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Friday, April 3, 2015

Pua: GST confusing, cumbersome, costly to implement

There’s major confusion all around the country among manufacturers, sellers and consumers of all types of goods and services on the world’s longest GST list.
Tony-Pua_gst_rakyat-Malaysia_600KUALA LUMPUR: Malaysians are caught between a hard rock and the deep blue sea following the ruling Barisan Nasional’s (BN) “unwillingness” to listen to dissenting voices opposing the implementation of the Goods and Services Tax (GST) and its “incompetence”.
The GST in Malaysia, warned Petaling Jaya Utara MP Tony Pua, has become “a confusing, cumbersome and costly system to implement”.
An earlier report claimed that the Malaysian Customs Department was in a “state of panic” following the belated realization that the GST system as implemented would simply lead to a rise in the prices of most goods and services and in turn burden the poor even more.
Instead of boasting about the world’s longest GST list, said the DAP National Publicity Secretary, “Prime Minister and Finance Minister Najib Abdul Razak should be embarrassed that we would soon become the world’s most famous textbook case study on how not to implement the GST”.
He noted that Bernama quoted Najib as saying just before the implementation of the GST: “Our aim of implementing the GST was not to burden the people. We implement the GST in a way to minimize the burden on the people. No other country has given as many zero-rated GST and exemptions as we have.”
“The above assurance was a complete paradox and, again, ironically serves to prove that Malaysia was not yet ready to implement the GST,” said Pua. “The confusing, cumbersome and costly world’s longest list of GST zero-rated and items that were exempted was exactly the reason why Malaysia was not ready for its implementation.”
He conceded that the GST was indeed a more efficient and effective taxation system relative to both the former SST (Sales and Service Tax) and even the existing income tax. “It is for this reason that many governments, including Malaysia, have decided to implement the GST system for its direct taxation,” said Pua. “However, the efficiency of the GST system in Malaysia remains only on paper.”
He alleged that “Najib has failed to recognize the fact that the more efficient GST predicates upon the simplicity and universality of the tax”.
He explained that this means the GST was efficient because it charges a single tax rate and it applies to all products. “The outcome under such a system will be a tax that is simple to understand, easy to implement and cheap to administer,” said Pua.
Once the list become lengthy, he reiterated, and in Malaysia’s case the Prime Minister has proudly boasted that it was the longest in the world, then the GST become an inefficient taxation system which was arguably worse than the SST system it sought to replace.
“The world’s longest list of exemptions and zero-rated goods and services proves that Malaysia was not ready for the implementation of the GST,” he said. “We are faced with a wide income disparity and a population where more than 80 per cent don’t even earn enough wages to qualify to pay income taxes.”
Already, he added, many smaller firms with small profits have chosen to close their businesses down because of the costs involved in extensive re-engineering which often necessitates a computerization exercise and increased specialist staff.
Meanwhile, he claimed, that many businesses have been unable to implement their GST system simply because of the sheer complications involved in their goods and services which require extensive re-engineering of their work processes. “Accounting wise, any shop which offers or produces all three types of standard, zero-rated and tax-exempt products effectively has to put in place three sets of sub-accounts,” said Pua.
There’s major confusion all around the country among manufacturers, sellers and consumers of all types of goods and services, he cautioned. “Even the most literate of the new tax are often uncertain of the exact classification of products which are either standard-rated, tax exempt or zero-rated.
The GST-experts on radio talk shows, he cited as another example, get stumped by questions posed by listeners. “Or you can read the various news reports of inconsistent application of GST across the same or similar products between different retail outlets.”
Despite clearly knowing the above, he continued, the Government has proceeded with its self-pronounced longest list of zero-rated and tax exempt goods and services.
Low income and inequality issue
“The income inequality in Malaysia will also not be able to tolerate the regressiveness of the GST system which burdens the poor proportionately more than the rich,” reiterated Pua. “In turn, that defeats the purpose of implementing the GST in the first place as a more efficient and effective taxation system.”
He thinks that the Government should have instead addressed and resolve the low income and inequality issue in the country first before switching to a GST system. “Had Malaysians achieved a higher income status and lower income inequality, we would then not need to implement a GST system which was riddled with such complicated tax exemptions,” said Pua.

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