GST – Don’t rob the poor

There is absolutely no way GST will benefit the poor. If anyone says it will benefit the poor, it is just plain bunkum.

COMMENT

The Goods and Services Tax (GST) topic has been left on the backburner by the man-on-the-street who is currently grappling with the high cost of living and rising inflation.

The rakyat must not forget that the Barisan Nasional federal government will definitely implement GST if given an overwhelming mandate in the coming 13th general election.

GST is certainly a tax to be feared by the poor and low-wage earners. And GST will certainly be unbearable to the poor as nearly everything will be taxed save for basic foodstuff and public transport.

But what about things like soap, toothpaste, clothes and shoes? We certainly cannot do without these things and for sure GST will be imposed on them. Thus, the poor and the low-income group will be the ones to suffer most from this regressive tax while for the wealthy, it will just amount to the loss of a little loose change.

Take the case of someone single earning RM1,000 per month, for instance, and spending RM500 each month. That is already 50% of his income whereas for a single person earning RM5,000 a month, if he spends RM500 per month is only 10% of his income.

This is indeed a vast difference and thus the GST will hit the poor man really hard as he has to spend a larger percentage or proportion of his income due to the flat tax rate of 4% and therefore he will have less savings – simple mathematics and logic.

There is absolutely no way GST will benefit the poor. If anyone says it will benefit the poor, it is just plain bunkum.

Salaries have remained stagnant since 1998 for the lower-ranked office workers such as dispatch clerks and general clerks as well as for the low-skilled blue collar workers.

A RM900 per month salary in the private sector is still in existence these days for the post of a general clerk for a Form 5 fresh school leaver now as it was in 1998 while prices of staple goods have sky-rocketed since the tremendous petrol price hike in June 2008 from RM1.92 to RM2.70 (a steep 40% increase).

With the existence of such a meagre salary, it is unthinkable for the BN government to implement GST because it will eat into the income of the poor and burden them terribly. GST can only be implemented if Malaysia achieves the status of a high-income nation and certainly not before that.

Widening income gap

As it stands now, the income gap is increasingly widening. The top company director can be earning more than RM200,000 per month but the lowly clerk is only earning RM1,000 per month.

Therefore it is not surprising that in Malaysia the rich are getting richer at a very fast rate while the poor are getting poorer, also at a very fast rate.

Malaysia’s income gap is one of the worst in Asia and is comparable to countries such as Cameroon and Nigeria according to the Gini Co-efficient Index which is used for measuring income disparity.

According to the UNDP 1997 Human Development Report and the 2004 United Nations Human Development (UNHDP) report, Malaysia has the highest income disparity between the rich and poor in Southeast Asia, greater than that of Philippines, Thailand, Singapore, Vietnam and Indonesia.

The UNHDP Report shows that the richest 10% in Malaysia control 38.4% of the economic income as compared to the poorest 10% who control only 1.7% (source: wikipedia).

This simply points to the fact that the nation’s wealth is increasingly concentrated in the hands of the rich.

Malaysia has Ferrari’s biggest showroom outside of Italy while there are still 45,000 (a conservative estimate) hardcore poor families trying to survive on less than RM500 per month! What a paradox!

Meanwhile, the government’s silence on the income disparity issue is deafening and the Minimum Wage Policy has yet to be settled.

The government should be bold, honest and transparent enough to state the minimum wage figure. Given their elusive stand on this issue, it is certainly not surprising if the rakyat thinks the government is on the side of the employers and large corporations.

As it is, the government only takes care of the welfare of the civil service. And this is certainly the hallmark of the practice of cronyism where only those who are well-connected can have their voices heard and their interests catered to.

This means that the slogan of “People First” which is much touted by Prime Minister Najib Tun Razak should be rephrased as “Well-connected People First”.

Due to the fast-approaching 13th general election, the BN government has kept mum with regard to the implementation of the GST, for now that is. Rest assured that once BN wins a huge mandate, GST will be implemented faster than you can say “BN” and the income gap will become an increasingly wider yawning abyss.

Losing out to foreign workers

The problem of low wages is also compounded by the massive importation of low-skilled foreign labour which depress wages. If the market rate for a Bangladesh worker is RM800, it is difficult for our own low-skilled citizens to demand more.

Employers in the low-skilled industry want to cut cost and it goes without saying that they will employ the foreign workers who are easily available.

In the end, the Malaysian worker loses out and the Malaysian economy loses out too because of the currency outflow as these foreign workers send their income home while at the same time the wages of the locals remain firmly entrenched at a low rate.

As long as the situation remains the same, Malaysia will never achieve high-income nation status and this talk of high-income nation by the government is just plain hot air.

With the abundance of low-skilled factory workers maintaining the rate of RM800 as a benchmark for a starting salary, inevitably the effects have spilled over to the job of a low-skilled office clerk whose starting salary will be set at the rate of RM900.

In this manner, those who suffer most are the poor Malaysians who through lack of education and lack of finances to improve themselves will forever be trapped in the vicious cycle of poverty.

The BN government must have a strong political will to curb the intake of low-skilled foreign workers to safeguard the interests of Malaysian workers.

To implement GST is to rub salt into the wound of the low-wage earner and therefore shows that the government is clearly uncaring of the poor. This is because GST in Malaysia will amount to robbing the poor and can be referred to as a subversion of Robin Hood.

The fact that the government does not display any political will to curb the intake of low-skilled foreign labour by giving lame excuses that employers still need them and Malaysian workers are choosy only serves to fuel the rakyat’s suspicion that the government only listens to the employers and worse still, perhaps there is a hidden agenda.

At the end of the day, the blame for this sorry state of affairs falls squarely on the shoulders of the BN government although most people tend to blame it on “the system”. Blaming everything on “the system” absolves the government of any responsibility as “the system” is a faceless entity.

The low-income problem in the private sector is perpetuated by the incumbent government and it is they who must take serious steps to solve the problem. Otherwise, the low-wage earners should wake up and vent their anger through the ballot box in the 13th general election.

Selena Tay is a firm supporter of Pakatan Rakyat, being a DAP member, and a FMT columnist.