Saturday, November 28, 2009

GST Debate Commences

The debate has begun. Should we or should we not implement the controversial Goods & Services Tax (GST). I've received a comment from a supporter in my earlier post that he supports GST. His arguments are as follows:
  1. Currently our Sales Tax is 10%. So, I think anything lower than that is a better deal for the Rakyat.

  2. GST is fairer. GST is a consumption tax, people with more income consume more, so they will be taxed more often. People cheats on Income Tax, which explain the low percentage of Rakyat who are tax payer. With GST, those who cheats by not paying or paying less will still have to pay some tax to the Govt, especially when they buy big nice cars and houses.

  3. GST is more difficult to cheat than sales tax. Because Sales Tax is so easy to cheat, SMEs who are honest are forced to cheat in order to survive. An example, it's common to find a clause in an open tender that states that the provider has to bear all taxes, and every participant knows that if he doesn't cheat on Sales Tax, he would not have the chance to win the tender. This scenario cannot happen in case of GST, as everyone in the supply and consumption chain has to pay GST, therefore you can't have a clause in the tender to excuse yourself of not paying the GST. With GST, all honest SMEs and providers can now compete fairly and squarely in the market place.

  4. As GST is more efficient, the revenue for the Govt will increase. In theory, the Govt will have more money to do all kind of wonderful things for the Rakyat. Now, the track records show that our Govt favors a selected groups of Rakyat and often squanders billions of MYR. Still, I think GST do more goods than harms. Especially when DAP comes into power.
My short response will be as follows:
  1. Our sales tax is 5%, and that's only on very selected goods.

  2. I agree with all the theoretical arguments mentioned - (2) and (3). But you have to balance that against the pain you will incur on 85% of the working population who does not pay any income tax at this point of time because their income levels are too low (and not because they are evading taxes)

  3. As for(4), I fully agree that implementing GST will increase govt revenue, that's why BN is doing it, 'cos they've run out of money after wasting it in the last 10-20 years. It has bled Petronas dry and now it wants to bleed the people too.

    Lets increase govt revenue by increasing the income of the people (more income, more people will need to pay tax) instead of increasing govt revenue by increase tax rates.
Our BN govt wants to increase tax rates without first increasing the income of the people, and hence it is both unfair and burdensome to the people.
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