Opponents of the introduction of goods and services tax (GST) in Malaysia have raised a number of points.
Some of the points are valid even if they are disagreeable. Sometimes, the disagreement is ideological and difference is due to premises originating from separate irreconcilable positions. Those points are fine because at least they are logical and honest.
Some, like opposition to GST based on regressiveness, are plainly illogical and wrong however. Some are pure bullshit of gargantuan magnitude, i.e. if the tax rate is 4% and there are four points within a value chain, the total tax rate paid by the end consumer is 16%. One made by Lim Guan Eng at an anti-GST forum some weeks ago is disingenuously irrelevant.
Mr. Lim stated that under GST, everybody will be taxed.[0] It is true that everybody, in a sense that any anybody who consumes a particular taxed good regardless of income levels, will be taxed. But this line of argument presumes that everybody has not already been taxed.
Unfortunately for Mr. Lim, consumers in Malaysia have already been taxed through a consumption tax that is theoretically as flat and as regressive as GST. That tax is the sales and services tax (SST).
Because of the untrue presumption, his argument is irrelevant.
Why is the argument irrelevant?
To evaluate the worth of his argument, a comparison between GST and status quo scenarios has to be made.
Why?
Remember, the proposal is to replace SST with GST. The desirability of one option has to be defined in terms of the desirability of the other and vice versa. In other words, ask the question, “why one option is better than the other?” Absolute statement does not help in decision-making. Relative statement does.
Further, for Mr. Lim’s — and increasingly what is becoming one of Pakatan Rakyat’s as well as others parrot the argument without thinking — argument to be relevant, the status quo must consist of a scenario where not everybody is being taxed. There is no such status quo: the status quo has SST in place.
What is the point of arguing as Mr. Lim has done so when everybody has already been taxed — in fact, taxed at a higher rate? Remember, the current GST is planned to be introduced at 4% while the current SST rate ranges from 5% to 10% and there are goods taxed at even 20%.[1]
Both SST which is currently in place, and GST, will affect everybody. If one opposes GST on the basis of how GST affects everybody, then the person has to oppose SST too. Therefore, that person should be indifferent between having GST and SST. One simply cannot make sense if one bases one’s opposition on how GST will affect everybody.
[0] — Penang Chief Minister Lim Guan Eng said with the old sales and services tax system, only some 1.5 million of the total of 12 million workers are taxed but its replacement with the GST will mean everyone, including poor workers, will be affected. [Pakatan bets on GST to muscle BN out. The Malaysian Insider. February 29 2010]
5 replies on “[2176] Of Lim Guan Eng probably does not know that everybody pays SST”
at the end of the way, it’s not about who and who got taxed and how much tax is paid. it’s all about whether the taxes collected will be used to genuinely (focus is on the word genuine) develope the country … or… taxes collected will be used to buy submarines which cant dive or fund 1malaysia F1 team. well, u know what i am saying.
It doesn’t matter who explicitly pays for the actual tax. It will be passed down to consumers. There is a reason why SST is called a consumption tax. This is the reason. (Besides, you yourself said that SST is embedded in the price in your second point. The consumer faces price after tax, not before tax. That means it is being passed down.)
Secondly, the GST is to replace SST. SST will be eliminated. The 5%-10% will be removed before the GST is added.
Further, under the GST plan, electricity, water and other items will be exempted. (http://thestar.com.my/news/story.asp?file=/2010/2/12/nation/5666542&s ec=nation)
Sales tax is paid by importers and manufacturers and not the consumers. These businesses will then bill the subsequent wholesalers, distributors, dealers, traders and retailers, with the sales tax embedded in the selling prices. The dealers or retailers do not know the amount of sales tax embedded in each of the thousands of goods they sell to consumers. When GST is introduced, the businesses will just add the 4% GST onto their current selling prices, meaning the SST is included therein and is not replaced by the GST. This problem must be resolved, otherwise the consumers will be charged both Sales Tax and VAT.
GST is imposed on almost all things under the sun, while the scope of SST does not include tax on say, electricity, water, toll, education and many more.
that is the sad thing about the whole episode isn’t it?
well i guess PR underestimated the effect of taxing that 12million workers. All those will start asking, where does my tax money goes.
Regressive: removal of RPGT is regressive. nobody shouts anything.
Eventually, GST has to be done. Its just a matter of time – by looking at the condition of government’s fiscal position. either by BN or PR has to do it.
If BN: try to delay as long as possible. fix other things like leakages because the possible political backlash from GST is large. might lose the next election.
if PR: try to get BN to do this ASAP. Angry 12million workers can topple BN for sure.