DEC 16 — Malaysia faces the prospect of dwindling income from petroleum since petroleum is a depleting resource and will not be there forever. After suffering the curse of oil, which has resulted in massive misuse of petrol money and wasteful expenditure like massive buildings and bailouts, we are now staring at a future without oil money.

To cover for the loss of income from oil, GST is to be implemented in a year or two.

In theory, GST is a good tax, and it will be good for the country if income is growing and people's earnings are expanding.

GST taxes on goods consumed and so is a form of consumption tax. It expands the revenue base of the government, and as a form of consumption tax, it discourages wastage and encourages wiser spending by individuals and hence may be considered a form of “green” tax.

It is a fair and equal tax in principle since everyone is subjected to this tax as long as you buy things or get services. But in reality, it hits the poor more than the rich .

A 4 per cent increase in tax will be nothing to a high-income earner and would do little to discourage his spending habits. But a 4 per cent increase to a middle-income person will be felt quite badly, and he or she has to budget and reduce spending in order to save the same amount of money for a rainy day.

But to a low-income earner already struggling to survive especially in urban and semi urban areas, a 4 per cent increase in goods and services will really burden him, and when income is insufficient to cover expenses in order to survive, he has only two ways to resort to: either turn to the loan sharks, in which case his life will be even more miserable OR he may turn to crime.

A GST is good when the income level of everyone is rising and when the country is prospering. That way, the pinch felt would still be tolerable.

But in the words of a deputy minister, “Malaysia's economy has been stagnant for the past decade", a situation all of us know. So a GST at this stage when the economy is not growing will only push a big segment of population below poverty line.

In fact, Malaysia's economy has been stagnant since 1997, more than a decade.

A fresh university graduate earned about RM1,500 a month then. A fresh university graduate earns about the same amount now, even though the money is much smaller now 12 years later, taking inflation into consideration. A cup of coffee costs more . A plate of chicken rice costs more. Income remains stagnant.

On top of that, his expenses have gone up.

In 1997, he did not have to worry about handphone bills. Now he has to foot handphone bills since the handphone has become a necessity. In 1997, he did not have to pay much for Internet services, but now, he has to dig out money for broadband, which is also considered a necessity to a university graduate if he wants to keep up with knowledge. The lifestyle now necessitates certain expenses which were not there 12 years ago, but are considered a necessity now.

Urban dwellers are now like a piece of moist cloth being squeeze for water. The moist cloth is fast becoming dry and still there is relentless effort to squeeze it drier; any drier, however, and the cloth will be full of irreparable holes.

I hope the implementation of GST can be delayed until the country's economy really starts moving again. In the meantime, the government can easily find the RM1 billion revenue (which GST is supposed to raise) by more careful and prudent spending and tackling corruption at the top levels.

Dr Hsu Dar Ren is a medical doctor and blogs on socio-economic issues; he believes that a fair and equitable society with good governance is the key to the future of this country. He is currently a research fellow of SEDAR Institute.

Source:http://www.themalaysianinsider.com/index.php/opinion/hsudarren/46700-squeezing-a-piece-of-dry-cloth-drier

---

Share this page