You ask us to save but you buy a new jet, say the poor on GST

A The Malaysian Insider's survey on the GST, which comes into effect on April 1, shows the lower a respondent's household income, the more ‘negative’ he feels about the new tax. – The Malaysian Insider file pic, March 19, 2015.

Yesterday, The Malaysian Insider published Part I of a survey that attempted to measure the impact in terms of ringgit and sen in families’ groceries bill after the implementation of goods and services tax (GST). Part II today looks at whether they were “positive, neutral or negative” about the new tax which kicks in next month, and finds that the answer corresponds with the level of household income.

Zaidi Othman is likely to pay an extra RM6 to RM7 a month for his groceries after the introduction of the 6% GST on April 1 but he still thinks that the new tax is more “negative” than “positive”.

The 48-year-old Klang small trader’s views on the GST is part of a trend seen in The Malaysian Insider's survey on the new tax – the lower a respondent's household income, the more “negative” he feels about the new tax.

This is despite extensive government PR campaigns to convince Malaysians that the tax was fair and that it would lead to a reduction in the prices of goods.

“The government wants to tax us and tells us to save. But then it goes and buys a new private jet,” said Zaidi, referring to the RM465.4 million Airbus ACJ320 that Putrajaya admitted purchasing recently.

The survey found that families earning RM12,000 and above were more positive about the new tax.

But the lower the respondents’ income, the more ambivalent they were about the tax, its impact on them and whether it was good for the country.

Those earning below RM5,000 were mostly unhappy with the prospect of paying GST.

Their negativity towards GST was pronounced even when it was pointed out to them that if they continue with their present shopping trends, they would likely pay less in total taxes compared with high-income earners.

Their disapproval raised further questions on the effectiveness of Putrajaya’s PR campaign on GST. Even though these families were aware of the tax, they did not buy into the mantra that it was fairer and more transparent than the existing sales and services tax (SST).

Positive to negative

The survey measured the shopping patterns of 12 families in 10 areas of the Klang Valley to get an idea of how much of their shopping would be taxed if they continued buying roughly the same items after April 1.

Their shopping receipts were compared against a Customs Department's list of groceries and household items that would be taxed or exempted from GST.

They were then told of how many items in their receipts would be taxed and whether they would make changes to their shopping patterns after April.

They were also asked about their thoughts on the tax itself, whether it was a good system and whether their feelings were positive, neutral or negative towards it.

Three families had household incomes of less than RM5,000 a month, five earned between RM5,000 and RM12,000 and four earned above RM12,000.

The survey was carried out in Klang, Shah Alam, Puchong, Kepong, Damansara Jaya, Gombak, Ampang, Bangi, Kajang and Cheras.

Level of confidence

Putrajaya has claimed that the GST is part of its efforts to reform the current tax system, where only about 1.7 million out of 12 million workers pay income tax.

The tax burden will be spread throughout the population and will affect almost all goods and services. 

In exchange, personal income taxes would be reduced from 1% to 3% depending on the tax bracket. It is estimated that about 300,000 individuals would no longer pay income tax after GST.

Another thrust of the GST is that those who consume more will pay more and this was shown in receipts, where higher income households could expect to pay more in GST because of what they buy.

Although 31% to 34% of the items low-income families in the survey bought would be taxed, the total amount of tax they would pay on their groceries was between RM6 and RM8 – the lowest among all groups.

Yet, this did not change their perception towards the tax, with all three of the low-income families saying that they were more negative towards the tax than positive.

Contractor Hadar Thakrip of Bandar Baru Ampang felt the tax was unfair even though 69% of groceries he bought during a recent supermarket trip would not be taxed.

For instance, in one of Hadar’s receipts, where 11 out of 22 items would be taxed, he would have to pay an extra RM4.25 on top of the RM136 total.

“They should tax the rich instead of taxing the poor,” said Hadar.

One middle-income earner, Maznah Ahmad of Shah Alam, also felt negative towards the GST. About 55% of the items she bought in one receipt would be taxed.

“As a consumer, I am also stuck in this situation because the goods I buy are for daily needs, so there is no option left for me," said the administrative assistant whose household earned RM8,000 a month.

The majority, or five out of the 12 families, were “neutral” and had mixed feelings about the GST. These five were both middle- and high-income earners.

“If I were the government, it will definitely help because you are taxing every single individual,” said Yap Mun Fen, a finance manager from Bandar Kinrara, Puchong.

But in order for the GST to be really effective, Putrajaya must repair its system of spending money, which right now was still full of leakage, said Yap.

Of the 12, only three families – two high and one middle income – were positive towards the tax. But even they were cautious about its implementation.

“It’s good to do it but I think it’s best done when the economy is good,” said Predip Bipro (pic), of Kajang, who works in the hospitality industry.

“The rich probably will not feel it much. But middle-class people like us will worry,” said the 29-year-old whose household income is about RM7,000 a month.

Federation of Malaysian Consumers Association secretary-general Datuk Paul Selvaraj said any tax was usually unpopular, especially among the poor who would likely feel a bigger impact.

“That is why a crucial test of the system is how the government deals with profiteering and people gouging prices,” said Selvaraj.

This is to ensure that runaway inflation can be checked and that prices can stabilise as the GST replaces the higher 16% SST.

“How the government responds to complaints of profiteering will affect the level of confidence people have in the new tax.”

- TMI