Friday, November 27, 2009

Deputy Finance Minister was Clueless on GST

I raised my concerns on the controversial Goods & Services Tax (GST) in my committee stage debate on the Ministry of Finance, you can hear it here. The key gist of my argument was that while GST is in theory, more effective and efficient, it has to be noted that in Malaysia only 6.7% of its 27 million population pay any income taxes, or 15% of its working population. This means that any introduction of GST today would mean a substantial burden on 85% of the working population who current do not pay a single cent of tax. They are not pay tax not because they are evading, but because their income is below taxable levels.

Hence my argument was that the GST should be implemented only after a sizeable majority of the working population are able to increase their income to taxable levels. Then, it may be appropriate to switch from a direct taxation mechanism to an indirect one like GST. In essence, until the Prime Minister's stated goal of becoming a "high income" society is achieved, the Government must not implement the GST.

The Minister replied to my concerns very briefly. He said he agreed with my comments, but the Government at this stage is only studying the matter and do not have any intentions at all to implement a GST any time soon. This was on the 18th November 2009 (Wed).
Dato’ Dr. Awang Adek Hussin: [...] Saya ingin menyebut beberapa perkara lain. Salah satunya GST di mana Yang Berhormat Petaling Jaya Utara pun ada enyebutnya. Dia kata sokong dari dasarnya bagus cuma masanya tidak ready lagi. Pertamanya saya ingin menyatakan di sini bahawa kerajaan tidak berhasrat melaksanakan GST dalam masa yang terdekat ini tidak ada. Sekarang ini pada peringkat kajian, mengkaji, memahami dan mencari penyelesaian kepada masalah-masalah yang mungkin timbul.

Apabila kita sudah dapat ke tahap di mana kita yakin bahawa semua ini sudah dibereskan, barulah pengumuman akan dibuat. Akan tetapi, buat masa ini tidak ada lagi sebab ada juga orang dan media pun bertanya adakah kita hendak laksanakan tahun depan kerana perbincangan- perbincangan yang sering disuarakan di dalam Dewan yang mulia? Akan tetapi bagi pihak kerajaan, saya boleh katakan bahawa kita tidak ada perancangan untuk melaksanakan dalam masa yang terdekat.

[...]Cuma, ada seolah-olah tadi di mana saya tidak mahu ada tanggapan bahawa Malaysia tidak ready, negara-negara lain ready melaksanakan kerana mereka ready. Mereka sudah bersedia tetapi tidak bagi Malaysia. Saya cuma mahu katakan, negara-negara yang telah melaksanakan termasuklah negara yang berpendapatan lebih rendah daripada Malaysia dan sudah melaksanakan. Contohnya, Sudan, Indonesia, Thailand, dan Vietnam sudah pun memperkenalkan GST ini. Maknanya, kalau sesuatu yang tidaklah di luar kemampuan kita sekiranya kita sudah bersedia. Akan tetapi, pada peringkat ini kita sedang mengkaji.
And then, guess what, in less than a week, the Prime Minister and Finance Minister, Dato' Seri Najib Abdul Razak announced that the Government will table the GST bill for first reading in the current session of parliament!! The 2nd Finance Minister, Datuk Seri Ahmad Husni Hanadzlah even indicated yesterday, the the GST rate will likely be at 4%!

Obviously, the Deputy Finance Minister, Dr Awang Adek was complete out of the loop and clueless about the GST and should not have been allowed to answer the question! This shows how important the Government treats the Parliament as its highest legislative body.


Anonymous said...


These human-looking animals in BN/UMNO do not communicate.....they only "oink oink oink".

These animals are looking at ways and means to increase their income.

Tamak....betul betul tamak binatang-binatang ni....


Mohd idris

Old Fart said...


You may be right about the low taxable population which may appear to not justify GST imposition on them. However, that by no means should mean we should wait any longer. There are other ways to ensure the non-taxable are not impacted by GST. The number of basic goods and services consumed by the poor can be zero rated so that by and large a majority of them continue to remain outside the tax loop. I should say that the bigger impact will be seen in the economic activity of those operating below the tax radar. For a lot of hawker stalls and similar sized business operations, they may not even register themselves for GST purposes. Meaning, they will not be able to recover the input taxes they pay. In which case either buying from them would mean higher prices or they end up making lower profits. It is the administration of GST that is going to add to the cost of running a business. Of course for a lot of cash businesses, they will now find it difficult to stash away the cash from the taxman.

OTL said...

Dear Y.B Tony Pua,

But for me, if government can efficient using the income from GST, I do think it is a good way to implement it, but if the refund of GST to low income group can't proper manage, the impact will be huge and burden to rakyat.

Below is the my opinion & explanation why I support to GST.

magnee said...

I'd argue for GST.

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.

You may be interested to know that GST or VAT was first proposed in 1918 in Germany. Read it in wikipedia.

Anonymous said...

Until and unless the government can justify their mega expenses eg 1Malaysia F1, Maltrade new expo centre in change of billion ringgit land, RM500 million commission to Razak Baginda company, annual misappropriation of government expenses in AG report, etc etc, till then they have any reason to introduce GST.

What for rakyat continue paying taxes to finance these robbers and thieves?

Similarly like in KLIA, having formal taxi lane close permanently and reserve especially for the few super VIPs. While the rest of us taxpayers, be it taxis and private vehicles jam pack in another lane. They should reserve one runway specially to these so called 'VIP'!

Barisan National is too proud to understand rakyat predicament. They are the king makers! When they need money, who else do they turn too?

telur dua said...

This is what happens when half-past-voters voted in this bunch of half-past-six MPs who know bollocks.

KL Management Services said...

Implementation of GST is only a short-term gain for the government. From a personal financial point of view, RM1 billion / annum doesn't help much.

We have much to learn from financiers outside - Take for example Bill Gates and his foundation.

He dreamt big ideas, gathered big checks behind him, and push for a go. How much longer do we have to wait?

Do we need approval from MPs' to run projects beyond our means?