Friday, May 10, 2013

The Truth And Nothing But Truth



After taking control of the Federal government after a controversial "fraud" victory , BN/UMNO Federal Government has already started imposing hardship on the poor Malaysian rakyat.

The above shows a tax of 16% being imposed (service tax - 10% and GST of 6%) on the rakyat.

Malaysians don't deserve this!!!! BUT the fault lies on some Malaysian voters who had been carried away by favors and goodies to vote for the "uncaring, corrupt and ineffective" BN/UMNO.

I linked to the site as a matter of course as it’s internet etiquette, but personally I wouldn’t recommend visiting – too many pop-ups and pop-unders.

Nevertheless, this is something that’s been going around the net lately. A variation is to confuse the service tax (abbreviated as GST) with the government somehow stealth-bombing the Goods and Services  Tax (also GST) on an unsuspecting public.

You might visit this link for more on the latter (and “like” it while you’re at it).

In any case, the REAL truth is that both the government sales and service taxes (SST) have been around for yoinks. The sales tax has been in force since 1972 (link to relevant act) and the service tax since 1975 (link to relevant act). The current 10% rate for the sales tax was set in April 2008 while the 6% rate for the service tax has been in effect since January 2011.

How many people haven’t realise they’ve been paying 10%-16% extra on so many items all these years?

Doesn’t GST at 6%-7% to replace SST at 10%-16% now make a WHOLE lot more sense? ¡Ay, caramba!


  1. Yeah I get this a lot as well. Talk about setting higher price expectations (I am a rational expectations fan). In fact the last time this I was asked was 3 days ago from a pair of well-meaning colleagues.

    I don't think I sounded half as convincing verbally as you are on this blog, though. I take it as a failure on my part.

    Personally, I hope GST gets passed so policy discussion can get into an area that's more relevant.

    1. I met the guy at MoF who's in charge of the GST unit - everything's ready to go, it just needs a green light. It makes you want to pull your hair out.

  2. Does taxation fuel inflation? ;P

    Add GST sans SST may give sellers an easier reason to raise prices because the second is less apparent than the proposed first.

    G'bye Nurhisham.

    1. walla,

      Both in theory and in practice, increases in sales tax/VAT have not resulted in higher inflation, just a one-time shift in the price level.

      I think in our case, because the differential is for most items fairly minor, there won't be any changes in prices. The biggest impact will be on firms in the supply chain (producers, wholesalers and distributors), not consumers. Companies on the front-line would have no motive to raise prices, as maintaining prices would in effect raise their margins automatically.

  3. wow, what an irony
    blog title : malaysians must know the truth
    post : bluff and more bluff

    anak bentong

    1. @anak bentong,

      Yes, ironic is precisely the right word.

  4. I do believe in the argument that GST should have limited inflationary pressure given that the proposed rate is lower than the current one and there are wide exception on foodstuff.

    But I'm not wholly sure that is the case because GST would cover stuff that wasn't covered before, i.e. it gonna more efficient. The mak cik at the stall under the kelapa tree would face consumption tax for the first time and she will probably pass it to consumers to protect her margin. The underreported sectors of the economy would be taxed for the first time.

    So, that efficiency has some probability of pushing prices up even with exceptions and lower tax rate charged vs SST.

    And yes, it's a one-time hike but because of y-o-y basis, heh that 12-months of higher inflation (probably a case for seasonally adjusted m-o-m).

    1. Hafiz,

      If I'm not mistaken, there should be a threshold for the imposition of GST just like with SST. I don't think mak ciks under a tree are liable to become government tax collectors. Or mamak stalls for that matter.

      But you're right on the "apparent" effects in CPI growth.

    2. Hmm..the implementation is going to be an interesting exercise then.

      It might be a good time to figure out the estimated size of our informal sector which provides for final consumption.

      Btw, does anybody know enough about value added taxes (or even sales taxes) around the world?

      I would like to know why can't shops be made to display their after-tax prices in their advertisements/menus/etc.? I know doing the math isn't that hard for consumers, but it's just a pet peeve I have at the moment.

    3. I'm not referring to the mak cik per se. I'm referring to the under-reported sectors of the economy where they pay little tax/no tax. They won't be the tax collectors but they'll be part of the supply chain taxed by the GST.

      That chain will be taxed and so, they will face the final price after GST. They won't collect the GST, but their margin will be under pressure anyway.

      That is unless they buy from the chain that is exempted from the GST.

  5. Hisham, can clarify whether all (if not, majority of) firms in the informal sector are suppliers of final consumption?

    On another note, are there instances in the past/other countries where there's GST resistance politically because the informal sector is overly large?

    1. Jason, I've no idea - I imagine they would be, but I don't know one way or the other. The second part I haven't thought of at all. I don't suspect so, but then, we're one of the last in the world to implement a VAT.

  6. Salam.

    Hi Hisham,

    A lot of people are up in arms due to Idris Jala's statement that the government could raise up to RM27 million in revenue if a GST rate of 7% was applied, similar to Singapore.

    What's your take on this?

    I believe the government was toying with a start rate of 4%.


    1. Salam Louise,

      Actually I heard 6%. In any case, as the GST will be replacing the existing SST, for me anything under 10% is fine.

      Seriously, for the majority of consumers, implementing GST won't make much difference, as the impact should be marginal on prices. Most of the gains in tax revenue will actually come from the registration of companies in goods supply chain, who previously were not "captured" in the system.