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Thread: Economics: Malaysia GST

  1. #1
    Join Date
    Oct 2008

    Economics: Malaysia GST

    GST in Malaysia – How the Goods and Services Tax affects You

    As the Budget 2014 (tabled on the 25th of October 2013) announcement came, Malaysians awaited with bated breath on whether the government of the day will or won’t finally introduce a Goods and Services Tax (GST) in Malaysia.

    Update: A GST of 6% was announced, with the abolishment of Sales Tax and Service Tax effective 1 April 2015.

    Read our guide below to find out all about the GST, get the full low down on why it’s being introduced, and what it means for you!

    Wait, don’t we already have GST in Malaysia? I’ve seen it in some receipts…

    Confusingly, there are 2 other indirect taxes already present in the Malaysian tax system. One of them is the Sales Tax (as per the Sales Tax Act 1972), and the other is the Service Tax (under the Service Tax Act 1975). Combined, they are usually referred to as the SST.

    The Service Tax part is the one that is sometimes confusingly referred to as the Government Service Tax (or “GST”) but it is not the usual use of the GST acronym worldwide, Goods and Services Tax.

    Note that the Sales Tax and Service Tax are not to be confused with a “Service Charge” of 10% typically present in the hospitality industry (hotels, large restaurants etc.). This charge is not a tax, and the restaurant typically keeps the 10% (and maybe shares some of it with their staff).

    Sales Tax – 10% tax on manufacturers and importers

    The Sales Tax of 10% is collected from all manufacturers or importers who have yearly revenue of RM100,000 and above. Licensed manufacturers are to charge 10% sales tax on sales value of their manufactured products and to collect the tax from their customers, and remit to Customs every 2 months.

    There are a number of items which have a special Sales Tax rate of 5%, and the following manufacturing and import activities are exempted from sales tax (ie. 0%):

    • All exports are exempted from sales tax.
    • Live animals, fish, seafood and certain essential food items including meat, milk, eggs, vegetables, fruits, bread, etc.
    • Medical and educational equipment including sports equipment, books, etc.
    • Photographic equipment and films.
    • Motorcycles not exceeding 200cc capacity, bicycles for adult use.
    • Machinery for textile industry, food preparation industry, paper and printing industry, construction industry, metal industry, etc.
    • Primary commodities including cocoa, rubber, etc.
    • Naturally occuring mineral substances, chemicals, etc.
    • Helicopters, aircraft, ships and other vessels.

    Service Tax – 6% tax on service providers (and RM25-50 / year per credit card)

    Previously 5%, raised to 6% in January 2011, the Service Tax applies to certain items in the service industry including food and drink outlets and tobacco. The tax also applies to professional and consultancy services provided by the professional firms or persons such as accountants, lawyers, engineers, architect, insurance companies, etc. and is also remitted to Customs authorities every 2 months.

    This 6% Service Tax is the thing that is frequently called GST (Government Service Tax) although in international convention, GST normally stands for Goods and Services Tax.

    Adding to the confusion is the recent introduction of a RM50 / year Service Tax for principal credit card holders (per credit card) and RM25 / year for supplementary credit card holders, both falling under this Service Tax nomenclature.

    What is the Goods and Services Tax (GST)?

    Known across the world as either GST or VAT (value added tax), it is a broad-based consumption tax (tax on your spending!) which affects all parties in a multi-stage taxation system across the value chain from manufacturing to sales, it is based on a tax-on-value-add concept which avoids duplication of taxes. This is in contrast to both the Sales and Service Tax in Malaysia which is just added at one stage (Sales Tax at manufacturer level, and Service Tax at consumer level).

    The Goods and Services Tax in Malaysia (GST) was initially mooted by the federal government in 2011 to replace the existing Sales and Service Taxes, but was met with much resistance from the public at large, partially due to the implication of a price hike in essential goods and services, but also partially due to the lack of clarity around the current consumption tax systems in Malaysia.

    How does GST work in Malaysia?

    In the current tax regime, the 10% Sales Tax (on manufacturing and imports) and 6% Service Tax (on the F&B and professional services industry) is collected by one party (usually the seller) and passed on to the tax authorities.

    For example, in the previous 6% Service Tax regime, when you buy a cup of coffee from Starbucks that says RM15 on the menu, you pay RM15.90 (including the current Service Tax of 6%). Starbucks will keep RM15 and pass on RM0.90 to the tax authorities.

    In a GST regime (6% GST in this calculation), the following happens:

    1. Starbucks buys the coffee beans from the wholesaler to make your cup of coffee for RM10 (RM10+ 6% GST). The Wholesaler keeps RM10 and passes on RM0.60 from Starbucks to the tax authorities.

    2. You buy that cup of coffee from Starbucks which the beans were used to make, and pay RM15.90 (RM15 + 6% GST). Starbucks now keeps RM15 and passes on RM0.30 to the tax authorities (RM0.90 – RM0.60). The reason why Starbucks only passes RM0.30 to the tax authorities is because they have effectively already ‘paid’ RM0.60 in tax earlier on the first RM10, and only RM0.30 tax is left to be paid on the RM5 “value-add”.

    We have graphically shown this example below.

    Why replace Sales Tax and Service Tax (SST) with GST?

    The government’s intention has always been to replace the sales and service tax regime with GST and to do so at a GST rate that is revenue-neutral. This means that (when it gets introduced anyway) they don’t expect to collect any more or less taxes than they did before. Why would they bother then?

    Well, the GST unit of the Royal Malaysian Customs Department gives us the following reason ‘method of collecting taxes which works better than others’ to explain the need for GST. Economists, meanwhile, believe the government has very rightly approached the GST as a new source of income with a broad tax base as a means to begin to diversify tax revenue sources.

    So if the 10% Sales Tax and 6% Service Tax is abolished, does this mean GST will be introduced at a rate of 16% to make this a revenue-neutral exercise?

    It might seem like simple arithmetic, but as mentioned before, not all items are subject to 10% Sales Taxes (some 5% and some 0%), and likewise with the 6% Service Tax (and rarely are 2 items subject to both Sales and Service Tax, as one targets the manufacturing and import industry, and the other the service industry). As such, a 16% GST rate (with no exemptions) will definitely result in higher prices across the board!

    As a result of this, to make the introduction of GST a revenue-neutral exercise for the federal government, an initial rate of 4-7% had been proposed, with some essential items given a zero-rate mooted as well.

    The final rate that was announced on 25 October 2013 was 6% GST, with the following items 0% rated (and thus exempt):

    - Essential items such as: Rice, sugar, salt, flour, cooking oil
    – Public transport (LRT, KTM, Buses)
    – Sale and Rental of property

    How will the implementation of GST affect me?

    As mentioned, the replacement of Sales and Service Tax with GST is intended to be revenue-neutral to the government’s coffers, so in theory, to consumers this may represent a minimal effect to the aggregate prices of everyday goods and services. Lets look at 3 scenarios to see what it means for prices, (1) for items charged with Service Tax, (2) for items charged with Sales Tax, and (3) for items with no Service or Sales Taxes:
    6% Service Tax Abolished, 6% GST introduced - Pay less

    10% Sales Tax Abolished, 6% GST introduced - Pay less

    SST Exempt Items, 6% GST introduced - Pay more

    However, the obvious concern here is to make sure that businesses do not take advantage of just the fact that GST has been introduced as a reason to raise prices of goods and services indiscriminately. To this end, the Anti-Profiteering Act has been tabled to enable enforcement against such practices. In theory though, the multi-stage tax nature of the GST should allow the Customs department to aggregate pricing information far more accurately than they do currently, the implied monitoring of this should serve as a deterrent to unscrupulous businesses (will wait and see how things pan out!).

    How does the GST affect SMEs in Malaysia?

    As the total GST amount is paid for by customers (parts of it effectively paid across the value chain, through GST input credits etc.), businesses are not affected directly by price increases due to GST.

    The added cost through the implementation of GST will be due to administration of GST input credits and accounting for GST. Because of this, businesses with an annual turnover of less than RM500,000 are exempted from being GST registered and will thus not be required to collect or pay GST.

    So there you have it, if you have any questions or comments do ask us in the comments section below!


  2. #2
    Join Date
    Oct 2008
    3 things BN doesn’t want you to know about GST

    28 October, 2013
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    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.

    - See more at:

  3. #3
    Join Date
    Oct 2008
    Wednesday, 30 October 2013 13:11

    THE CHEEK OF IT! 40% of our wealth held by Umno elite, cronies & they still want to charge us GST!

    Written by Sam Chee Kong, Malaysia Chronicle

    The task of the taxing authorities is to "so pluck the goose as to obtain the largest amount of feathers with the least amount of hissing." We the taxpayers, of course, are the geese. - Jean-Baptiste Colbert

    The highlight of our Budget 2014 is the long anticipated introduction of the 6% GST or Goods and Services Tax. Under the current tax regime we pay 10 % sales tax (mainly manufacturing goods) and 6% service tax (mainly on F&B).

    To illustrate how the operations of a company in Malaysia will be impacted by the implementation of the GST we will use the following scenario.

    By April 2015, a company operating in Malaysia will have to have to pay tax to its supplier which is also known as input tax. When the company sells its end product to the consumers or other businesses, it will have to impose a tax known as output tax. To calculate how much tax to pay the authorities it will have to add up its output tax and minus the total input tax or,

    GST payable by the company = Total Output Tax – Total Input Tax

    Why GST is implemented?

    There are many reasons for the implementation such as:

    1. To widen the tax base rather than relying on current corporate and personal income tax.
    2. Our income tax level has reached its political limits currently hence our government will have to look at other alternatives.
    3. Government Deficits has to be financed through an alternative source that will not increase our Government debt burden.

    To see why our tax base is very narrow I present to you below the chart for our country’s income distribution. Malaysia can be considered to have one of the worst income disparities in the world and certainly tops in Asia.

    As can be seen form the chart below, the top 10% of the population controls 38.4% of our country’s wealth while the bottom 10% controls only 1.7%. I suppose this explains why only 10% of our population pays income tax!!

    The second chart displays Malaysia being on top spot in Asia’s richest/poorest 10% disparity chart. This clearly shows that our tax limit has already been reached and further hike in taxes will surely infuriate the top 10% of the population.

    By now you should know who made up the top 10% which is none other than the cronies or the special interest group (UMNO) plus their relatives and friends. In order not to cause further resentment to this group the government had no choice but to find an alternative taxing method.

    Secondly, our Government is currently running a budget deficit to the tune of 4.5% to GDP as shown by the graph below. A Budget deficit is a situation where it spends more than it received.

    To finance its spending our Government needs to either raise money through money printing, taxes, royalties, levies and other sources or through borrowing. The problem is that currently our Government’s debt is at 53.1% to GDP and capped at 55%.

    Since its Debt/GDP is nearing the ceiling, our Government will have limited options to raise funds other than increasing taxes or reducing subsidies. These measures will fall into the non-monetize or deficit financing category. As its name suggests Non-monetize does not increase our Government’s debt because it will not increase the existing money supply.

    The reason why non-monetize activities does not increase the money supply is because it mainly involves a shuffling of money. Or put it in layman’s term it is the shifting of money from the left pocket to the right.

    To illustrate, we take an example from our petrol or sugar subsidy. When our Government reduces their subsidies, money will be transferred from the public to the Government coffers because the public is paying higher price for them. The existing money supply is the same but our Government now has a bigger share of it and hence money to spend.

    Similarly when our Government implement the GST it also resulted in the transfer of money from the public to the Government. Since the GST is proportionally taxed meaning everybody, including the 90% that didn’t pay taxes will also be affected.

    Hence by shifting money from the left pocket (public) to the right pocket (Government) our Government is expected to add about RM16 – RM20 Billion to its coffers.

    What are the shortcomings?

    As a result of the implementation of the GST, it is not going to be a smooth ride. There will be repercussions from it and I present them below:

    1. A rise in corruption.
    Since every company is subjected to the authority’s scrutiny hence is obliged to keep an orderly and tedious account. They have to report all their incomes, expenditures and the amount of tax to the authorities. As empirical evidence emerged from European countries with experience with VAT, companies tend to over-inflate their expenditures and hence reduce their value added.

    Discrepancies are bound to happen and this will give an opportunity for the powers to be to abuse their power and hence corruption. In the end it helped flourishes a brand new industry and that is faking invoices.

    2. Increase in disparity
    because GST will apply to everybody irrelevant of their income level and hence also known as the proportional tax system. So how is the GST going to affect the poor more?

    To illustrate, we have two individuals, A with an annual income of RM30,000 and B with an annual income of RM80,000.

    In a Progressive Tax system A is paying a 5% tax or RM1,250 for his RM25,000 income and B is paying 20% tax or RM16,000 for his RM80,000 income. In this respect the poor man pays only RM1,250 for his taxes while his richer counterpart pays RM16,000 for his taxes.

    In a Proportional Tax system everyone pays the same rate or 15% tax in this case. A with an annual income of RM25,000 will be paying RM3,750 while B with an annual income of RM80,000 will be paying RM12,000.

    So, obviously the poor man is going to have less (RM21,250) after the tax deduction whereas the wealthier man still has much left (RM68,000).

    Similarly, with the implementation of the proportional GST of 6%, who is going to pay more in monetary terms? Hence, will the low and middle income or the high income group suffer more?

    3. Risk of Recession or slowing down of the economy.

    This will be caused by the Crowding Out effect on the money supply. When our Government raise funds through non-monetize deficit financing activities such as cutting subsidies or broadening the tax receipts through GST, it will have the effect of Crowding Out or displace the consumer and private business credit.

    This is because our Government is soaking up the money from the economy, money that would otherwise be used by the consumer to spend and the business to invest. At the end of the day this could reduce both private consumer and business spending and thus will lead to lower economic activity and worsen the recession.

    Our Government should also know that by soaking up money from the existing money supply will lead to lower economic growth and hence might cause a recession. A recession means lower future tax revenue from both the private consumers and businesses.

    What is our Government going to do next when tax revenues collapse? Increase the GST from 6% to 10% and further rationalising of subsidies? Or further monetize its debts by increasing its borrowings by raising the Debt ceiling?

    4. Increase in prices.

    In understanding how taxes affect the prices of goods and services we must understand the two concepts of taxes.

    Firstly, we must know that taxes impacts the prices of goods and services in two ways namely tax incidence and tax impact. Tax impact refers to the initial point of the tax or the impact on a company or consumer. Tax incidence refers to the final resting place or the burden of the tax where it ended. As for GST the first impression is that it will be levied fairly to everybody since it is proportional. Thus it also gives the impression that the initial impact will be on the companies.

    However companies are able to shift the tax burden backwards to the suppliers or forward to the consumers. In economics this is called the shifting thesis.

    How do they do it? To reduce the impact of GST, companies can shift the tax burden backwards by pressuring suppliers to reduce their prices by a couple of percentage. With the current slowing economic conditions, I am sure most suppliers are willing to oblige. Thus the initial impact of the GST has already been taken cared because of price reduction from suppliers.

    Another method is to shift the tax burden is to cut wages. Since buying more machineries will have some tax advantage and hiring more people doesn’t give any tax advantage, employers can then threaten employees to accept lower wages or risk being fired. This is because the company can now afford to hire less workers by automating their production processes.

    Now to shift the tax burden forward to the consumers by increasing the price by 6% or they can reduce the portion (as in F&B).

    Hence, in the end the companies will be better off in two ways, first by paying 6% GST on the back end but receive price reduction from suppliers and second from reduced wages and hence more profit. On the front end consumers will be charged higher prices (6% GST) but a smaller portion may be served (as in F&B).

    The poor consumers will be hit by the full brunt of the price increase because they cannot shift their tax burden either forward or backward.

    In wrapping up

    At the end of the day it will certainly create two groups of people where one is the recipient while the other is the payer to the state coffer. The group that pays consist of the middle and lower class while the recipients are from the rich whose members include the politicians and their cronies, friends and relatives.

    Moving forward I reckoned that the disparities between the rich and poor in Malaysia will be further widened. This is because by further rationalisation of subsidies followed by price increases, the lower and middle income group will be more affected due to their inability to absorb further increases in the cost of living.

    How will the extra funds be utilized?

    Our next problem is what is our Government going to do with the extra funds? From records, I don’t think much can be expected because we are still going to pay for road tolls, education, expensive and inefficient public transport, expensive public utilities and communications.

    In other words there is no genuine effort to help us reduce our costs of living other than dolling out some money through the Bantuan Rakyat schemes. Again much of the funds will be spent on projects that will benefit their cronies.

    It seems there is not much being done to strengthen our comparative advantages such as abundant natural resources and labour force, good weather and strategic location.

    Companies in the past have access to the abundance of cheap labour as it is one of our comparative advantages. However this has almost disappeared because they are now being replaced by cheap foreign labour. Without them many of the products manufactured locally will not be competitive in the Global Market space. We have in fact lost many firsts such as being the biggest tin, rubber and now palm oil producer to the rest of the world.

    In view of past industrialization efforts, we are yet to produce any ‘Emerging market Multinationals’. A good benchmark on how successful and influential that a company command is getting listed in the Fortune 500 Global Companies. The Fortune 500 Global is the ranking of the top 500 companies around the world as measured by revenue.

    Throughout the years the only Malaysian company that consistently listed in the Fortune 500 is Petronas. The virtue on why Petronas is listed in the Fortune 500 Global is because it is a GLC or Government-Linked Company.

    Singapore has two corporations listed in the Fortune Global 500 and they are Flextronics and Wilmar International which is controlled by Malaysian tycoon Robert Kuok. The following is the ranking list of countries with the most Global 500 companies.

    China was virtually unrepresented 15 years ago, today has 89 corporations listed and ranked second place. Similarly South Korea whose economy was devastated during the Asian Financial Crisis has 14 corporations listed and ranked 7
    th in the world. Other Asian countries that have done pretty well are India, Taiwan and Singapore.

    After more than 20 years of industrialization modelled after the Japanese during our ‘Look East’ policy, we have yet to achieve commendable results. Even with the financial and technical assistance provided by the various Government agencies such as MITI (modelled after Japan’s MITI), Sirim, EPU and others, we have yet to produce any world class companies.

    So, I reckon our Government owe us some explanations to the following questions:

    1. How are we going to address our widening income disparity?
    2. Are we doing anything to make our economy more sustainable?
    3. Are we doing anything to address the current issue in our education system where science and mathematics are not given top priorities?
    4. What steps are we taking to enable us to move up the competitive ladder?
    5. How about issues on equal opportunity and corruption?
    6. Are we doing anything to capitalize on the Chinese and Indian diaspora to help us build our economy as what happened in China and India? China’s current achievement being the ‘World Manufacturing hub’ and India’s reputation being the ‘World Service Centre’ are made possible due to the contribution of their overseas Chinese and Indians.
    7. When are we going to stop discriminating other races from holding top positions in GLCs and the Government? As Deng Xiaoping quoted “it doesn’t matter whether the cat is white or black as long as it catches the mice”
    8. Why Malaysia as a resource rich country is doing worse than countries like Singapore, Hong Kong, Taiwan, and Switzerland that have no natural resources?
    9. How about our Talent development? Any idea where are we heading in the next 10, 20 or 30 years from now?

    Either not smart to think ahead or too busy pocketing from national coffers

    As long as no efforts are taken to address the above fundamental problems, it will be a herculean task to take our economy to the next level to compete with the rest. This despite the many corridors and hubs that have been implemented, we have yet to attract many Global technology companies to invest and create a critical mass in our Research and Development.

    Why? Because we are under-funding our research in physical sciences and thus lagged publications in these areas. Our politicians have yet given a thought on what Malaysia want to be in the next twenty to fifty years. Reason being our politicians haven’t
    “Got it” as those politicians in China and India.

    Many of their top officials are trained engineers and they ‘Get it’ because they understand the linkages between technology development to manufacturing, university and infrastructure Eco-system.

    Malaysia Chronicle

    Full article:
    Follow us: @MsiaChronicle on Twitter

  4. #4
    Join Date
    Oct 2008
    Oct 28, 2013

    Ihad my breakfast at my favourite Mamak restaurant today. A piece of Roti Kosong, Nasi Lemak bungkus and Teh Tarik kurang manis totalled RM3.70, the same price as before the 2014 Budget last Friday. It’s my favourite Mamak hangout because this is perhaps the last place on earth that will increase its prices after any sugar, petrol and whatnot increases. However, “Aneh” said they’re still adopting “wait-and-see” approach whether to increase their prices or not after the RM0.34 per kilogram increase in sugar price.Yes, the biggest surprise from the 2014 Budget was indeed the total abolition of sugar subsidies announced by PM Najib Razak. The main reason for the increase was to reward Syed Mokhtar al-Bukhary, the tycoon who monopolize the sugar business in the country, and the same person who sponsored Barisan Nasional (BN) heavily during this year General Election. Actually that was not something that upset the people the most. What really anger the people was the way Najib administration justify the subsidy abolishment.Sugar is not the only reason that leads to diabetes problem. Hence by slashing sugar subsidy does not guarantee a total elimination of diabetes issue. If this is the case, then zero-sugar-subsidy countries worldwide would have zero problem with diabetes, wouldn’t they? All carbohydrates can cause a rise in blood sugar as well because 90% are broken into glucose. And this includes food such as rice, potato, corn, bread, pasta, fruit, milk, honey and whatnot.PM Najib may thought this is the best time to insult peoples’ intelligence by justifying slashing sugar subsidy would solve diabetes problem, not to mentionhelping peoples’ sex life. But he definitely underestimates the chain reaction and multiplier effect in the prices of other food due to sugar price increase. But why should he care when the abolishment could help his UMNO-led government saves (or rather gains) a whopping RM567 million annually?On the other hand, it’s a blessing in disguise to the “Kampong Folks” who voted the present government because they’ve been demanding for decades for higher price in “Air Sirap, Kuih, Kopi, Cakes, Cookies, Carbonated drinks, Bread” and whatnot (*grin*). The next item that’s still screaming headlines is non other than the proposed GST (Goods and Services Tax) effective April 1, 2015 starting at 6%. This is not surprising at all since every Tom and Jerry knows it will be revealed upon BN winning the general election.It’s true that GST is the easiest way for a lazy government to collect more money. It’s mind-boggling that many economists applaud GST announced by PM Najib. GST on its own is not a problem. But implementing GST in Malaysia is a huge problem. GST is like a blank cheque for the present government to collect an estimated RM30.75 billion (at 6% GST with the exemption of basic necessities such as rice, flour, cooking oil, education, public healthcare, etc.) – a huge amount that most likely will lead to more leakages.Already pride itself with about RM26 billion in annual leakages, an additional RM30.75 billion income annually to Najib administration is indeed a mouth-watering golden goose. It’s a blank cheque because the government can always increase the rate any time they like it, mind you. In time, GST could become the country’s biggest revenue generator, surpassing current piggy bank Petronas. Unlike Petronas that depends on global oil prices, GST depends on government’s need to increase its coffers (*tongue-in-cheek*).PM Najib was grinning and having fun insulting peoples’ intelligence by justifying that since 146 countries have implemented it, then GST must be the greatest thing invented since sliced bread. Of course he didn’t dare to reveal that in developed countries, the GST is one of revenues pooled to help its citizens with free home, food, healthcare and whatnot. Fancy working for just nine months in your adult life and have the cheek to demand for a five-bedroom property upgrade despite claiming £32,000 (RM162,43 a year in benefits while having nine kids, 27-inch flatscreen, Nintendo Wii and Playstation 3?That can only happen in United Kingdom, one of the countries that PM Najib proudly showcase his GST case studies. Hey, we didn’t say anything about UK having a lazy government, okay. It’s also a big lie that prices would come down with GST’s introduction and abolishment of existing Sales and Services Tax (SST), which is at 10% and 6% respectively. You can argue till cow comes home whether GST is a replacement tax or an additional tax. The fact is whatever the items, the price will not become any cheaper post-GSTsimply because in Malaysia, whatever goes up will never comes down.If it’s true that Najib administration is so generous about a lower 6% GST tax rate instead of Sales tax at 10%, will cars price become cheaper by 4%, being the difference? The fact is people do not see and feel the existing 10% sales tax in general items but will surely see and feel the 6% GST when it is implemented. Unless there’s a period of “less 10% sales tax” whereby people can “experience” cheaper goods by 10%, and follows by a “6% GST tax” period, the slogan that GST will translate to cheaper goods is just plain lie.
    Knowing the extraordinary efficiency of government enforcement, goods will become 4% more expensive post GST – as simple as that, at least to the average Joe and Jane. Sure, existing SST is not fair but at least people knows that they’ve to fork out additional 10% plus 6% in Sales and Service Tax everytime they step into KFC, McDonald, Starbucks, Little Penang Cafe, GeorgeTown White Coffee, Papa John’s Pizza, Kenny Rogers, private hospital, hotels and so on. But with GST, people does not have any option but to pay the mandatory 6% tax bracket, even if they merely want to enjoy a can of Coca-Cola from 7-Eleven.Surely the government wouldn’t bother to implement the lower 6% GST if indeed prices of goods would become cheaper. Why collect less (6% GST) if you can collect more (10% plus 6% SST) presently? Here’s the main key that Najib administration doesn’t want to tell you – there’re more items to be taxed under GST than the existing SST. For example, you would end up paying extra 6% GST for newspaper, stationery, children school bags, shoes, private tuitions, smartphones, tablets, car’s spare parts, milk powder and the list goes on. Duty free goods would not be free after all.Furthermore, why cry and scream till foam at mouth about cheaper goods with GST when Najib also announced a one-off payment of RM300 to BR1M(1Malaysia People’s Aid) household when the GST is implemented. Doesn’t that proves overall goods would be more expensive hence the sweetener to pacify the ignorants? There’re countries that are fit to impose GST but definitely not Malaysia under the present corrupt regime. And this is precisely the missing piece that economists who support GST are not aware (or rather refuse to acknowledge) of.GST will be a new cash-cow for BN-led government to continue with their plundering. PM Najib’s own UMNO is now a hard to satisfy animal that needs bigger tits to feed. With more than RM500 billion (and counting) in government debt, you do not need to be a scientist to understand why GST is the beautiful solution to Najib administration. Perhaps it’s good to have GST after all. Perhaps GST is what it needs to wake those ignorant and dumb voters. But I suppose you can’t teach old dogs new tricks. They would most likely think GST is actually yummy Great Stew T-bone (*grin*).

  5. #5
    Join Date
    Oct 2008
    Govt: Rate hikes good for the economy, so good for the people

    First Published: 4:30pm, Dec 19, 2013
    Last Updated: 4:30pm, Dec 19, 2013



    PETALING JAYA (Dec 19): The government today defended its decision to hike certain rates and cut subsidies, saying it is a "responsible approach" that is "absolutely necessary" to maintain investor confidence in Malaysia.

    And what is good for the economy is also good for the people, argued Putrajaya in a statement today.

    "To keep Malaysia’s economy strong, we need to keep our public spending in check.

    "That means raising some rates and cutting some subsidies. In the short term, this will be unpopular with some.

    "But it is absolutely necessary to maintain investor confidence in Malaysia – and to continue the strong growth in jobs and income over the last four years," the statement quoted an unnamed government spokesperson as saying.

    Among the unpopular decisions were the increase in fuel prices in early September, and Prime Minister Datuk Seri Najib Razak's announcement when presenting Budget 2014 in late October that the sugar subsidy will be removed.

    Najib also announced that the Goods and Services Tax (GST) will be introduced in April 2015.

    More recently, Putrajaya announced an increase in power tariffs with effect from Jan 1.

    The new year is also likely to see a hike in highway toll rates and assessment rates for properties in Kuala Lumpur.

    Public transport and schoolbus operators have also announced plans to raise their fares.

    "International institutions, investors and agencies have backed this responsible approach, and 52% of respondents to the recent poll approve of the prime minister’s performance," said the government spokesperson.

    The Merdeka Centre for Opinion Research yesterday reported that public confidence and approval of the prime minister and his BN government has declined significantly to 52% this month, compared to 62% in August.

    Merdeka Centre said the reduction of fuel subsidies, introduction of GST and increase in electricity tariff have adversely affected public approval and confidence.

    The spokesperson said Putrajaya was taking the tough decisions needed to protect Malaysia’s economy "unlike the opposition, who promise everything to everyone."

    "Some measures may not be popular now but over the medium term what is good for the economy is also good for the people," the spokesman said.

    The statement added that in the short term, the government was providing extra help to those who need it most.

    "From Monday, some 7.9 million recipients in households earning under RM4,000 per month can apply for new BR1M payments.

    "We are opening new 1Malaysia shops, to help with the cost of daily goods, and new 1Malaysia Kliniks to provide affordable healthcare."

    Read more:

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