Friday, 4 December 2009

The GST debate - A sign of a maturing society?

This is something new as far as I am concern. There is a growing momentum in the community in discussing about the Goods and Services Tax (GST) which is seriously considered by the Federal government. Valued-added tax (VAT), the principle on which our GST has been designed, is always a contentious issue in any economy. Many government had fallen after the introduction of such a tax system.


By focusing on consumption rather than earning, this tax system naturally creates a larger pool of taxpayers. While people may be able to evade tax, most cannot resist spending their wealth. This is where GST would be more effective. The reasons why Hong Kong and Singapore could have lower corporate tax rate for example is due to them having VAT complimenting to the coffer. This is perhaps also the reason why Australia's public sector financial position is very sound. While they have introduced GST and the income-tax rate has not been really significantly reduced!

GST is considered the solution to our over dependent on petroleum revenue. As Malaysia approaches the point of infliction when we become a net importer of petroleum, a revenue source has to be found and GST has been talked as the best option. It could argued that it is better to initiate a measure when we are yet in a desperate situation. We need a fast reform.

The debate regarding GST has reached a higher level when Pakatan Rakyat set up an "Anti-GST Task Force" with the objective of opposing GST until the income of the rakyat has been substantially increased. Their argument is poor people who are not presently paying income tax will suffer through GST.

Such a move appears to have exert some pressure on the government. The Federal government appears to be playing down the impact of GST by indicating a rate of 4% which is lower than present the Service tax of 5%. It has also announced that GST would generate additional RM 1 billion, a small number compared to the idea of mitigating potential reduction oil revenue in the future.

What is really missing at present is the involvement of the third force, the rakyat in this debate. We need to hear from professionals and our intellectuals, for example, on the merits and demerits of GST. I am not sure why those from the academic world has not been visible in discussing this important issue. Is it because they are subjected to the Akujanji, that any view which is contrary to the government's view could not be discussed in public?

We are now right smack in a situation where public discussion on GST will re-in force the strength of our civil society and expedite the process of making us more mature as Malaysians. Please air your view on GST as it would have great impact on our lives in Malaysia.
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