TODAY, Malaysia joins the ranks of some 160 countries around the world that have implemented a value added tax. The Goods and Services Tax (GST), standing at six per cent on all non-exempt or standard-rated goods, is the lowest in the region and will improve the efficiency of the country’s tax collection. This, in turn, equates with increased government revenue. Theoretically regressive, and replacing the sales and service tax, GST subjects every shopper to a six per cent tax — the government has had to balance this effect by ensuring that essentials like staple food items, medicine and education are zero-rated or exempt. The aim is to ameliorate, as much as possible, the negative impact on the country’s lower income group. For that, the former minister of international trade and industry is urging a comprehensive list of zero-rated items to be released immediately. This itemised list will enable shoppers to compare yesterday’s price with today’s and complain if there has been any increase.
For general categories of exemptions are just not good enough given extensive branding. The Customs Department must issue a complete list. Yesterday, in this paper, a list of some 55 items that are not affected was published, containing a substantial range of food items, some commonly used over the counter medicines, learning tools for children, newspapers and dictionaries. Whether electricity and water rates are exempt needs an unequivocal answer. However, there is no denying that a person can well survive without resorting to the standard-rated goods. That the government added more goods to the list in the final days, like zero-rating prepaid telephone credit, is proof that Putrajaya is genuine. However, what operators might do behind the scenes still needs scrutiny. Consumers, therefore, must stay vigilant more so now that the GST is operational. Meanwhile, there is the promise that the regressive tax will come with dividends for the average employee. The argument put forth when presenting the annual Budget was that with the increase in revenue — because GST closes the scope for not paying income tax unless, of course, one can opt out of society altogether — there can be a reduction in income tax. To realise this, the authorities need to monitor the implementation well. Otherwise, manufacturers, wholesalers and traders will exploit every loophole not to pay, on the one hand, and on the other, be able to claim back as much as possible. When there are hundreds of thousands of businesses registered, those dedicated to ensuring effective implementation must enforce the law which makes transparency essential. GST was scheduled to be implemented during the third quarter of 2011, but it was delayed amid mounting criticism. Experts say this new tax regime will take some six months to settle into cruising mode. Consumers and the authorities, meanwhile, must work together to make certain that the full potential of the GST is accomplished to strengthen the country’s financial resources.