Enough with the comics, give full list of GST-free items, says Rafidah

BY ANISAH SHUKRY

Published: 31 March 2015 7:00 AM

The article was first published on The Malaysian Insider.

Putrajaya must change its current approach of educating the public on the goods and services tax (GST) by publishing immediately a list of tax-exempted items in every newspaper in the country, former minister Tan Sri Rafidah Aziz said.

The outspoken former international trade and industry minister said a clear list would help consumers to be better prepared for the new tax which takes effect tomorrow.

She said Putrajaya’s reliance on the use of cartoons, billboards and technical jargon such as "zero-rated" for the past year to explain GST has left Malaysian consumers, including herself, more confused over the new tax system.

"I personally think that right now, we should have a complete list of the categories that are exempted, so the public will know which (items) won’t be taxed.

"It should be made available in all the newspapers, in all languages, and it should not be technical,” Rafidah told The Malaysian Insider.

"Our problem is that the explanation so far has not been clear. The government has been using different sources or different approaches, and most of them have been very technical.

"For instance, who understands what ‘zero-rated’ means? Why can’t they just use the phrase ‘tak kena GST’ or ‘no GST’. That’s much simpler and easier to remember.”

She said it was also important that Putrajaya first cleared the air over which items would not be taxed, so that consumers would not rush to stores and hoard goods unnecessarily in anticipation of the GST.

Rafidah said the newspaper pull-out would also help consumers identify traders who raise prices on items that were not affected by the GST.

"Let’s say on April 1, I read the newspaper and I see that soap will not be taxed. Then I go to the supermarket and see they are charging me 6% for it. Thanks to the pull-out, I know they are cheating me and I can report this.

"Forget about the various codes, the technical jargon and whatnot. All that is irrelevant,” said Rafidah.

She added that Putrajaya could pay for the newspaper pull-out as the cost involved would be far less than erecting large billboards across the country.

"Some time ago, there was a billboard near my house that said education would be exempted from GST. It even had a cartoon drawing on it. I thought, what does that mean? Are university fees or tuition fees exempted from GST? What about books or computers or school-related tools?

"Instead of spending money on all those billboards, by this time you could’ve gotten a complete publication on all the items that are not taxed,” said Rafidah.

She added that a separate exercise should be done for traders so that they could calculate how the GST would affect them, and urged the government to hold meetings with associations.

"Right now, there appears to be no coordinated effort. That’s the only problem. I have no quarrels with the tax itself. It is a good move to rationalise taxes. But people are not familiar with it; some are taking advantage of it, and that causes confusion and hoarding.” she added.

The GST jingle sung by customs officers which was mocked online by Malaysians. – The Malaysian Insider pic, March 31, 2015.One of Putrajaya's efforts to educate the public on GST through a music video recently received heavy criticism from Malaysians after went viral on the internet.

The video, purportedly created by the Customs Department, hailed the virtues of implementing GST, but was panned by critics as "sad", "cheesy" and "reminiscent of the 1970s".

In the meantime, to ease the transition period, the Domestic Trade, Cooperatives and Consumerism Ministry has set up a round-the-clock operations room to monitor prices after the GST kicks off.

Located at Precinct 2 in Putrajaya, the operations room would also take complaints and reports from the public on GST matters.

Jom ambil peduli tentang GST

Ramai yang bertanyakan tentang Goods and Services Tax (GST).

GST adalah cukai langsung ke atas setiap pembelian barangan dan perkhidmatan.  Mulai bulan April 2015, majoriti barangan dan perkhidmatan di Malaysia akan dikenakan cukai sebanyak 6% kecuali peratusan kecil barangan dan perkhidmatan seperti makanan asas, pengangkutan awam, yuran pendidikan dan perkhidmatan perbankan bukan berasaskan yuran.

Jangan salah anggap GST dengan Sales and Services Tax (SST) yang berjumlah 16% itu kerana sekarang ini majoriti barangan dan perkhidmatan TIDAK dikenakan cukai sebanyak 16% tetapi mulai bulan April 2015, majoriti barangan dan perkhidmatan AKAN dikenakan cukai sebanyak 6%.

Secara peribadi, GST adalah cukai yang lebih adil kerana lebih banyak seseorang itu berbelanja, lebih banyak cukai yang dibayarnya. Kurang berbelanja maka kurang cukai yang dibayar.

Cuma terkilan dengan pelaksanaan GST ini. Di peringkat perbincangan, kadar yang dicadangkan adalah 4%. Jadi, segala hujah, strategi dan assumptions dibuat berdasarkan cukai pada kadar 4%, termasuk  pengurangan cukai pendapatan peribadi sebanyak 2%. Oleh itu, apabila kerajaan menaikkan kadarnya kepada 6% sewajarnya pengurangan cukai pendapatan peribadi dinaikkan kepada 3%. Begitu juga dengan strategi dan assumption yang lain-lain, perlu disesuaikan dengan kadar cukai baru dan bukannya kadar 4% semasa dalam perbincangan dahulu.

Dan kerajaan perlu meyakinkan rakyat bahawa April 2015 adalah tempoh yang selayaknya untuk melaksanakan GST, tika dan saatnya majoriti rakyat mempunyai pendapatan isirumah RM3,000 dan ke bawah. Ada kajian yang mengatakan tempoh yang sesuai adalah apabila pendapatan majoriti isirumah berjumlah RM5,000.

Nasihat saya, ambil peduli tentang GST sebab buruk baik akibatnya akan ditanggung sendiri oleh setiap orang, setiap rakyat jelata.

GST will be neutral to business costs

The article was first published on Business Times.

'GST will be neutral to business costs'

By Norhisham Hussein

THE introduction of Goods and Services Tax (GST) to replace the current sales tax and services tax (SST) system has been a long-standing issue in Malaysia.

First mooted in the 1980s, GST has been put off countless times due to the public's doubts over it.

Much of the criticism of GST fall into three distinct categories:

* GST is hard to comply with, as it requires proper accounting and audit systems;

* GST is "regressive" since it is a flat tax and doesn't take into account the income level of consumers;

* GST is supposedly inflationary since it is applied to the prices of all goods, at all stages.

All three criticisms have some validity but not to a degree that critics will have them to be.

First, because of the multi-stage nature of GST and input tax credits, businesses incur no tax liability. Businesses paying GST on raw materials can offset this cost against the GST they collect on sales, which gives them an incentive to invest in the systems. GST, therefore, also does not have a "cascading" cumulative tax effect.

In other words, GST will be neutral to business costs, unlike the sales tax, which is levied at the manufacturing stage and incorporated into the input cost at the retail level.

Second, the regressive nature of GST should be balanced against the equally regressive sales tax. In fact, the government can make GST somewhat more progressive than the sales tax, as basic staple goods such as food can be "zero-rated", i.e. not charged GST at all.

Certain other consumer items that are deemed beneficial, such as books, are typically often zero-rated as well.

Third, the historical evidence regarding the implementation of GST and other ad-valorem taxes (VAT) across the globe shows that, at worst, such taxes cause a one-time increase in the final prices of consumer goods.

There have not been cases where the introduction of such a tax has caused a systemically higher rate of inflation. Consumers only pay the final tax rate, not the cumulative effect of GST levied at each stage of production.

In cases where GST/VAT system has replaced a pre-existing sales tax system, the evidence suggests final prices change very little, and in one case (Canada), have actually fallen.

At the level that is being discussed (circa seven per cent) relative to the sales tax (10 per cent), the likelihood is that GST will cause little movement in consumer prices, if at all.

The arguments against GST are thus weaker than they appear at first blush.

To counterbalance any weaknesses, a GST system causes far less market distortions and is much more efficient than the SST, while promising to yield higher tax revenue at lower tax rates.

Consumers will see how much tax they're incurring on consumer goods, unlike under SST where the tax burden is "hidden". No tax system is perfect, but a GST is much less imperfect than many assumed.