali.

The GST is a consumption-based tax where the tax is borne by the person who consumes the goods or services.

Ultimately, it should reduce business costs because manufacturers, distributors and suppliers are able to claim back the GST they paid on goods and services acquired for the purpose of their business.

And these businesses are supposed to pass those savings down to the consumer, which should result in lower prices.

Khazali says people find it hard to accept the GST even though it benefits them because “tax” is never a popular subject.


“Generally, nobody likes to be taxed or, rather, the word “tax” is taboo to many.

“However, governments all over the world need to impose tax to get the revenue to provide their citizens with their social needs, employment, security and so forth.”

Educating consumers on the GST, he admits, is not easy because the moment you say that GST is a form of tax, “you will be faced with a wall of resistance”.

“So we have to explain the GST and its benefits to the people continuously to avoid or eliminate whatever misconception they have about it,” he adds.

Khazali also notes that most people do not know that the GST actually replaces the current sales and services tax which they have already been paying on a lot of goods and services because it is embedded in the price of what they buy.

Under the current system, by the time the goods reach the consumers, the sales tax that is paid at the manufacturers level would have cascaded at each level of the distribution and the supply chain, and this results in a higher price.

But with the GST, since businesses at every stage are able to get a refund on the GST paid on the goods and services acquired or used for the purpose of their business, this will eliminate the cascading effect suffered under the current sales and services taxes.

And because of this, an immediate reduction in prices should be seen for goods and services where people have all along been paying an embedded sales tax.

He also stresses that the government has repeatedly emphasised that the people will have to understand the GST first before the government actually implements it.

“The public should not have any fear over GST. It is a form of consumption tax which has been implemented in nearly 150 countries in the world, whether developed or developing, so there must be something good about it. “

He says the GST is also supposed to result in cheaper prices for imported goods. At present, unless exempted, imported goods are subject to an import duty and sales tax.

People find it hard to accept the GST even though it benefits them because ‘tax’ is never a popular subject. - Datuk Khazali Ahmad People find it hard to accept the GST even though it benefits them because ‘tax’ is never a popular subject. - Datuk Khazali Ahmad

With the GST replacing the sales tax (5% to 10%), imported goods will still be subject to an import duty and a GST; but because the proposed GST rate is lower than the existing sales tax, consumers should be paying less.

Before implementing the GST too, he says, the government will also educate businesses on the need to pass down the savings they get from the GST refund, and set up a mechanism to stop businesses from trying to profiteer from it.

For him, the GST is a good thing because it will reduce business costs, lead to more competitive pricing, make exports more competitive because exports will be zero-rated (meaning no GST), increase gross domestic production and reduce grey economy activities.

Khazali also believes there might be a change in consumption pattern with the GST because the GST works on the affordability concept.

“Consumers have to decide which goods or services to buy. They pay GST only when the goods or services are consumed. So they may divert more of their expenses towards essential goods and services rather than on luxury goods.”

Khazali also points out that if the GST is implemented here at the proposed rate of 4%, it will be the lowest rate in the region.

Indonesia, Thailand, Cambodia, Vietnam and Laos charge a 10% GST rate, Philippines 12% and Singapore 7%.

But what is to stop the government from hiking the rate after it has been implemented?

Khazali cites past experiences, saying Malaysia increased its sales tax rate only once from 5% in 1972 (year of implementation) to 10% in 1983 and service tax rate too increased only once, from 5% in 1975 (year of implementation) to 6% in 2011.

There are still nuts and bolts to sort out with implementing the GST here, including tabling a new bill for it, putting an anti-profiteering mechanism in place, getting public understanding and acceptance on it. For now, it looks like it is still quite a long journey away.

Is GST the way to go?

No burden: The people can be assured of zero tax on basic essential items like rice, cooking oil, meat, chicken, vegetables, sugar, salt and water.
No burden: The people can be assured of zero tax on basic essential items like rice, cooking oil, meat, chicken, vegetables, sugar, salt and water. 
The Goods and Services Tax has been successfully implemented in 146 countries but many Malaysians are still unaware of its benefits.

JAYCEE Sim (not her real name) is a self-professed shopaholic who loves nothing more than spending her weekends at shopping malls. She is thus pleased with the one per cent cut in income tax rate announced in the Budget 2013 (for chargeable income up to RM50,000) because some extra money in the pocket is always welcome, especially when prices have been on the rise.

But she dreads the much-talked about Goods and Services Tax (GST) which has yet to be implemented in the country.

“I think it will cause a further hike in prices,” says Sim who teaches at a private college. But her friend, Debbie Lim, who owns her own business supplying component parts, is all for the GST.

“I think it is only fair. You pay for what you consume. You consume more, you pay more tax. If you don't spend, then you don't pay lah,” says Lim, who has family members in Singapore and has seen how the GST works there.

Lim too loves to shop and enjoys trying out new food places with friends.

She believes that post-GST, she can continue to do this without feeling the pinch, because there will be zero tax on essential food products like meat, chicken, fish, seafood be it locally produced or imported.

“Hey, without tax, maybe food prices can even come down. I can live with that!” she laughs.


So far, 146 countries have imposed the GST which is seen as a more efficient form of tax.
In Malaysia, which has a population of 28 million, there are approximately 12 million people in the workforce but only 1.7 million pay taxes.

PricewaterhouseCoopers Taxation Services Sdn Bhd senior executive director Wan Heng Choon refers to the GST as a fairer tax.

“I fall under the unfair' category of paying taxes. Out of our population of 28 million, I am one of the 1.7mil paying taxes. The rest of the population do not contribute but consume the same goods and services (like roads, schools, hospitals, public transport etc.) that the government provides for every single one of us. How can that be fair?” People here generally fear the GST, he says, because they do not understand how it works.

“Tell me which country will introduce a tax that drives prices up? It doesn't make sense. The GST has been successfully implemented in 146 countries. The difficulty here is that the simple mechanism is not understood,” he adds.

The people, he says, can be assured of zero tax on basic essential items like rice, cooking oil, beef, mutton, pork, chicken, fish, prawns, squid, vegetables, sugar, salt and water above.

They will also be exempted from paying GST on critical services such as public transport, toll, taxis, hospital and healthcare, schools, residential property, land for agriculture use, and financial services. Thus, the lower income group will not be burdened by the GST.

“If you conduct a poll, two out of 10 people will not know that essentials will be tax-exempted or zero-rated. That is a worrying statistic to me,” says Wan.

As for other consumer items like clothes, shoes, non-essential food items and furniture, Malaysians have in fact already been paying tax without realising it, because sales tax (sometimes as high as 10%) has been embedded in the price of the goods.

The GST system, on the other hand, will make the taxing system more transparent. The consumer will know what he is paying a tax on and how much.

Under the GST regime, the sales tax and services tax that people have been paying all this while, will be removed and replaced with a one-time consumption tax the GST.

So, it is not a case of consumers paying tax twice for what they buy.

Malaysia is looking at a GST rate of about 4% which actually works out to be cheaper than the present 5% to 10% sales tax and 6% service tax.

Refunds

A significant difference too under the GST regime is that the manufacturer, supplier and wholesaler get a refund from the Government on the GST (which in their case is an “input tax”) they have paid to buy raw materials, parts and utilities used, to produce their goods. So, it is the end user or customer who pays the 4% GST.

When manufacturers, wholesalers, suppliers get a refund on their input tax, it is good for business because it brings their production costs down. And when their costs are reduced, they can sell their products at a cheaper price to their customers.

At the customer level, since one has already been paying an embedded tax (of 5% to 10%) on many items prior to the GST, prices should not vary much.

As the GST covers a wider range of products (including those previously without a sales and service tax), some prices will go up but others will come down. But the important thing to bear in mind is that essential food items and key services will not be affected.

Wan says the Finance Ministry and Customs department have done years of extensive work on the GST.

They have come up with a Shopper's Guide, a list of 350 items in the CPI basket showing the estimated prices after the GST is implemented and the percentage of increase and decrease for each of these items, and shared this list with a number of trade associations including the Federation of Malaysian Manufacturers and the Chartered Tax Institute of Malaysia (CTMB).

“It astounds me that the list is not made available to the public. People want to know if their cup of coffee or roti canai will go up,” he says, adding that people need time to become aware of, accept and prepare for the GST.

Australia, he notes, took a year to prepare the public, explaining how the GST works and addressing concerns.

“If you release the list and information to the public only about three months before the implementation date, that's madness.”

Because the price of some non-essential goods might be higher, Wan suggests that the Government consider identifying the lower income group and offering them a one-off BRIM-like direct financial assistance to help them cope with the GST.

“Thus, the Government gives them support to deal with the GST but leaves it to them to decide how to spend that money.”

Dr Veerinderjeet Singh, chairman of Tax and Malaysia Sdn Bhd and former president of CTMB, believes that because Malaysia already has a sales tax embedded in the price of goods, it should be easier for people here to accept the GST than a country that never had similar taxes.

“People never really understood the objective and as a result, some sections are not for it. The GST is good for a country and this has been proven worldwide. We already have a sales and service tax; what we are doing is to merge and tweak it into the GST which is a more effective tax system,” he says, adding that the Government has done five years of solid work on the GST and spoken to every association. Now, they only need to go down to the ground to speak to the man-in-the-street.

Should manufacturers, suppliers or traders try to profiteer from the GST by not passing on their cost savings to the customers, action can be taken under the Price Control and Anti-profiteering Act that has been in place since April last year. Enforcement comes under the Domestic Trade and Consumer Ministry which is looking into establishing a price monitoring council to combat profiteering.

Dr Veerinderjeet points out that with the GST regime, there are more checks and balances in place as manufacturers, suppliers and wholesalers have to get their documents in order to claim their refunds on their GST (input tax).

He says it would also help uncover the underground economy because these businesses would now have to be registered to recover their input tax. And when they register their businesses, they will have to pay income tax, thus the government gains by collecting more taxes.

Wan notes that in the past, when the country's economy was growing at 7% to 9% annually and Foreign Direct Investment (FDIs) were coming in at a healthy rate, the Government did not worry too much about revenue because “the growth in the economy generated income that took care of things.”

“But remember 1997 and 1998 when corporate profits plummeted and PNLs (profits and losses) turned red? Where does the Government get its money from then?

“That's why the GST as a tax is a much better source for the Government. Regardless of whether there is an economic boom or recession, the GST can ensure a steady revenue to the Government .”

Wan suggests that people take a macro view of the economy, given the fact that the country has had a budget deficit for 16 consecutive years.

“People should not underestimate the impact of a budget deficit. If the government is spending more than it earns in revenue, a direct impact is that the value of the Malaysian ringgit will fall. What happens if that happens? We import inflation. A falling ringgit has greater far reaching implications on the overall economy and recession than the GST will ever have.

“The GST, on its own, is not going to be the silver bullet that cures deficit but it is definitely one of the strategies to help balance the books,” he says, adding that Malaysia should also tighten its subsidies and do something about its bloated civil service because a country as wealthy as it is should not slide down the slippery slope of the likes of Greece and Spain.

Dr Veerinderjeet admits that the one per cent cut in personal income tax rate took him by surprise and he feels it has been “overly-generous”.

“It benefits everybody in the taxable threshold, including the higher income group. People will save RM25 to RM475 in taxes. It is a good measure because it reduces liability and puts more money in your pocket. But I would have preferred for it to be held back for a rainy day,” he adds.

Currently, the maximum corporate tax in Malaysia is 25% but for personal income tax, the maximum is 26% which is something odd, given that individuals now pay a higher tax rate than companies.

Dr Veerinderjeet says it wasn't like that years ago.

“Personal taxes have always lagged behind corporate taxes. But countries have been lowering corporate tax rates over the years (to stay competitive) and we too have lowered ours.

“Many of us, including professional bodies, have been lobbying for the top margin tax rate for personal income tax to be aligned with corporate tax rate of 25%,” he shares, adding that the income tax bands too should be widened so that someone who works hard and earns an additional RM10,000 to RM15,000 a year will not find himself pushed up into a higher tax rate bracket.

Tax system

Dr Veerinderjeet favours a revamp of the entire tax system, including personal income tax, corporate tax, petroleum tax, real property gains tax, customs duties, sales tax, service tax, the GST and fixing the anomalies and income tax laws that may be burdening business and introducing incentives that encourage innovation and business while reviewing those that have not achieved their objectives.

“It is not as simple as introducing the GST, then think of lowering personal and corporate tax rates. Is this system sustainable for the future? We are looking at 2020 who are we benchmarking ourselves against in terms of our tax system? Are we benchmarking against a developed nation?”

On views that the GST should be deferred to give back to the rakyat, Dr Veerinderjeet says Malaysia needs far more development and it needs to fund this development.

“We are giving back to the rakyat in different forms like better roads, better schools and better hospitals,” he says.

With 146 countries already implementing the GST, it is perhaps only a matter of time before the Government here follows suit. But for this, they must really go down to the ground to allay the fears, address the concerns and explain to the people why GST is the way to go.

Consumers assured of a fairer tax system


“YOU know that shirt you are wearing? You've paid tax on it,” Customs Department director-general Datuk Khazali Ahmad points out during a recent interview on the proposed Goods and Services Tax (GST).

What people do not realise, he adds, is that the Customs Department has been collecting sales and service taxes over the years. This is because the taxes have already been included in the prices consumers pay at the check-out counters.

And the amount collected is significant. Just take this year alone, till Oct 4 even without the GST the Customs Department has already collected RM7.3bil in sales tax and another RM4.36 bil in services tax.

Last year, it took in RM8.57bil in sales tax and services tax came up to RM4.98bil. In 2010, its collection for sales tax was RM8.17bil and RM3.92bil for services tax.

“Some people are not happy with the GST because they think the Government is introducing a new tax to add to the tax that is already in place.

“But the GST is not a new tax. The GST is only a replacement tax (to replace the sales and services tax) to make our taxing system more efficient and transparent,” says Khazali.

He understands the people's fears that the GST will affect prices of goods, services and their consumption pattern. But these fears are unfounded, he says.

“There is a zero tax on a lot of basic necessities (see chart) and we are giving exemptions on critical services (schools, hospitals, public transport, tolls, banking),” he explains.

“Consumers should be better off as essential food like rice, vegetables, cooking oil and fish are not subject to GST at all.”

Currently, the people are already paying a sales tax of 5% to10% and services tax of 6% on goods and services. With a proposed 4% GST rate, prices of these goods and services would in fact, be down.

He says this is because suppliers and manufacturer get a refund on what they pay as GST to produce their goods; so with the GST regime, they would now have to remove these elements from their cost.

“We have gone around to meet the suppliers to make sure that whatever cost savings they get (from their refund), will be passed on to the clients and consumers. We will ensure the public do not pay more when the GST is introduced.”

However, for certain goods and services that are now not subject to any sales or service taxes, there might be an increase in price with the GST but the rate should not be more than the GST proposed rate.

Khazali says the Customs Department will work closely with the Finance Ministry, Domestic Trade, Co-operative and Consumer Ministry and consumer associations to monitor prices and release a shoppers' guide to the rakyat so that they know how much they should be paying.

They will also get hypermarkets to co-operate and be the price-setters.

By SHAHANAAZ HABIB, The Star/Asia News Network

Related posts:
Malaysia's Tax Budget 2013: politically savvy for general ...
Sep 30, 2012