GST WILL MAKE WORKING CLASS POORER!
GST WILL MAKE THE WORKING CLASS POORER!
Prime Minister Najib Tun Razak was quoted by Bernama as saying that the proposed Goods and Services Tax (GST) would be introduced very gently upon Malaysians. It’s a wonder how he plans to do it gently, as a tax system across the board like the GST will have immediate effect on the inflation rate. The most affected will be working class and the lower income group, as a bigger percentage of their income will be used to pay the GST compared to the higher income group. It is a deliberate attempt to shift the tax burden from the rich to the poor.
Najib too added that he will give a 18 month period to allow the public to give their comments, engage them, and if necessary to fine tune the GST. It is very clear that the government has already decided to implement the GST system in 2011. Any invitation of ‘comments’ and feedback from the public will only serve as a public relations exercise and Najib will never consider scrapping the GST totally.
Since when the government first talked about the GST, Parti Sosialis Malaysia (PSM) has voiced out its objection against its implementation. A protest memorandum was also handed to the Finance Ministry in Putrajaya in October,2004. The memorandum against the implementation of GST was signed by over 30 , groups of unions , workers committees, NGO’s and political parties. Later for political reasons the Badawi government then, postponed its implementation.
Now, it is clear from the 2010 Budget presented by Najib that government desperately needs funds to swim out from the economic recession. A tax system across the board like the GST will certainly boost governments’ revenue.
Unlike the current Sales Tax and Service tax which is only applicable to certain purchases and services, the GST will be more comprehensive. The current sales tax is single stage tax on locally manufactured goods and imported taxable goods. The current service tax too is a single stage tax on turnover of food and beverages in selected outlets (such as clubs & hotels) and professional services. It was more of a tax on the rich, patronising such clubs, hotels or seeking professional services.
But the GST is a multistage tax that works through the whole manufacturing and supply chain of everyday goods and services. Thus price increases are unavoidable and will affect the common man irrespective of their household income.
Customer(the rakyat) will pay for the GST which has been worked into the price of the item purchased and he/she has no one to pass the tax burden too as how the others in the chain have done!
Mr.Dale Boccabella , a lecturer at School of Business and Taxation University of New South Wales, Australia clearly pointed out that
“The liability for the tax is imposed on the entity that makes a taxable supply .However generally the liability of the supplier for GST will be built into the price charged to the customer. ......In this way, the GST liability ultimately falls on the end consumer of goods and services because they, generally speaking are the only entity that does not get a credit for GST on its purchases. “
Thus as in Australia and Singapore and many other countries, it has been proven that, when the GST (VAT) is introduced it will cause an inflationary effect for the first year . The government will attempt to soothe public fears by promising to keep key sectors free of GST. The common GST free supplies might be basic food, health service, medicines ,childcare services ,education, water and sewerage and so on . This is known as zero rating or exempting a variety of basic items to protect the low income group against price increases.
But since GST is such a comprehensive tax system, the effectiveness of zero rating to completely shield certain goods and services from chain effects of price increase have yet to be seen. Even now ,without the GST, the government is unable to control prices of so called ‘controlled items’ and is often held ransom by manufactures as in case of sugar prices.
Najib seems to be determined to bulldoze the GST Bill, calling for first reading in the parliament by the end of the current Parliament session. The propaganda has already started to convince the rakyat that the GST will not burden the people and will benefit in the long run.
The Second Finance Minister Ahmad Husni Hanadziah said the GST rate proposed will be only 4%, which is the lowest in the region. Currently Singapore’s GST is 7% , but it started off introducing GST at 3%. Thus, GST for Malaysia will not remain forever at 4%, it will increase as the government sees the need to do so.
The GST will seriously affect the lower income group whom are mainly the working class. Experts have mentioned that a government will have to adjust income rates and social security payments before introducing GST to cushion the effects of price increase on the poor. But the Malaysian government still turns a blind eye on the calls to implement a minimum wage for workers. The drastic increase in inflation rate will hit hard on manufacturing and service sector workers. The average basic wages paid by most employers is from RM 450 onwards. PSM, JERIT and the MTUC have long campaigned for a minimum wage of at least RM 900 per month. But the Human Resources Ministry have remained loyalist to the free market system to determine wages.
If the GST is introduced in the year 2011, in the absence of a minimum wage for workers, it will push back thousands of working class families into poverty. The rakyat currently is still struggling to overcome the onslaught of the job and pay cuts during the global economic crisis since 2008. The governments’ economic stimulus package has not trickled down to the common man.
We have to oppose the implementation of GST now! PSM invites workers, unions and mass organisations to move quickly against the GST. GST is not a tax on the rich, but it will make the poor, poorer! PSM thus demands MINIMUM WAGE FOR WORKERS, NOT GST! An urgent anti –GST campaign in needed to fight the governments’ propaganda machinery. The rakyat need to be exposed to the true nature of the GST as an agenda of the neoliberal pro-business Najib administration.
NO TO GST! MINIMUM WAGE NOW!
Sivarajan
Parti Sosialis Malaysia,
National Treasurer PSM.