By Marc Jitab
A roundtable discussion on the implementation of the Goods and Services Tax (GST) Bill, which will go into its second reading in the Dewan Rakyat next week, raised continuing concern that it was introduced without proper consultations with stakeholders.
The Bill is expected to be passed and implemented in the middle of 2011.
Organised by the Selangor government, the discussion was chaired by Klang MP Charles Santiago with MTUC president Syed Shahrir Syed Mohamud, PAS treasurer Dr Hatta Ramli and Klang municipal councillor Robert Choo Teck Keong on the panel.
Representatives from think-tanks, the business community, academia, consumer associations, tax consultants, politicians and private individuals also took part in the discussions.
Santiago said at a press conference later that public understanding of the GST and its effects was found lacking. The government's intention to introduce the GST was based on the need to cover up its past errors.
“We have had a deficit for the last 12 years as a result of the federal government spending more than it is earning,” he said.
He attributed the high government expenditure to corruption, leakages within the economy and wasteful mega projects undertaken over the years.
“This is proof of poor management skills of public finances by the federal government, which has now bled the country's coffers dry and made it desperate for new sources of income,” he said.
Higher costs equal higher prices
He argued that even with the implementation of the GST, the same problems will remain and the needs of poor will not be met. He also said the GST will adversely affect the small and medium industries (SMIs) in particular.
“SMIs will be hit with high compliance costs ... and will be forced to pass on that costs to consumers to maintain profit margins,” said Santiago.
“Compliance is a major point of contention as companies that register for the GST will have to adapt to the new changes in the tax law, which will cost them money.
“Higher costs mean higher prices, and the absence of minimum wage legislation creates a situation where wages are not increased to meet the rising prices effectively. A drop in real wages will occur.”
Choo also disputed the government's claim that there will be a drop in prices of goods when the GST is implemented.
“In all 140 countries where the GST is implemented, there's an initial spike in the price of goods. It starts at a low rate... but the government will eventually increase this rate,” he said.
Hatta contended that the true effect of the GST will only be realised after it is implemented, by which time it will be too late to reverse it.
“The GST will increase the burden on people who are not paying direct taxes (such as income tax)... more taxes equals more expenditure,” said the PAS treasurer.
Syed Shahrir contended that the present explanation for the implementation of the GST is much like that given for subsidies introduced in the past. But the goals were not met.
“When we used to complain about toll and petrol price increases, the reason given was that more public transport facilities will be given to the people.
“But over the three or four years, where are the buses? Unless there is a solid explanation, we will not be convinced of the need for the GST,” he said.
