M40 hardest hit with SST hike: Govt should heed public opinion & reinstate GST

 

It is regrettable that Budget 2024 failed to heed public opinion to reinstate the goods and services tax (GST).

The current tax rate in Malaysia is indeed lower than that of neighbouring Singapore and Thailand while the government’s proposal to restructure the taxation system to expand the tax base is necessary. However, opting to increase the rate of the sales and services tax (SST) is akin to prescribing the wrong medicine for an ailment.

The GST is universally recognised as a tax system that is more transparent, fair and with a broader tax base. Unfortunately, the government has ignored the requests from the business community, associations and the public, and remains unwilling to reintroduce the GST.

Although the government has exempted food, beverages and telecommunications from the 2% SST spike, consumers are still confronted with daily necessities such as credit cards, insurance, medical care, logistics, e-hailing, air tickets, accommodation, broadband, and professional services such as legal consultation and accounting. All aspects of daily life will be affected. Hence, it is incomprehensible that the financial burden on people will not increase as the Prime Minister claims.

Usually, the M40 will have to bear the weight of these additional financial burdens ultimately, since the B40 consume relatively far less in these areas. Meanwhile, the purchasing power of the T20 is relatively higher. Hence, it is the M40 who are most affected in the end.

With the continuous plunge of our ringgit and the long-standing dilemma of inflation, the government should restructure taxation instead of blindly hiking tax rates so as to increase national revenue.

Without a doubt, increasing the SST rate is a "punishment" against individuals who pay their taxes regularly and on time. Compared with the GST, the biggest disadvantage of the SST is that this system cannot effectively curb tax evasion more transparently. Therefore, the government's move to raise the SST percentage has actually emboldened and further motivated tax dodgers to find other means of evading taxes. Ultimately, regular taxpayers will continue to be squeezed.

The irony is: The government’s intention and method to collect taxes from a wider pool will actually result in the government losing out on collecting tax revenue.

Although the government proposes to launch electronic invoices, the fruition of its full execution will take some time, while the intensity of the implementation remains to be seen. It is too early to say whether the problem of circumventing tax payments can be reduced.

If the government had carefully heeded public opinion and had been considerate in refraining from heaving additional financial burden unto the rakyat, why is it unwilling to restore the GST to a lower percentage of between 3% to 4%, and on the contrary, would rather enforce an 8% SST?

Saw Yee Fung

MCA spokesperson

-Star