What GST boils down to

I was never in doubt that GST will be implemented. After all, BN passed the Bill into law, and short of a revolution, I did not think protests could stop its implementation on April 1.

Despite initial resistance and reluctance, enforcement will ensure registration of the bulk of those required to be registered. There might be teething problems but things will eventually sort themselves out, warts and all. There would be profiteers as well as those who collected in the name of GST and not remitting the due amounts to Customs. The general public should not be over concerned with the nitty gritty of GST collections which is the duty of those in Customs department. What concern us is how much it would affect our pockets and if necessary, boycott those traders who took advantage of us. Sometimes, ignorance is bliss. Let those who want to profiteer, do so at their own risks. By now, we should have been well conditioned to all kinds of imperfections in life, especially in Malaysia, where many criminals are still able to roam freely.

Initially, our government hinted at the possible introduction of GST (or VAT in some countries) with examples showing a rate of 4%. Nearer implementation date, the rate was increased to 6%. This, by itself, shows how easy it is for the government to revise the rate (even before implementation), once it is implemented.

GST is supposed to be a revenue earner for the government to cover for any future shortfall in oil revenues. Initially, we were told about the depleting oil reserves which could last less than 20 years. But our revenues fell very much short even before that, as a result of the dramatic drop in oil prices worldwide. Even our biggest corporation, Petronas, was so badly affected that it has to cut capex, opex and other substantial expenditures which in turn affected those companies who relied on it. Petronas used to contribute half of our national revenues.

GST has become so necessary for our dire financial situation that our government will not let its introduction be derailed by those anti-GST protests. Some of the leaders involved in the protests were arrested, under one pretext or other, but many believe that it had more to do with preventing the escalation of protests which might affect GST implementation.

In trying to explain to the public the advantages of GST (like getting more people to pay tax instead of the small percentage currently paying income taxes), literature and seminars were conducted for the benefit of business people likely to be affected, as well as the general public who will have to bear the brunt of its effects. The problem with using too simplistic examples is that the actual situations are so different that confusion prevailed on the first and subsequent days.

Each industry has its own problems in dealing with GST. Besides knowing whether it is exempted or not, it has to know what goods or services are zero-rated or standard-rated. For those dealing with a myriad of items, like sundry shops and hardware shops, it was a herculean task. If the shops are big enough like supermarkets and hypermarkets, they are financially and operationally ready to take on any changes in tax. But the poor marginal shops which are liable to be registered because their annual turnover exceed Rm500,000, it is more tempting to just close shop, which some actually did.

Consumers' first encounter with GST is likely to be at the coffee shop, sundry shop or supermarket. From feedback, prices rose across the board (rightly or wrongly) on the first day of GST. Some customers insisted on receipts to ensure they are correctly charged for the increase, but they fail to understand that for those businesses which are not required to be registered, they could not claim back any input GST and had to charge more as a result of the increased prices of raw materials and services. Yet, they can be penalised if they claimed the increase was because of GST! The other point is, how can they provide GST registration number if they are unregistered and how can they produce GST bills? So it was almost comical to see examples of traders forced to scribble a note to show the GST portion charged!

 

Courtesy of Leonard DCruz in FB

The other common confusion was the old Sales and Service Tax which was replaced by GST, as well as the old Service Tax (10%) and Government Tax (6%) charged by restaurants and fast food outlets. Most people confused the service tax charged on professional service with the service tax charged in restaurants which are meant to be for their waiting service. It has been explained that restaurants are allowed to impose 10% ST because Malaysians are poor tippers! In trying to sooth those who complained, a minister actually said that the ST is optional and customers can choose whether to pay or not. But I can imagine the argument between customer and waiter at the time of settling the bill.

I wonder if those in charge of GST implementation had sought advice from other countries which have implemented VAT or GST (like UK which had a long history, or Australia which introduced GST only a few years ago). I am sure we should have been able to avoid some basic problems by learning from mistakes of others.

If only we were not desperate for revenues... we could have reduced the number of items taxable and slowly increase them when the people are familiar with the tax. For example, most people complained about medical service and drugs which are taxable in the private sector. The list is very long and it seems those listed represent only 25% of all known drugs! Just imagine the confusion as a result of having to check against the list. There will be mistakes, deliberate or otherwise. How we wish all medical service and drugs are exempted or zero-rated instead! But like everything else, if there are more items taxable mean so much more revenues for the government. How can we expect our desperate government to miss the chance of collecting such huge amounts?

If there is going to be a backlash from GST, it would be from the lower income groups which form the bulk of those badly affected. Whatever benefits from BR1M will be negated by the increase in prices of essential goods and services.

To the middle income groups, they can still afford the luxury of choice as explained in this blogsite:
Pay Your Good Hawkers Whatever They Want
 http://malaysiafinance.blogspot.com/2015/04/pay-your-good-hawkers-whatever-they-want.html

To the super rich, which include Umnoputras and well heeled ministers, they are so out of touch with the common people that they think people could be fooled by unrealistic Rm1 chicken and impractical enforcements to ensure prices are controlled. The reality is more like 'take it or leave it'. How many times can we complain if traders refused to sell at controlled prices?
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