Clowning on GST

The ‘communicating’ clown

A lot of people especially economic and political analysts are expecting Prime Minister Dato’ Sri Mohd. Najib Tun Razak to announce the introduction of the GST system as an avenue for revenue to the Federal Government’s coffer in his Bajet 2014 speech on Friday. The time table of the implementation would also be announced.

It is designed to make up in the effort of reducing dependence of revenue from income tax, reduction of budget deficit and the long term solution for the Federal Government to reduce national debt.

Federal Government is taking the necessary steps to reduce across the board subsidies and work on a mechanism for a targeted subsidy, designed for the groups within the society which deserve the continuation of subsidies so that their lives are maintained at a certain level. This is amidst world wide escalation in cost of production and distribution, which has elastic effect on cost of living.

However, contradicting statements by Deputy Minister of Finance Dato’ Hj. Ahmad Maslan is really confusing many mainstream media readers.

Ahmad Maslan: GST may not be implemented under Budget 2014

OCTOBER 18, 2013

Biz Updates From PR Newswire

Ahmad Maslan said the government has agreed in principle to implement the tax but it has not decided when to enforce the tax and its percentage in the initial stage.– Picture by Siow Saw Feng Ahmad Maslan said the government has agreed in principle to implement the tax but it has not decided when to enforce the tax and its percentage in the initial stage.– Picture by Siow Saw Feng

KUALA LUMPUR, Oct 18 — Deputy Minister of Finance Datuk Ahmad Maslan hinted today that the much talked-about goods and services tax many not be implemented under Budget 2014 to be tabled in Parliament next Friday..

He said the government has agreed in principle to implement the tax but it has not decided when to enforce the tax and its percentage in the initial stage.

“When to implement it, what percentage, we don’t know yet, though we’ve stated in official statements (to implement the tax),” he told reporters after a pre-launch to collect funds to build the Integrasi Islam Malaysia madrasah. — Bernama

– See more at: http://www.themalaymailonline.com/malaysia/article/ahmad-maslan-gst-may-not-be-implemented-under-budget-2014#sthash.vHGETwBD.dpuf

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Then he went to say this frightening statement:

GST rate may be less than 16%: Ahmad Maslan

Posted on 20 October 2013 – 08:52pm
Last updated on 20 October 2013 – 09:49pm

MELAKA (Oct 20, 2013): The tax to be levied under the goods and service tax (GST) may be less than 16%, that is, the amount under the existing sales and services tax (SST) system, says Deputy Finance Minister Datuk Ahmad Maslan.

He also did not see the new tax being a burden to the people.

“If we look at other countries that have implemented the GST, it is less than 16%,” he told reporters here today.

He had earlier officiated the High Performance Organisational Leadership Seminar at the Royal Malaysian Customs Academy at Bukit Baru, with the participation of 100 customs officers from throughout the country.

Also present was the Customs Department Deputy Director General Datuk Zainul Abidin Taib.

According to Ahmad, the government began looking at the GST in 2005 and planned for its implementation two years later, but had to postpone this due to a number of reasons, including objections from certain quarters.

He said the rate and date of implementation of the GST may be announced by Prime Minister and Finance Minister Datuk Seri Najib Abdul Razak when he tables the Budget 2014 on Oct 25.

Two days ago, Ahmad had hinted at the possibility of the much talked-about GST not being implemented under the Budget 2014.

Meanwhile, the Deputy Finance Minister said the Customs Department had collected RM25.8 billion as of last Thursday for 2013.

He expressed confidence that RM34.4 billion would be collected by the department by year-end. –Bernama

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What is Ahmad Maslan trying to do?

He is not helping to make Malaysians across the society understand better. In fact, he is creating a bout of confusion. Especially when his response to the quantum of the GST if and when it is introduced.

Bernama report a few hours ago

Bernama report a few hours ago

Compared to economists and professionals in the capital market who have contacted by media, they are providing a more ‘cushioned’ response to help ‘pad the news’.  This is to make more Malaysians especially the middle income segment of society absorb the thought of having to pay consumption tax.

Alliance Bank Chief Economist Manokaran Mottain expects the GST to be introduced at the rate of 4-5%.

The fact is that Federal Government especially Treasury did not do enough to educate the Malaysian public about GST as a consumption tax to be introduced, how it relates to revenue and the complete works of the subsidy system and the projection of the nation cash position and commitments.

Some of the available materials for public consumption are far too technical for the common person on the street to comprehend, let alone support.

The Minister in-charge of PEMANDU, who was said to be a ‘people person and communicator’ when he was in Shell, did not do a good job on unlocking the confusion ball. In fact, he made it worse.

Idris Jala pushes for GST, says ‘much income’ unreported

BY BOO SU-LYN OCTOBER 21, 2013

Jala explained that a value-added tax like the GST, where a tax is paid on each step of the process, is a Jala explained that a value-added tax like the GST, where a tax is paid on each step of the process, is aKUALA LUMPUR, Oct 21 — Malaysia needs to introduce the controversial goods and services tax (GST) – which is likely to start in 2015 if announced in Budget 2014 this Friday – because much income goes unreported, Datuk Seri Idris Jala said today.

He added that it is not sustainable for the country to depend on fewer than two million tax payers in a country of nearly 30 million people,

“Out of some 29 million in people in Malaysia, only less than two million people pay income tax,” the minister in the PM’s department wrote on his blog today.

“In fact, if we don’t widen the tax base, there is absolutely no room to cut income taxes further. For various reasons, including the fact that much income goes unreported, we need to broaden the tax base,” he said.

Jala explained that a value-added tax like the GST, where a tax is paid on each step of the process, is a “consumption tax” that taxes people with spending power.

Putrajaya is seeking to introduce the goods and services tax (GST), possibly in the upcoming Budget 2014 that will be tabled on Friday, in a bid to broaden the tax base and to narrow the fiscal deficit.

The federal government has stated that it aims to reduce the fiscal deficit from 4.5 per cent of the gross domestic product (GDP) last year to 4 per cent this year, and gradually to 3 per cent by 2015.

Jala stressed that the GST would be implemented only in 2015 if it were to be announced in Budget 2014, as 12 to 18 months is needed for preparation.

He also allayed fears on the impact of the GST on the lower-income group, pointing out that the tax rate for essential goods like food, public transport and education will likely be set at zero.

“Also there is currently the sales tax as well as the service tax now of 6 to 10 per cent which will be repealed once the GST is introduced. In the first few years at least, we expect that the GST will be revenue neutral for the government because gains will be offset due to the termination of the sales and service taxes,” said Jala.

The minister explained that the GST would make tax evasion harder, as complete records are necessary at each stage of the taxation process for businesses.

He gave the example of a drink manufacturer, who would have to add a tax, representing the GST, to their product sold to customers, after suppliers similarly include the GST in their sales of sugar, flavour and bottles to the manufacturer.

“But you are entitled to claim a rebate on the tax to the value that you did not add, in other words the tax your suppliers added on. To do that you have to keep proper and complete records,” said Jala, referring to the manufacturer.

“For instance, studies have shown that Malaysia has large capital outflows which can’t be reconciled in the national accounts. As much as 80 per cent of this is said to be from transfer pricing where firms transfer costs to various centres around the world to minimise the tax. Once a GST is implemented, it makes it very much more difficult to do so because complete records are kept at every stage of the value-adding process,” he added.

Jala stressed that the GST is a “broad-based tax” that taxes based on consumption.

“Because it is the more well-to-do and the wealthy who will consume more, the GST automatically taxes them most, not the lower income group,” he said.

Due to public pressure, the implementation of the GST has been postponed several times since the tax was first announced during Budget 2005.

– See more at: http://www.themalaymailonline.com/malaysia/article/idris-jala-pushes-for-gst-says-much-income-unreported-fewer-than-one-in-10#sthash.owlkfnRn.dpuf

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We doubt that Ahmad Maslan even in his position as the Deputy Minister of Finance could explain all of it and rationalise why it is necessary for consumption tax to be introduced, to ensure that the burden of subsidy has not been ‘wasted’ and draining the nation’s coffer indiscriminately.

Neither are we confident that the BN elected representatives could do it too, when they meet their constituents.

Even the recent retail petrol and diesel price hike has not managed to convince the majority of Malaysians. More over, when the decision to reduce subsidy as an excuse to lessen the burden  on the Federal Government does not commensurate with the across the board impression and perception about inefficiencies, wastage and worst of all, practice of abuse and corruption.

A lot of Malaysians also question efficiency of the collection and revenue system for the nation such as Inland Revenue Board and Royal Customs and Excise.

The demand of a modern Malaysian society is that they want to be informed and in the know. Many of the younger and educated ones are progressively growing to be more critical and willing to challenge the decisions that the Federal Government take and embark.

Inability to respond, engage and rationalise would simply compound to the distrust that the Federal Government under Prime Minister Najib is doing the right thing and heading the right direction.

Prime Minister Najib should the very least consider having the right spokesman if not the right assistant as deputy minister level in the most important ministry of the Malaysian Government. He simply cannot afford to make anymore perception slip-shots.

Published in: on October 23, 2013 at 23:59  Comments (17)