Service tax loophole exploited

A DAP leader says that some eateries are exploiting the loophole and consumers may be duped by profiteering -minded restaurant and food outlet operators.

GEORGE TOWN: Consumers and politicians alike objected to the imposition of a 6% government service tax for each purchase of handphone reload cards.

The issue has briefly ended with a deferment by the telecommunication companies on imposing the service tax.

However, a Penang DAP leader pointed out that some eateries are exploiting the loophole on the 6% service tax and consumers may be duped by profiteering-minded restaurant and food outlet operators.

Komtar state assemblyman Ng Wei Aik said that some operators are apparently inserting the 6% tax into bills on unsuspecting consumers, including himself when they are not supposed to.

Many are unaware that only operators of outlets, who make an annual record sale of RM3 million and upwards, can apply and get approval from the royal customs and excise department, to bill the 6% government service tax on top of the normal 10% service charge.

However, the operators must display a sign that their outlets have accreditation from the customs authorities to impose the taxation.

The catch, according to Ng, is that some operators are not qualified to impose the 6% tax but they do it because their customers are unaware of the regulations.

“Usually when we dine in restaurants, we ask for the bill and we look at the total amount and settle it promptly. We may look at the food items ordered but rarely, do we look at the taxation columns. This is where, our consumers get cheated,” he said.

Ng claimed that he was one of those who was duped in March and upon realising it, he lodged a complaint with the customs department.

The authorities later took action against the errant operator by issuing a fine and later, they also discovered that the outlet made millions just from imposing the 6% tax, he said.

The same outlet does not need to contribute back to the government coffers as they had not applied to impose the 6% tax in the first place, Ng explained.

In this context, he urged Prime Minister Najib Tun Razak, who is also the finance minister, to act before the abuse becomes rampant.

The DAP leader hopes that Najib will have the political will to abolish the 6% tax and reduce the 10% service charge to alleviate the burden on consumers, who are already dealing with an inflated rise in the costs of living.

Ng also urged the consumer watchdogs and the government’s enforcement division to monitor the imposition of the 6% tax on every item, not just in eateries.

“There also has to be a united front among consumer groups to prepare for the challenges in dealing with the impact from the goods and services tax (GST), which would eventually be adopted,” he said.