Tuesday, December 22, 2009

GST - a consumption tax, What about its companion, welfare safety net

I notice a few facts are HIDDEN from the minister's statement about GST. True that we need to widen our tax base, and with GST, we can derive new tax base from foreign resident in the country, tourists and those groups who normally dont pay tax, eg black economy sector and low income group.

He said the Consumer Price Index (CPI) would not increase as a result of the GST implementation.
This is bulls, my apologies for my french.. I had the experience of going through the first year GST introduction in NZ, and CPI went up as much as the rate of GST. Retailers and service providers didnt reduce price, no discount to soften the impact of GST.

So brace yourself for 4% inflation in 2011.

Ah, for got to mention, that the last quarter before GST take effect, people would buy whatever they can, whether they can afford them or not, just because they dont want to pay GST to the government. So we can expect a surge in demand for consumer goods, people would stocking up on goods and services if they can do it.
That in itself would be inflationary.

Brace yourselves, if you are business owner, your administration cost would indirectly increase, because now you become indirect tax collectors for the government. Yes you would collect GST from consumers, and remit them to tax department. Although you would have a wee bit increase in cash flow, ie 4%, for the month, that is still not your money.

I have been supporting the concept GST ever since the idea was first mooted in 2005. It will net wider tax base, and force the black economy to pay taxes, indirectly. So soon the criminals, traders, illegal immigrants and poor farmers who normally dont pay taxes will have to pay 4%.

Fair enough if those people are rich, BUT if they are poor farmers and traders, its a burden and absolutely not fair.

WE should also think of social safety net, minimum wages and help for the poor.
How much Jabatan Kebajikan Masyarakat pay for every poor families? If they apply for help?
What is the minimum wage in Malaysia? NONE, no minimum wage.

Minister, your performance is dismal.

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