Commentary Politics

The twisted GST-SST conundrum

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Zaidi Azmi
Written by Zaidi Azmi

August 6, 2018

A Youth’s Take – A column by Zaidi Azmi

ODD is the government’s stand on the Goods and Services Tax (GST). Most economists and international financial analysts say it’s good for the country but the Pakatan Harapan wants to do away with it anyway.

In parliament last week Finance Minister Lim Guan Eng had, for the second time, admitted that GST was more transparent and efficient that it’s soon-to-be successor, the Sales and Services Tax (SST).

Lim said – during a seemingly childish debate in the Dewan Rakyat on Tuesday – the GST needed to go simply because Pakatan had promised to do so before they won the May 9 general elections.

In his first admission three weeks ago, Lim claimed that while the GST was more transparent and efficient, SST would be less burdensome to the people. The reason? Because previously the SST collected less revenue than the GST. At least RM20 billion less a year, that’s how much.

Was Lim trying to imply that having a transparent and an efficient taxation system is a bad thing so as to justify SST’s re-implementation?

Also, what Lim may have conveniently left out, in insisting the people-friendly aspects of SST, was the fact that the SST has many holes which render the authorities almost powerless in stopping tax evaders.

How the government intends to pluck these holes is something Lim has not mentioned until today and the SST is scheduled to be reintroduced beginning next month.

Even odder, and worrying, was Lim’s assurance that the Inland Revenue Board will stop raiding tax evaders, adding that offences like under declaration of the amount taxable will instead be resolved through discussions.

So not only will we be having an opaque taxation system, one of the tigers, in which the government has been using to hunt tax evaders, has had most of its teeth plucked out.

Also, the claim that the SST is not too burdensome on the people is perhaps a tad ambitious since the prices of many goods and services have not come down despite the GST being zero-rated since almost three months ago.

The more erudite Malaysians should have probably realised it by now that consumption taxes such as GST and SST play only a little role in determining the prices of goods and services.

Theoretically, the GST should not have increased the prices of certain goods because the government reimbursed the six per cent – called input tax – to manufacturers and retailers.

The reality surrounding a price increase is simply because a business wants to make more money.

There was also the argument by businesses that price hikes were inevitable because the reimbursement from the government was too slow and that they had to hike prices to offset cash-flow problem.

If that is the case, former finance minister Datuk Johari Abdul Ghani has a solution, one that does not require the country to re-implement a leakage-laden tax system like the SST.

The solution is that the government to allow businesses to deduct their following tax returns by offsetting the amount of the late-refunded input tax against their obligatory output tax and pay only the difference.

Another option is to reduce the GST’s rate from six to four per cent. GST was proven the most efficient system. More than 170 countries adopt it and have never gone back, said Johari.

 

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About the author

Zaidi Azmi

Zaidi Azmi

If Zaidi Azmi isn’t busy finding his way in the city, this 26-year-old northern kampung boy can be found struggling to make sense of the Malaysian political scene. Zaidi can be reached at [email protected]