tag:blogger.com,1999:blog-6297413898275266606.post4739663349761435915..comments2024-03-27T18:15:59.096+08:00Comments on Economics Malaysia: GST And Inflation: Part IIhishamhhttp://www.blogger.com/profile/06265308095732759923noreply@blogger.comBlogger26125tag:blogger.com,1999:blog-6297413898275266606.post-16662268158604654132013-11-24T11:13:08.943+08:002013-11-24T11:13:08.943+08:00i'm working on my thesis abt GST..sighhh wish ...i'm working on my thesis abt GST..sighhh wish i can ask u personally..Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-52018890480161102642013-10-25T07:34:23.871+08:002013-10-25T07:34:23.871+08:00If you know mathematics well, yes = GST at 7% will...If you know mathematics well, yes = GST at 7% will balloon the cost hike to more than 20% at end user. If you are living in a GST country, you will know. About fair taxation, there will be the same loopholes. If the government is corrupted, they will sure find ways to corrupt. Najib and BN never keep any promises they made. Now they promise this, later they change it to become worse. To be exact,Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-31912919578893406882013-10-09T16:01:36.002+08:002013-10-09T16:01:36.002+08:00@anon,
"What these two gentlemen have found,...@anon,<br /><br /><i>"What these two gentlemen have found, is that changes in the tax rate was largely passed through (“shifted forward”) to the consumer – the estimate lies between 60% to 100% of the change in the tax rate was reflected in consumer prices, depending on which measure you prefer to use."</i><br /><br />The calculation is just 60% of the change in the tax rate from 10% hishamhhttps://www.blogger.com/profile/06265308095732759923noreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-664345208276593752013-10-09T13:59:22.209+08:002013-10-09T13:59:22.209+08:00At the risk of over-generalising, if Malaysia were...At the risk of over-generalising, if Malaysia were to implement GST at 7% relative to the current Sales Tax rate of 10%, the likelihood then is at worse, we should not see much change in the overall price level. Using the lower elasticity estimate (60%, or to be more precise, 0.6), we should see an approximately 1.8% overall reduction in consumer prices (0.6 x (10 - 7) = 1.8).<br /><br />hisyam iAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-7405799297144856992013-05-27T12:01:00.412+08:002013-05-27T12:01:00.412+08:00@anon 10.22
From the abstract:
"We found th...@anon 10.22<br /><br />From the abstract:<br /><br /><i>"We found that GST had a significant but transitory impact on inflation only in the September quarter of 2000 when this new tax system was implemented."</i><br /><br />That's consistent with a one-time increase in the price level, not an increase in inflation per se.<br /><br />You might want to read <a href="http://hishamhhttps://www.blogger.com/profile/06265308095732759923noreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-91775075073944070102013-05-25T10:31:42.670+08:002013-05-25T10:31:42.670+08:00One other example I have, if say food is zero-rate...One other example I have, if say food is zero-rated, wouldn't also the seller needs to price it's food higher since it's costs would increase as a result of gst it needed to pay on other expenses?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-34274246060184777182013-05-25T10:22:37.547+08:002013-05-25T10:22:37.547+08:00I tried to google and found a research paper on Au...I tried to google and found a research paper on Australia's introduction. there were numbers and data and it did show an impact to inflation by GST implementation. you may want to have a look:<br />http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1410&context=commpapers&sei-redir=1&referer=http%3A%2F%2Fscholar.google.com.my%2Fscholar_url%3Fhl%3Den%26q%3Dhttp%3A%2F%2Fro.uow.edu.au%Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-404478341151829792013-05-25T10:11:18.478+08:002013-05-25T10:11:18.478+08:00I see where you are coming from and thanks Hisham....I see where you are coming from and thanks Hisham. one last question, and needed to back track to the miner factory example. do you agree that miner after GST introduction would price it's product higher than 10.00 as he has to pay for other costs now or like you said passing on the tax to the consumers? and the same goes to the factory if it's purchases is now higher and other expenses Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-60629857581911547832013-05-25T01:49:28.070+08:002013-05-25T01:49:28.070+08:00@anon 1.54
Whether the price increases takes one ...@anon 1.54<br /><br />Whether the price increases takes one period or two or three or four is irrelevant. It does not change inflation dynamics, just the mechanical calculation of inflation which dies off after the effects of the tax propagates through the system. Most empirical research into this question find that such effects only last 2-4 quarters, i.e. just the base effect. <br /><br />Therehishamhhttps://www.blogger.com/profile/06265308095732759923noreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-8867946540824413902013-05-25T01:34:43.933+08:002013-05-25T01:34:43.933+08:00price increase I agree should be one off, but not ...price increase I agree should be one off, but not at all times everyone increase costs at once. effects maybe delayed, that is supplier A increasing price, affecting B, in turn affecting C and so on. if process and impact is not immediate, results is increase of prices is delayed, that was why my view is this will cause inflation and not just a one off increase.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-15613192497547895592013-05-24T23:45:16.766+08:002013-05-24T23:45:16.766+08:00@anon 10.13
What you're looking at and descri...@anon 10.13<br /><br />What you're looking at and describing isn't the impact of the change in tax regime, but inflation generally, which is a different matter. The imposition of a new tax has a one-time effect on the price level, not a continuous one i.e. if you impose a new tax of 10%, costs will rise 10% across the board. But that doesn't mean it will increase 10% every year after.hishamhhttps://www.blogger.com/profile/06265308095732759923noreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-65720823023749181062013-05-24T22:13:40.849+08:002013-05-24T22:13:40.849+08:00on the product the factory produced, it will no lo...on the product the factory produced, it will no longer sell at 53.50 because if the taxes that's been collected overall will be greater, so 53.50 is no longer reasonable. hope you get what I meant.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-3482221349016794742013-05-24T22:05:36.003+08:002013-05-24T22:05:36.003+08:00back to the same example, wouldn't now the fac...back to the same example, wouldn't now the factories' costs is higher? not just from products alone but other costs have increased. thus from a pricing perspective selling price is upwards resulting in inflation.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-77704396856688210412013-05-24T20:19:44.851+08:002013-05-24T20:19:44.851+08:00@anon 10.46,
Yes, the change in the base complica...@anon 10.46,<br /><br />Yes, the change in the base complicates analysis considerably, especially relative to consumer expenditure. However, consider that even with the introduction of GST, the expansion of the base doesn't amount to much. The current yield from SST is RM15 billion, while the estimate of GST is RM27 billion. In a RM1 trillion economy, that amounts to a difference of just 1% hishamhhttps://www.blogger.com/profile/06265308095732759923noreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-73170982123441636212013-05-24T20:12:42.681+08:002013-05-24T20:12:42.681+08:00@anon 11.08
Thanks for the help.
@anon 11.36
Th...@anon 11.08<br /><br />Thanks for the help.<br /><br />@anon 11.36<br /><br />The key point here is that under GST businesses do not have any tax liability, they only act as collection agents. Any GST paid by businesses for raw materials, services and utilities can be claimed back from the government. That in fact is one of the whole reasons for the shift from SST to GST, the fact that GST is hishamhhttps://www.blogger.com/profile/06265308095732759923noreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-36994218862322333982013-05-24T18:27:44.882+08:002013-05-24T18:27:44.882+08:00Nik,
Implementing GST should actually be benefici...Nik,<br /><br />Implementing GST should actually be beneficial to low-income households, because basic foodstuffs will be zero-rated, instead of 5% as it is now, and other goods will have the tax rate cut from 10% to 7%. I don't see a problem here.hishamhhttps://www.blogger.com/profile/06265308095732759923noreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-21965026831085976782013-05-24T12:00:53.050+08:002013-05-24T12:00:53.050+08:00oops just realized the example is not yours Hisham...oops just realized the example is not yours Hisham but I am sure your thoughts are along the same lineAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-59394790429964957312013-05-24T11:36:47.282+08:002013-05-24T11:36:47.282+08:00hi Hisham
I like your simple explanation and calc...hi Hisham<br /><br />I like your simple explanation and calculation. it does give a good theoratical picture. Go deeper and think about the factory, buying the same goods at 10.70 now an increase of 0.70 cents, not just this. all of it's other services which was not even part of the product chain like cleaning services, phone bills all increases by 7%. why do you think they will still sell atAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-50647430448669021962013-05-24T11:08:28.025+08:002013-05-24T11:08:28.025+08:00It's non cumulative because all the tax paid a...It's non cumulative because all the tax paid along the supply chain are recouped, resulting in the effective GST being the GST on the final product price.<br /><br />E.g. , Miner sells RM 10 raw material, Factory sells RM 50 finished goods, and Supermarket sells RM 100 retail price.<br /><br />Thanks to GST the goods are sold for RM 10.70, RM 53.50 and RM 107 respectively.<br /><br />Tax paidAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-90022880507234621142013-05-24T10:46:48.568+08:002013-05-24T10:46:48.568+08:00Hi there, silly me replied in your first post, but...Hi there, silly me replied in your first post, but it seems more appropriate to post here instead.<br /><br />Essentially, you are ignoring the fact that the introduction of GST widens the tax base and eases enforcement, roping in many business who (legally or otherwise) are not paying SST. Since you agree that the evidence is that the cost of taxes are passed on to consumers, it necessarily Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-1720617825200069632013-05-24T09:54:31.325+08:002013-05-24T09:54:31.325+08:00Hey Hisham, your blog is a nice read. I have 1 que...Hey Hisham, your blog is a nice read. I have 1 question, you talked about GST being a non-cumulative multi-stage tax, riddle me this then, in the supply chain from raw material to end user, GST is incurred in the overall cost of the product, so as the product moves further down the chain while being value-added, it carries forward its GST tax as part of the cost. At last it reaches the end user, Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-51826718373442771932013-05-24T09:38:11.640+08:002013-05-24T09:38:11.640+08:00Salam Hisham,
I was wondering how this GST (at 7%)...Salam Hisham,<br />I was wondering how this GST (at 7%) would effect those households earning more or less RM3000/month. I understand GST corelation to inflation, or rather its non-corelation, however, do taxes such as GST/VAT have any profound relation to the impact it would render to lets say, salary? Should we wait for wages as salary be high enough across the board before we even think about Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-57255273980680950982013-05-23T19:04:50.318+08:002013-05-23T19:04:50.318+08:00@anon 6.18
I don't understand how your questi...@anon 6.18<br /><br />I don't understand how your question relates to the topic or my comment above. Can you clarify?hishamhhttps://www.blogger.com/profile/06265308095732759923noreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-54457091466188023272013-05-23T18:18:21.794+08:002013-05-23T18:18:21.794+08:00If that is your argument, how would you say about ...If that is your argument, how would you say about both Kelantan and Kedah state economy?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6297413898275266606.post-59757851924863047272013-05-23T15:45:35.998+08:002013-05-23T15:45:35.998+08:00About half the government's operating budget i...About half the government's operating budget is non-discretionary spending - salaries, pensions, interest costs. A further quarter is given in subsidies to the people (mainly for petrol) and another half of that is transfers to state governments and public agencies. The development budget is primarily devoted towards improving rural and basic infrastructure (building roads and schools etc). hishamhhttps://www.blogger.com/profile/06265308095732759923noreply@blogger.com