We know that government cannot operate without taxes, hence a tax structure needs to be efficient. GST is regarded as consumption tax, which means the more a person consumes, the higher the tax the person is paying indirectly.
Now comes the argument that it is taxing the poor and the lower middle income. It is but this is where we face problems as over 80% of the nation's population are not paying any direct taxes in the form of income tax. How is that? While I see lots of people in the middle income group who I know are paying taxes, I am also seeing people whom are rich which I am seeing may not be paying high taxes as well. They are not employees of a company. They may be working on their own and may be underdeclaring their income or the nature of the tax structure does not require them to pay much taxes.
Put that in the context of stocks investment. If a person has say RM5 million in shares and on average he gets return of 10% per year. He gets RM500,000 per year in return or about RM40,000 a month. Besides the stamp duty through transactions, that person is barely paying any taxes. Compare that to a person whom gets salaries of RM40k per month, I am sure the monthly income tax he pays is around RM8k - RM9k a month. In the eyes of the government, the person under employment is contributing to the government's revenue but not so much to the other person whom is not working but yet could be reaping income just as high as the other who is working. GST is a way which will tax the other non-working individual who is probably enjoying the ride. Hence, the current tax structure (before GST) is friendly to a person who has rich parents whom can provide an initial endowment of RM5 million for him to invest as opposed to the other who has been working hard by getting employed. In this sense, which tax structure is helping the rich and which is helping the hard working individual.
Tax structure has to change as over time the person who is working would be feeling that he has to do something about it. Worse still in a lot of cases, the working person could be regarded as a highly skilled employee and the opportunity to work elsewhere could be available, and that could possibly happen where he moves abroad to a country which is more friendly to his taxes - Singapore, Hong Kong?
GST is not a regressive structure but rather a progressive structure. How is it that another 300,000 between monthly income of RM3,000 to RM4,000 will not be paying income tax if it is regressive. They are being taxed elsewhere through consumption rather than through working. A regressive tax is when one is working but taxed highly whereas the one who is not working (but yet rich enough not to) and not taxed. That deters people from working hard.
A progressive tax is also where it will also cause the small and medium businesses whom may have been underdeclaring their revenue to keep up to speed in their declaration as only through correct declaration, they can claim back the GST paid. If you under declare, you will not be able to clear back your GST paid,
Efficiency - GST is much more efficient in terms of income for the government.
Let me provide a scenario. For now with GST, it now replaces sales and services tax. But over time, I would like to even see it grow and replaces (not entirely) excise and import duties. These 2 duties are highly confusing as even in the example of a PC, it is not taxable. But another example, media devices is taxed (around 25% - 30%). In today's world, PC and media devices are greyed to the extent that it may be difficult to put a distinction to what is a media device and PC and in a PC one can pretty much turn it into a media player. Manufacturers are taking advantage of this loophole.
Another example is import prices. Goods are taxed on the price of the item paid by the importer, but these invoices can be distorted by working together with the suppliers. Say a BMW car can actually be priced at USD20,000 but in the invoice it is declared at USD15,000, hence the importer is only paying at taxes for USD15,000. But in GST system, it will not happen as the importer which is actually paying USD20,000 plus the GST will charge more than the actual price he paid for importation of the car. The final taxes which is to the final consumer will be the determinant of how much the government gets - not the import duty.
There are many reasons where GST will also reduce corruption (especially through the customs) etc as in the above cases, we have heard of customs working together with the importers, distributors on the actual duties for the items imported. These monies which does not go to the government but rather individuals and companies who cheat is revenue lost to the government.
Now, which are you supporting? A tax structure to help the rich to continue getting richer and could be through cheating or a tax structure to help the government's improving its revenue? If you pick the second, there is no doubt GST has to hold.
omgimnoob
Exactly! Did the govt states that we can claim back the GST? It is too uncleared, oh.. individual tax rate will be reduced, ohh... special deduction for the middle income group, is that a middle income? With the high living cost in Klang Valley, I dont feel Rm4k is the middle income group, and further not understand how RM1.5k earner survived. Again, why not reducing tax BRACKET? It has been stated in Personal Money Magz, Oct 2012.
2013-10-26 23:46