KUALA LUMPUR: Tony Pua (PH-Damansara) today explained the reasons why the government decided to scrap GST instead of lowering it to 3%.
Pua believed goods would be cheaper after the implementation of the sales and services tax (SST).
He said with 6% GST collection, the government collected RM40 billion and if it was lowered to 3%, it would amount to RM20 billion.
“It would not be efficient because the cost of collecting GST will be higher for the government and businesses,” he said while debating the second reading of the SST which is targeted to be rolled out on Sept 1.
For instance, he said businesses that make RM500,000 a year would have some RM1,250 collection from 3% GST monthly.
“That is not all; they also have to deduct input tax. That comes to RM1,000. After deductions, they pay the government RM250 monthly. Just to pay RM250 a month, they have to incur the cost of the computer (software), pay accounting firms, clerks and audit (firms). The cost is high.
“That is why a lot of small and medium business close down. Do you understand?” he told Khairy Jamaluddin (BN-Rembau).
Khairy, earlier during his debate, suggested to the government reduce the GST rate from 6% to 3% as the amount would almost be the same as the amount the PH government would be collecting from SST.
He said the BN government had decided to collect 6% to offer a lot of services to the rakyat, such as MyBrain, BR1M and allowances for fishermen, among others.
Pua, in reply, said the government would lose out if GST was reduced to 3% as they will have to monitor over 400,000 companies for a collection of only RM20 billion.
“It is better for the government to monitor 30,000 to 40,000 companies and collect lower tax and use the money effectively for the rakyat.”
Pua agreed GST collection was efficient but it was being carried out at the expense of the rakyat.
“Those who support GST are accountants. They say it is efficient but that does not mean it is fair. It is like squeezing blood from the rakyat.”
He said the PH government did not want to do that but instead preferred a tax system which should not burden the rakyat, though it might not be as efficient as GST.
“We know SST is regressive. They (BN government) say they can collect more in the federal budget. Not true. Every year, it increases from RM37bil to RM44bil but that does not include tax refunds,” said Pua.
Khairy also raised the question about the weak processes that delayed the tax collection process.
“If it is about the process, then why not fix the process? And who is the one who supported GST? Not only accountants. I want to remind Damansara (Pua) that Bank Negara under Zeti Akhtar Aziz, who is now in the Council of Eminent Persons, supported GST,” Khairy rebutted.
To that, Pua replied: “I agree that not only accountants supported GST, but others too.
“We can ask accountants if they earned more after GST was implemented. How can we ask them about something that enriched them?”
Khairy also said that more items could be added to the zero-rated category to which Pua replied it was pointless to have a long list of tax exemptions if GST was effective.
“If we have one of the longest lists of GST tax exemptions, then it is a mockery of the GST. It defeats the purpose of the GST,” Pua replied to Hamzah Zainuddin (BN-Larut) who said the BN government had been kind by exempting a lot of items from GST.
Khairy also said there could be incidents of tax evasion once SST was implemented.
Bung Moktar Radin (BN-Kinabatangan) then questioned if any other country had reverted to the SST.
Pua said the US, which is the most developed country in the world, does not implement GST, neither does Hong Kong, one of the world’s richest cities.
“There is no need to have GST to become a developed nation,” he added.
Hasan Arifin (BN-Rompin) said Malaysia should not compare itself with Hong Kong as it was a developed city compared with Malaysia.
Hasan added that SST was a pro-business tax and GST was for the people.
“Tax should be distributed fairly as the RM40 billion collected from GST is given fairly to all,” said Hasan, adding that GST allowed proper auditing while SST encouraged tax evasion.
Pua said GST was also known as a consumption tax borne by the rakyat.
“There is proof that GST caused prices to go up. The inflation went up to 3.1% in 2015. When we zero-rated GST in June, it was 0.8%,” he said.
Pua added that items of goods would be cheaper upon the re-implementation of SST next month.