Please change the movie on tax

 Anwar Ibrahim is right on GST. It is regressive and hits the poor so instead of trying to impose it through the back door we need to look at something new for a change.

I’m not a fan of Bill Murray and I think “Groundhog Day” is even worse than “Lost in Translation” but in pre-Budget season we are all forced to endure the same old Groundhog Day debate about sales and services tax (SST) versus the goods and services tax (GST).

We know the script. Businesses say GST is better than SST. Of course they do. Everyone loves a tax they do not pay. I say a “black hair tax” is better than a “ginger hair tax” because I would not pay it. Businesses do not pay GST because they claim it back.

Former politicians tell us that GST is better than SST because it raises more government revenue. Of course it does. It is a tax on more goods and services paid by more people.

“Raising more revenue” means taking more money from the rakyat, especially the poor. This is why they are former politicians and fortunately will remain so.

Unfortunately, “tax experts” now tell us if only SST was more like GST, it would be more efficient. This is GST by the back door. They are fooling no-one except themselves.

We really need to stop the tax debates of the 1970s and drag ourselves, kicking and screaming, into the digital era of the 21st century.

I have said it before and I am going to keep saying it until someone listens, the best alternative to replace SST and GST is an electronic payments tax or EPT.

An EPT is a small charge on all electronic payments, for goods, services, fees and payments of every type, including pay-wave, credit and charge cards, debit cards and ATMs, e-money and e-wallets and normal bank payments and e-checking accounts online.

It is paid automatically at the point of the electronic transaction. Cash payments would be exempt.

The main advantage of an EPT is that it replaces complex income and consumption taxes with a tiny, automatic levy collected directly through the banking system.

This reduces compliance and administrative costs to almost zero. There are no tax filings for individuals and corporations because it is recorded through the electronic payment system.

The government collects revenue automatically from a small number of financial institutions rather than auditing millions of individual accounts and the costly bureaucracy required to manage traditional income and sales taxes is removed.

The EPT would have a very broad tax base of around 18.4 billion retail transactions annually according to the latest data and because a vast majority of economic value moves through electronic channels, a very low tax rate can generate massive public revenue.

My estimates last year were that a 1% EPT could raise RM28.8 billion and a 2% EPT could raise almost RM60 billion without anyone really noticing. It is so small that people do not change their behaviour, which is a key feature of tax efficiency and if you really object you can always pay in cash to avoid the tax.

It is inherently progressive because wealthier individuals and large corporations make a disproportionately high volume of financial transactions, meaning they naturally bear a larger share of the total tax burden despite the flat rate.

Tax evasion is virtually impossible because automated electronic trails make it significantly harder to hide income or bypass tax obligations.

For the government it provides unheard of fiscal stability and predictability with funds assessed, deducted and sent to the ministry of finance instantly at the exact moment a transaction settles. If they collect too much, then it’s SARA untuk Semua every month, except for those with ginger hair.

So please change the movie and let’s watch Ghostbusters! - FMT

The views expressed are those of the writer and do not necessarily reflect those of  MMKtT.