e-Poll – “Do you agree that Goods and Services Tax (GST) should be implemented in Malaysia?”

The e-poll is put up by Royal Malaysian Customs at its official website www.gst.customs.gov.my to gather and understand public feedback on the implementation of GST in Malaysia.

Out of the total votes (1,213), 924 votes or 76% were disagreed with the implementation of GST, while 262 votes or 22% agreed with it. The e-poll results may not be a good representative of public feedback as it is only involved 1,213 votes or people perhaps.

What are the benefits or pros & cons for implementing GST in Malaysia? Among the pros and cons, benefits/advantages or disadvantages of GST perceived by the public are:-

Reasons support for GST:

1. Increase national/government revenue and mitigate the heavy reliance on income tax and petroleum tax, in which income taxes contributed 44.4% of government revenue in 2010.
2. Tax burden will not increase when income level increased.
3. “Everyone” will pay tax and tax burden is spread over, instead of just relying on income taxes derived from 15% of the working population.
4. Overcome the loopholes of current sales and services tax systems.
5. Eliminate over-lapping tax at different stages, as GST is generally charged on the consumption of goods and services at every stage of the supply chain, with the tax burden ultimately borne by the end consumer.
6. More stable for government revenue with GST as a consumption tax based, compared to direct income taxes and minimise the impact of economic cycles, particularly during recessions.
7. Corporate tax and individual tax rates could be reduced.
8. Minimise the occurrences of tax evasions.

Reasons disagree with GST:

1. May result in inflation as general products prices may go up.
2. Increase the tax burden on low income working group (the other 85% as described item 3 above)
3. The government may possibly increase the GST rate from 4% to 15% to increase revenue.
4. Worry that the GST tax may even higher than current sales tax 10% and service tax 5%.
5. Worry that the effect of tax revenue re-distribution may not be achieved.

Bernama (4/6/2014): Prime Minister Datuk Seri Najib Tun Razak has announced that the RM1,000 Goods and Services Tax (GST) e-voucher by SME Corporation Malaysia (SME Corp) was now open for application.

He said the voucher was meant to be a simple, fast and effective way for small and medium enterprises (SMEs) to purchase or upgrade GST-compliant accounting software.

“All they need to do is to submit an online application for the e-voucher, which can be used to purchase software from participating vendors.

“I urge SMEs to come on board and take advantage of the assistance provided by the government to ensure a smooth transition in the implementation of the GST,” said Najib, who is also Finance Minister, at the opening of SME Annual Showcase (SMIDEX) 2014 here, Wednesday.

The six per cent fixed rate GST, to be implemented on April 1, 2015, will replace the present sales and services tax with a rate of up to 16 per cent.

While calling on all stakeholders, particularly businesses, to have a clear understanding of how to prepare for the GST, the prime minister said Malaysia too could learn from 160 countries which have gone through challenges in implementing and understanding this system.

“The government has allocated RM100 million (out of RM250 million) to conduct a nationwide awareness and training programme through various channels.

“The remaining RM150 million has been allocated for the SMEs to update their accounting software,” Najib said.

The prime minister also announced that SME Corp would work with the Securities Commission to establish the Malaysia Unlisted Trading Platform, which would facilitate financing opportunities for SMEs.

He said it was important for the government to promote growth and expansion of SMEs through the capital market as many have found it challenging to enter the official capital market due to various requirements and high listing cost.

“To make it easier, last year the Securities Commission announced the establishment of the Malaysia Unlisted Market or MyULM, to provide both access to capital and the information to facilitate transactions,” Najib said.

The prime minister also said the government was spending RM13 billion for SME development programmes this year compared with RM12 billion last year.

“These funds are not only from the government but the private sector as well.

“In fact, close to 50 per cent of the funds for this year’s programmes are sourced from the private sector,” he said.

Last year, RM12 billion was spent on 157 SME development programmes which in turn supported nearly 890,000 projects across all economic sectors, increased productivity, new business registered, higher profits and more job opportunities.

On Asean commitment, Najib said: “Malaysia is ahead of the curve in readying the economy for greater integration.

“Ultimately, we want Asean to be a highly-competitive, inclusive region, one that is fully-integrated into the global business environment.

“For Malaysian SMEs and international investors, the Asean Economic Community promises to bring real benefits but it will also alter the business environment and thorough preparation is essential.”

At the same event, Najib presented the Premier Award and RM1 million cash prize to KLSMC Stem Cells Sdn Bhd for being the Most Innovative SME.

Earlier, Najib witnessed a number of public-private sector partnerships formalised through several Memorandum of Understandings which included SME Corp and Department of Standards Malaysia, Padiberas Nasional Bhd and Malaysian Debt Ventures Bhd.

Source: BERNAMA

TheStar Online (4/6/2014): The goods and services tax (GST) is expected to have some short to medium-term impact on retailers in the country when it is introduced in April 2015, says Malaysia Retail Chain Association (MRCA) president Datuk Liaw Choon Liang.

“We think that the purchasing power for the middle to lower-income group will be affected and definitely (retail) sales as well.

This is not only limited to retailers but other industries also. Notwithstanding this, I still think it is a good tax system,” Liaw told StarBiz.

He hopes the Government will proceed to further lower corporate and income taxes moving forward with the introduction of the GST to increase the competitiveness of local industries.

Liaw said retailers were also coping with other input cost increases such as electricity and labour over the past two years.

“The other major challenges today are the shortage of manpower and that the younger generation workers are not too willing to work long hours,” he said, pointing out that retail business involved long hours, especially during weekend which were peak times.

“We have to be more innovative today to look into other opportunities and expansion overseas,” he added.

Source: Thestar Online

Malay Mail (29/5/2014):  The Goods and Services Tax (GST) goes into effect on April 1 next year but many Malaysians remain unsure whether the GST is a progressive or regressive tax system, and unsure about its impact on the people.

The GST mechanism and its implications may not be something straightforward for most people and, as pointed out by Royal Malaysian Customs Department’s GST director Subromaniam Tholasy, things become more complicated when people start talking of progressive and regressive tax systems without knowing what they are.

He pointed out that under a regressive taxation system, the medium and low-income groups bore much of the tax burden while under a progressive taxation system the high-income earners paid more taxes.

GST impact based on one’s spending

“GST is a broad-based consumer tax based on expenditure and not on income as misunderstood by some. This means if someone spends more on GST-imposed goods and services, thus the person will be paying more taxes.

“The confusion happens as some feel GST is based on income. If GST is based on income, every value added tax (VAT) or GST will appear more regressive and will burden the medium and low-income earners,” he said to Bernama.

The Royal Malaysian Customs and Ministry of Finance have conducted intensive study on GST implemented on 160 nations, and the study conducted pointed out that Malaysia’s GST model was progressive in nature.

Subromaniam said the International Monetary Fund (IMF) concurred with this finding. He went on to explain that in the event all goods and services were to be subject to GST without any exemptions, it was then considered regressive.

“Nonetheless when GST is implemented there will be many exemptions or zero GST that is bound to benefit the low and medium-income earners.

“Based on the spending patterns of low and medium-income earners, they hardly spend on non-essential items and services, or items that do not enjoy GST exemptions,” he said.

GST to replace Sales & Services Tax

Elaborating on other factors that contributed to the general public apprehension on GST, he said some feared that the GST would be implemented along with the existing Sales and Services Tax (SST).

“GST will replace SST. There is a general misconception that the GST will be implemented with the existing SST, and if this is true then it will burden the people and appear regressive,” he said.

Speaking on the existing SST, Subromaniam said that while both taxes were progressive in nature, the government wanted to go ahead with GST to restructure the national taxation system.

The restructuring of the national taxation system is seen crucial in overcoming the loopholes with SST and to ensure an effective, efficient and transparent tax system to enhance the nation’s competitiveness.

Among the shortcomings of the existing taxation system is that of overlapping taxation and multi-level taxation, transfer pricing and value, and no tax exemption on exports.

“GST is more effective as it will help to reduce the bureaucratic hassle and enhance tax compliance within the society.

“Apart from that there would be greater transparency on the pricing as all business transactions would be recorded on invoice receipts that will be audited by the Customs Department,” he said.

Household income

Subromaniam said based on the accumulated data, the tax burden on households with an income of RM2,000 per month was only 2.59 per cent while for those with an income of RM12,000 it was 4.14 per cent per month.

He said with a GST rate of 6 per cent, the tax paid by households with RM2,000 income was RM39.16 per month while for the households with RM12,000 income it was RM345.06 a month — nine times greater.

“Households with an income of RM2,000 spend about 32 per cent of the total purchase on items with zero GST and 32.63 per cent on GST-imposed items.

“Households with an income of RM12,000 only spend about 12.15 per cent of their total income on GST-exempted goods while 63.90 per cent of the spending is on GST-imposed items.” he said.

Among the things exempted from GST are basic necessities like rice, sugar, salt, flour, cooking oil, lentil, spices, salted fish and shrimp paste.

Government services like the issuance of passport, licence, healthcare services, learning in school; transport services like bus and train, highway tolls and education services are exempted from GST.

Refer to the facts

“The public have to seek knowledge on GST to understand the system better and should avoid listening to hearsay that GST will benefit the rich and burden the poor.

“It is undeniable that GST has an impact on the medium and low-income earners but the impact is very small on them compared with the impact on high-income earners.

“In spite of the negligible impact of GST on the low and medium-income group, the government will continue with the special cash assistance among others the Bantuan Rakyat 1Malaysia (BR1M) and RM300 cash for BR1M recipients when GST is implemented,” he said.

GST has been implemented in 160 nations and the rate of 6 per cent is the lowest in the world compared with Singapore (7 per cent) and 10 per cent in Indonesia, the Philippines, Thailand, Cambodia, Laos and Vietnam. — Bernama

Note from Author: GST will be charged via Tax Invoice issued by the merchants. You will see the total GST charged from the tax invoice given.

Source: themalaymailonline

MalaysianDigest (12/5/2014): Putrajaya is struggling to convince Malaysians on the Goods and Services Tax (GST) because it is approaching the issue as a branding exercise, former minister Tan Sri Rafidah Aziz said.

Rather than painstakingly explaining the controversial consumption tax still misunderstood by most in the country, Rafidah said the government was opting to commission costly billboards as though it were attempting to cultivate a brand.

“I see one in my area here that says GST is not charged for education. What for? That billboard is a few hundred thousand dollars,” the former minister of international trade and industry told the Sunday Star in an interview published today.

The former Wanita Umno chief also criticised the manner in which the mechanics of the consumption tax is being explained, complaining that even she found the information overwhelming and difficult to comprehend.

She added that the complexity of the information also lent itself to manipulation by critics, further hampering the understanding of the GST.

Rafidah pointed out that during her time at the head of the Umno wing, its members had been at the forefront of disseminating information on policies directly to the constituents.

“I don’t know who we are delegating to do the explanation. It’s very human to be wary of something you don’t understand,” she added.

The former minister then recounted the inflation spike experienced by Malaysia during the 70s and noted that information had then been managed to allay public fears.

Rafidah said that despite the “havoc” of double-digit spikes in inflation, the government was able to explain the predicament to the public and provide suggestions on how to manage the issue.

“For the GST, it’s not like something we cannot handle … Unless we explain it properly in a way that people understand, it’s going to be debated forever,” she added.

Merdeka Center released a survey last week showing that 62 per cent of Malaysians polled last month were against the implementation of the GST.

The independent pollster also noted that comprehension of the GST was still low, with 53 per cent of respondents admitting that they did not understand how the consumption tax would work.

The GST is a consumption tax, meaning all Malaysians will be taxed according to their level of spending, regardless of income. This differs from income tax that is only applicable after a certain earning level is exceeded.

Malaysia’s proposed GST rate of 6 per cent is the lowest in the region, as most countries implement a 10 per cent value added tax (VAT).

The tax was first announced during Budget 2005 and was originally scheduled to be implemented in 2007 before it was deferred due to fierce public opposition.

It was finally announced in Budget 2014 last year, a few months after the May 5 general election, and will be enforced starting April 1 next year.

Resistance culminated recently in a May Day rally by over 15,000 people to protest its introduction, which also saw signs of discontent over Putrajaya’s prosecution of opposition leader Datuk Seri Anwar Ibrahim and handling of missing flight MH370.

Source: malaysiandigest

TheStar Online (10/5/2014): IT could take up to two years before businesses are able to operate smoothly once the goods and services tax (GST) is implemented.

The time after the introduction of GST is critical as uncertainties and changes made by the Government would most likely arise, making it especially challenging for businesses.

The implementation of GST will prove to be a steep learning curve for most businesses within the country that have no exposure overseas.

“It is a learning experience for businesses and tax authorities,” says KPMG’s leader for Indirect Taxes Centre of Excellence in China Lachlan Wolfers.

For this reason, he adds that it is critical for the Government to provide some leniency to businesses in the initial one to two years after the tax is implemented.

“The implementation of GST in Australia was successful because the Government was trying to encourage the people to do the right thing and voluntarily comply and when you do that, people will naturally take the effort. So, I think having the same leniency is very important,” he says.

For Malaysia, the benefit of coming on board the GST train at this time is that it can learn from the successes and failures from implementation in other countries.

The GST had quite a few false starts in Malaysia, resulting in many taking a wait-and-see stance after the announcement during Budget 2014, especially since the legislation had not been passed until last month.

With just under a year till GST goes live starting April 1, 2015, businesses need to make some serious headway in becoming GST compliant and GST ready.

Businesses, big or small, cannot afford to rest on their laurels. An immense amount of testing and trial runs will have to be conducted, which may take up quite some time.

Businesses have to ensure their accounting software is properly updated with a GST module that enables capturing and computation of the tax, and should also, prior to the effective date, be confident that their systems and processes are in proper working order.

Although some businesses have operations and exposure in other countries that have adopted GST or the value-added tax (VAT), not all GST modules can be implemented as it is, in Malaysia.

There would still be many differences in the GST rules between different countries.

“Therefore, such businesses would still need to deploy a significant amount of time and resources to training and implementing IT systems configuration,” says BDO Malaysia head of tax advisory David Lai.

Many accounting firms have been kept busy with GST seminars, catering to small and medium enterprises, as well as the public, to enhance awareness on the tax that will replace the current sales and service tax.

The Royal Malaysian Customs have also issued guidelines on its practices, procedures and interpretation of the GST legislation. A lot of the groundwork has been done, and assistance.

Lachlan believes Malaysia is slightly further advanced than when Australia was implementing GST.

“In terms of the education process, it is very achievable to implement it within the timeframe.

“Customs has done a lot of ground work, and has starting consulting and conducting seminars with businesses, whereas in Australia, not much of the ground work was done before the legislation there passed,” he says.

Now that the legislation has been passed, industry groups and consultants will be able to expand more broadly on queries, accountants say.

Leading up to the GST implementation in April next year, by the time it is nine months till it goes live, businesses should understand the overall financial impact the tax has on its operations and the key technology issues that needs to be addressed.

Six months to GST, businesses should be focusing on system changes that need to be made, and then three months away, they need to look at pricing changes and communicate with their customers.

KPMG has developed a toolkit to help mainly small and medium enterprises identify the impact of GST.

“The most critical areas they would need to assess are the impacts to the business. The toolkit shows where it impacts most, for example, human resources. With the impact assessment, implementation plans can then be put in place,” says KPMG Malaysia managing director and head of advisory Datuk Hew Lee Lam Sang.

Source: thestar online