Over-representation without taxation

As far as the new Goods and Services Tax (GST), we are for it.

Theoretically, it is a fairer taxation system than the current situation in which only 2.3% of the 13.3 million voters pay taxes.

The Boston Tea Party of 1776 was about the colonial protesting against "taxation without representation." [Read about it here.] In Malaysia, the situation is the other way around. It is over-representation without taxation.

Non tax payers and tax evaders with no sense responsibility asking for endless help from government without taking up their fair share of responsibility for the nation.

The point will be further understood with the fact that government is reliant on income tax and excise tax for revenue. The bulk of government revenue come from income tax in which 65-70% is contributed by Petronas and GLC.

Basically, Government raised it's own revenue through businesses and that money is used to run the nation. Since Government can function on it's own, it seems far fetch but Government does not need representation or to have a democratic system to function.

No worry we are not going to agree on that. However, it's citizen must play their part and stop demanding abolishment of GST by threatening through through the ballot box.Till it is election time, Government must be allowed to govern accordingly.

GST forever

If Pakatan Rakyat were to take over government, believe us, they will not abolish GST. Like many of the promises they made before the election, they had negate on many promises to abolish many of the suitable and advantageous policies of the previous BN state government.

In 1994, Dato Seri Anwar Ibrahim admitted that GST is a fair tax system.

All previous administrations since 1984 had no political will to implement. It is only Dato Najib's administration that dare to take up the challenge of restructuring government finances including reducing government's subsidy expenses. 

One staggering figure is the annual subsidy to IPP in order to maintain electricity at a reasonable level. The figure being bandied around is RM19 billion. It is not us that said it but DAP. [Read Lim Guan Eng in 2011 TMI report here].

Something had to be done and at the same time ensure electricity remain affordable to the consumer. And, something had to be done to maintain government finances in a realististic level.

More than 75% of Government tax revenue comes from direct tax in which individual's tax contribution is between 10-12%. So much for seeking more representation with taxation.
  
Top level income tax was once in the region of 30-40% but that rate had to be realistically taken down and it has been brought down to within 25%. Corporate tax had been brought down much lower rate to be competitive with the region.

Reality bites

The nation cannot depend on Petronas alone for oil royalty, and income tax anymore. Their business is more challenging. Oil fields in Malaysia are merely marginal fields and require investments, huge amount of investment and assuming of political risk.

It is also unrealistic to expect Government to slash budget drastically. Subsidy can only be further reduced upon the higher income model to work. The average income increase is still going at snail's pace. Believed Dato Abdul Wahid Omar mentioned a figure of less than 4%.

Pushing for higher income is not as simple. It attracts inflation and also inflate government budget. Currently it is the income at the higher bracket that is experiencing marked increases but not the lower end.

The Government don't seem to have the political will to institute minimum wage. Someone should find out whether the minimum wage for Government servant is above poverty level. This could be their fear of wanting minimum wage. 

GST is one way of raising a source of revenue for Government. Contrary to what was said by Dato Ahmad Maslan, all Malaysian that consume goods or service pay a percentage of the consumption to the Government.

Naturally, what is good for Government is not necessarily good for the people.

However, there are certain features of Malaysian GST that is sensitive to the people. A long list of consumable goods and services are exempted from GST. It makes the system cranky because other country charges almost across the board for all items.


By right, GST at 6% should be lower than SST that was previously charged. Most goods should be lower.

Unfortunately, Information Department fail to understand traders and small businessmen mentality. They are not willing to cough out the cash to pay for the initial GST and wait for the refund but charges the consumers. 

There is also that so-called conspiracy theory that Chinese traders and shopkeepers have gang up to agree to not lower prices but squeeze on the consumers. Malaysian consumers are too timid to use their rights as consumer to not boycott goods or shops.

Presuming all Chinese were to vote DAP and Pakatan Rakyat, it is believed that DAP wanted to create a sense of anger among voters towards Government. The anger from Government sqeezing into their pocket.  

Pakatan Rakyat activist had campaigned against GST by saying that the increase against GST will be at many level thus the increase will be more than 6%. People realise Pakatan Rakyat is right when they see a packet of 5 Maggi Mee of RM2.50 has shot up to RM4.50. [Not exact but about there]

Mistake and Problematic

This had put the Government in a difficult situation.

In the first place, traders' refusal to cooperate is expected. If not because of DAP, it had always been the kiasu, opportunist and penny pinching attitude of selfish Malaysians to take advantage of situations without consideration for others.

Malaysian government is good at developing laws and policies but dulu, kini dan selamanya poor at implimenting the strategy laid out. Too many compromises and adjustment for political expediencies.

System will usually cock up in the initial stage. Sin Chew's Deputy Executive Chief Editor said GST was problematic because "Government system is inefficient and our income gap is big." Most Government Department were ill-prepared.

The usual blame would be the lack of information problem. The GSTpenerangan have been going on for two years and so it is not an excuse. Maybe there is the problem of a certain agency focusing only on UMNO Divisions and hoping the Division Information service will do it's work.

To say that the pre-implimentation engagement had not been done is also not correct. The discussion had been going on for 30 years!

Another perpetual weakness of Government machinery is enforcement. It is laden with corrupt and low paying government officers.

Knowing that system usually cock-up and Malaysians only bother to find out, give feed back and complain at the last minute, it should not have started at full blast. Do so for a certain category of goods and gradually cover all.

To lessen the impact from profiteering and shock to the economic system, the rate should come in at a lower rate first. Say 3% and gradually raise it to 6%, but the public must be made aware that the rate should be 6% but only starting at 3%. In the meanwhile, get the enforcement to adjust and running.  

Another suggestion posed was to focus GST on the import and export sector. Malaysia is the 16th biggest trading nation in the world. A good system had managed to raise about RM36 billion of indirect taxes from excise tax, SST, etc.

The focus should have been focus at getting GST revenue from product and services related to import and export.

There are many loopholes and leaks in the system and corrupt customs officer have been enriching themselves by taking bribe to take advantage of loopholes and leaks. The top officials resist any attempt to cover-up.

It is said that once traders are confident of receiving the rebate from the GST output tax then prices will stabilise or lower again within 3 months.

In developed countries, government are less reliance on income tax and depend more on consumption tax and GST. Tax rate are usually in the teens.

Re-lowering of prices and lower income tax will be the tomorrow both government and public hope will happen. Will tomorrow come?

-Another Brick in the Wall