Sunday, October 27, 2013

Think tank: GST is a ‘regressive tax’ | Free Malaysia Today

Think tank: GST is a ‘regressive tax’

Alfian ZM Tahir | October 26, 2013
Penang Institute claims its field study and analysis of the GST showed that lower and middle income households would end up paying additional 3,38% for goods.
KUALA LUMPUR: Slapping a high  6% goods and services tax (GST) on Malaysians who are not accustomed to such a levy is simply too heavy and irrational, notes a think-tank here.
 Refuting the federal government’s repeated assurance that it won’t affect the low income group, the Penang Institute today claimed that their study involving 24,768  ”living quarters”  showed that at 6% GST, prices of items will go up by as much as an additional 3.38%.

The study was done by Dr Lim Kim Hwa, Fellow at Penang Institute, and Ooi Pei Qi, research analyst at the same think tank.

“The government now expects the budget deficit to fall to 3.5% of Gross Domestic Product (GDP) in 2014 with economic growth at 5 to 5.5%. (This is before the GST is introduced in 2015),” said Ooi.

“But our analysis shows that at 6% GST, prices could go up by as much as an additional 3.38%. (And) GST will raise RM 6 billion from households (ignoring any fraud).

“(And this is) despite setting essential items like basic food, public transportation, education and healthcare as exempt or zero rated items.

“Our analysis shows that GST is a regressive tax where the lower income  households will bear a higher tax burden than the higher income households.”

Ooi said in view of the contradictory findings,  it is best that the government studies in detail the effects of the GST.

“We want an in-depth or critical approach by the government because at this moment not many research has been done on GST,” Ooi said.

Earlier today federal minister Abdul Wahid Omar claimed that the GST would not burden the people, especially the low-income group.

He said the 6% GST was the lowest among the Asean member countries including Singapore and Thailand which imposed a GST of 7%  while other countries imposed between 10 and 12%.

He also denied widespread arguments that the GST is an additional tax.

“If we introduce the GST, it is not an additional tax,” he added

24,768 people surveyed

But Ooi opined otherwise.

She said their study clearly showed that it was an ‘additional tax”.

She said the worst hit family units were those earning RM 2,500 comprising majority Bumiputera households in peninsular malaysia.

“For these families they will have to pay an additional 2.67% on their household income towards GST.
“Families with lowest household incomes such as those earning an average of RM605 a month they will pay an extra 2.35%,” she said.

Ooi said the analysis however noted that those earning a higher income such as RM30,815 a month only had to bear 1.32% GST burden.

The study also found that individuals in Peninsular Malaysia who were employed as technicians, clerical and service staff as well as farmers and fishemen and single individuals aged 24 and below would pay a higher percentage on the GST.

The insitute’s GST study was based on data sourced from the Household Expenditure 2009/2010 survey conducted by the Department of Statistics Malaysia.

A one month period was used to collect data on daily expenditure incurred while an entire 12 months was used as a reference period for items that were purchased on an infrequent basis.

These items included consumer durables like refrigerators and washing machines and semi-durables like clothing and footwear.

The survey tracked 24,768 “living quaters” in East and West Malaysia. Institutional “living quarters” such as those in hotels and hospitals were excluded from the survey.

For every selected living quarter, all households in the particular living quarter were surveyed.

The survey also noted that it was unreasonable to apply Bank Negara’s marginal propensity to consume (MPC) data on incomes to sub-regions of Malaysia as these areas differed in social economic development.

No comments:

Post a Comment