GST is a serious matter but the general Malaysians are not made aware of it. After all, tax is a complicated matter. And most will choose to ignore it although it affects the dough in our pockets. Taxes are just not our daily comic strip readings.

There is nothing wrong with GST. The government needs taxes to run the country. But the question is, is Malaysia ready for GST?

To debate on this question, we first need to understand what GST really is.

GST is nothing and should not be anything but an ALTERNATIVE TAX COLLECTION METHOD. Right now we have taxes in the forms of corporate tax, personal tax, withholding tax, real property gains tax, service tax etc. Taxpayers go all out to reduce their taxpayers (naturally) via loopholes in the system or through out right illegal means. This is where GST comes in. It ensures a more efficient collection of taxes by the government by having value adding points collect taxes from their customers on behalf of the government. GST should not be a new source of tax revenue for the government that adds on to its coffer.

With GST, the person who sold you the goods or services is now tasked to collect your taxes on behalf of the government and then remit it. The underlying objective is that the collection will be more efficient when the collection ‘agency’ is now no longer paying from his own pockets (there is no heart ache involved). He is merely collecting from his customers; if he fails to collect then he gets penalized – so obviously there is not going to be much incentive for the seller/provider to not want to collect the taxes for the government. If you understand this, then you will see that this is actually a good system. How efficient is the government in utilizing this money is another subject – we are talking about the theoretical effectiveness here.

I mentioned that GST is an alternative tax collection method. It should NOT be an additional tax. But this does not seem to be the case with Malaysia.

With GST, if I were a taxpayer paying RM5,000 per annum, an efficient GST system should not cause me to pay significantly more or significantly less taxes than I previously did. If I were a non-taxpayer, GST should not cause me to have to pay any new taxes. In an efficient market with GST, the only way the government should be able to add to her tax revenue is via the closing of tax loopholes.

Now, how many percent of Malaysians are taxpayers? I do not have the figures but the figures being bandied about is about 15% to 20% of Malaysians only. That means 80% to 85% of Malaysian are not taxpayers. But with the introduction of GST, all Malaysians will be taxpayers. Every time you buy a can of Coca-Cola, you get taxed. Every time you buy an ikan kembung, you get taxed. Every time you buy a karipap, you get taxed. So what we have now are non-tax payers paying taxes at inflated selling prices. Prices are inflated as everyone in the supply chain of production and distribution have to pay taxes to the guy below him in the supply chain. So, you have taxes added on and on and on. And you finally pay the makcik additional 4% tax on her new inflated price.

GST will work if and only if the country is one that is of high per capita income. Quite simply, a developed country. That is because when the average income per head is high, chances are most of its people are already taxpayers. And by implementing GST, the personal income tax rates will be reduced to compensate for the alternative GST. Remember, GST is but an alternative form of collection – not a new form of tax.

If we were to implement this 4% GST, personal income tax must be brought down to below 20%. By this the higher income earners will not have their positions changed. The brackets for the lower income taxpayers must also be enlarged so as to enable more taxpayers to fall into the lower tax brackets. This is not a suggestion – but is a must. Look at countries like Hong Kong and Singapore where GST have been implemented. Their highest income tax bracket is at mid-10%.

But even with the reduction of tax rates and changes in tax brackets, we still do not solve the problem of non-taxpayers. How is the government going to exempt them from paying taxes now? You cannot have a GST exemption card being distributed to certain income group can you? The lower income group is not paying taxes because they are not earning enough. They are low income earners. The taxes are meant to subsidise them. The rich subsidises the poor, remember? Why is the government now trying to drive the lower income group to the edge by increasing prices and imposing taxes upon them. GST implemented this way will then be inefficient and is a departure from the very objectives of GST and the key pillars of the tax system.

What is the solution? Sadly, there is no solution. There is no solution because GST is simply not suitable for Malaysia now. We are not a country that is ready for GST. GST is only effective and efficient in an environment where the people are high income earners where most of the population are taxpayers. And we are not! There is just no 2 ways about it. Our government must go back to the drawing board and first understand the meaning of the word ‘tax’. (Ahem… actually we already know that Najib and goons think that tax means money in their personal bank accounts. Farkers!)

Do not take GST likely. Something as simple as 3 alphabets will turn the country upside down. When the under-privileged in the society forms the mass of the numbers, forcing them up the wall will only bring trouble. When the people could no longer afford to buy rice, petrol, clothes and all other necessities, all hell will break loose. We have seen enough examples in the recent past with Indonesia a decade ago being the best example. Are we willing to risk all this just so that the greedy ruling government is able to pocket more ringgits in their personal bank accounts?

Maybe we should we all join Tok Guru in his prayers regardless of if you a Muslim, Buddhist, Taoist, Hindu, Catholic, Protestant, or Sikh? After all, tax knows no religion.

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