GST concerns
 

Hi
as you all know GST is coming in next year.
I have noticed a number of articles decrying various areas of worry.
One thing I read today was a letter to the Star decrying how Body Corporates should not be required to charge GST. The writer said they should be treated as a payment within a family or non profits.
This shows a totall misunderstanding of the way a GST works.
As a service provider the Body Corporate claims an input credit for all the GST it is charged by providers and then claims (charges) GST from its residents.
The net impact is that GST is only charged on the value added portion. As most condos employ few people directly (this is done by the management company) the "value add" portion will usually be very low.
If the Body corporate did not oncharge the GST it would still have to "charge" the GST anyway because without the oncharge it does not get an input credit and that is a cash outlay which needs to be recovered.
I think GST is a good thing but I worry that the rate will be so low (6%) and that the exemptions so many (food, small traders etc) that it will not be as good a revenue raiser as it could be.
Will be interested to see what drops occur in sales tax which in theory a GST should replace. Some items such as electricals that attract a higher rate of sales tax could become cheaper.
cheers

Re: GST concerns
 

It's a tricky one. Malaysia has debt and, on the face of it, it seems like a good idea to generate some revenue. That was my view when I heard about it.

A Malaysian friend pointed out that most of Malaysians have such a low income that GST will impact in a big way on those already struggling to make ends meet.

So......

Re: GST concerns
 

GST or VAT (actually means Very Awkward Tax) is never good for the consumer. It is very inefficient the way it goes on, than off, on again, off etc, and finally on at retail sale. This stupid scenario even happens when no final tax is due when things are given away free such as plastic bags in shops. Governments like it as they devolve collection to the supply chain who become unpaid tax collectors. Fraud is common in the "pay cash, forget the VAT" scenario. What's in it for the trader, well he is not paying income tax either.
It also encourages this terrible throw away society we now live in as household goods are generally cheaper with GST/VAT but servicing becomes more expensive.
Don't think it will stay at 6% either. The UK started at 10% and over the years it has crept up to double at 20%. Similar has happened elsewhere and the EU now has a rule forbidding standard rate VAT to be less than 15%. Hungary has an eye watering 27%.
Of course there should be no need to increase the rate as GST/VAT take is self inflating with inflation but try telling the bean counters that.

Re: GST concerns
 

So Winston if you are not going to impose a GST where do you suggest that Governments get their money.
Increase income taxes, property taxes, cut services ...money does not grow on trees.
Malaysia is protected at present by its oil and gas wealth. That has allowed it to subsidise the cost of many items, from petrol to rice. The subsidy mentality has lead to ridiculous economic outcomes. For example there have been no increase in the cost of road tolls for a number of years. This is despite the toll operators having a contractual right to an increased toll. So what happens the Government pays an ever increasing amount to the toll operator and each year it gets harder and harder for the Government to move anywhere near a cost recovery model
cheers

Re: GST concerns
 

You have some interesting points, Carbolic.

Winston, don't think you can compare with Europe or UK. Not the same. Apples and oranges. Better to compare with other ASEAN countries and their tax situations. EU is mental anyway.

Re: GST concerns
 

All governments need tax revenue to operate. It's just that I believe the GST model is inefficient and not appropriate for the reasons in my post.
What else, well sales tax seems to work elsewhere, and in Malaysia at the moment. One needs to look at petrol prices, at the moment RM 2.10 per litre, cheaper even than the U.S. This needs to be brought to a more realistic level which would also have environmental benefits and reduce congestion in KL and elsewhere.

Re: GST concerns
 

But now you're comparing with USA. Why not compare with Thailand? Is that not subsidised too?

yes fuel cheaper than USA. And salaries lower than USA, yes? How to compare?

Re: GST concerns
 

All right I'll compare with Asia. Petrol is cheaper than anywhere else in Asia.

Re: GST concerns
 

Brunei? Hehe.

Actually I confess I didn't know that but just googled and came up with a site for mytravelcost.com which said it was cheaper, but that was the only cheaper country in Asia. I'm probably getting a tad off topic :o

Re: GST concerns
 

I believe there is no personal income tax in Brunei.

Re: GST concerns
 

I agree, and am surprised the government allow petrol prices to be so low. The government's response to the worsening traffic congestion seems to be to build more new roads. Admittedly, the government is investing in the new MRT in Kuala Lumpur, but I am not sure this will be the answer to the congestion on the roads.

Re: GST concerns
 

Regarding the petrol prices, here is som enews from Bernama:

''Starting June next year, the purchase of RON95 petrol for those in the high income bracket will be according to market prices, said Deputy Finance Minister Datuk Ahmad Maslan.

He said the mechanism and methods of implementation were being finalised by the Finance Ministry and Domestic Trade, Co-operatives and Consumerism Ministry either through the use of MyKad or other cards.

"They will pay the cost of RON95 according to market prices. For example if the price is RM2.58 sen, then it is RM2.58 sen," he told a news conference after presenting a talk on the Goods and Sales Tax (GST) for senior officers of the Regional and Rural Development Ministry and its agencies here Thursday.

He said those in the low and middle income groups would continue to enjoy RON95 at subsidised prices.

"This system is more fair as only those qualified will receive the subsidy," he said, adding that a similar system would be implemented for diesel consumers starting January next year via the fleet card.

At present the price of RON95 is RM2.30 per litre.

At the news conference, Regional and Rural Development Minister Datuk Seri Mohd Shafie Apdal said the GST talk was important so that the people were not be easily influenced by inaccurate information being spread by irresponsible quarters.

He said information to rural residents would also be intensified not only through talks nationwide by the Finance Ministry but also involved agencies under his ministry''