GST: good news to some but depressing to most...

My Australian friend, Ken, who is a practising accountant said one of his clients remarked that each morning when Ken wakes up, he should thank John Howard for introducing GST. He admitted that his revenue doubled as a result and that was why he had been visiting Malaysia every year since year 2000!

So, one thing that is certain for our PM for introducing GST will be the gratitude of public accountants in Malaysia. The requirement for every trader or service provider who is defined as under GST to submit quarterly returns (showing tax due to be paid or refunded) would necessitate proper records to be kept. For those small time business people (according to their previous tax returns which may or may not be true) who are used to preparing accounts based on incomplete records at the end of each tax year, they will have to make an effort to keep proper records throughout the year and this is where the public accountants will be gleeful about.

The chain of add-ons (of 4% at each stage of production) to the prices of goods and services will invariably increase their prices to end-users, the public. It does not make sense to say that it will not lead to inflation, as claimed by government leaders. It would be erroneous and misleading to compare with the 5% Service Tax based on the difference in tax rate alone.

There is an assumption that all the GST will be properly accounted for and paid to the government. We should expect leakages as there will be many businesses which would charge the required tax (whether registered for GST or pretending to be) but not necessarily pay them to the government.

GST is certainly depressing for most of us to think about in the new year of 2010.

Link