Tuesday, April 7, 2015

The GST is keeping with the world norm


Taxes are never a popular thing, anywhere in the world. And there is hardly any country that does not have some form of tax. Malaysia’s 6% goods and services tax (GST), which came into effect recently on 1st April to replace the sales and services tax (SST) of 16%, has, understandably, attracted a lot of controversy and protest because no one likes to pay taxes.

Some are saying that if Barisan Nasional were replaced with Pakatan Rakyat then Malaysia would be able to abolish taxes. This is not true and is a fallacy because no country that changes its government abolishes its taxes once the government is changed. The new government also needs these taxes to be able to run the country.

Malaysia’s GST is not an additional tax but a replacement to the old taxes. And this means now more people would pay taxes and what you pay depends on how much you spend. So the more money you have and the more money you spend the more taxes you pay.

About 160 countries have this form of tax so Malaysia is not the only one nor is it the first to implement it, whether it is called GST or VAT. Can all these countries be wrong?

In Singapore and Thailand you pay 7%. In New Zealand it is 15% and 10% in Australia. In Canada it is 5% and in all these countries it attracted a lot of controversy and debate as well.

In the EU countries it ranges from 15% to 27% and in countries like Indonesia it is 10%, Japan 8%, Mexico 16%, Philippines 12%, China 17%, Israel 18%, Morocco 20%, Pakistan 17%, and so on.

Hence at 6% Malaysia is probably amongst the lowest in the world.

Just as is true of most Asian countries, in Malaysia the wage earner pays tax while the rich have all sorts of ways to avoid or evade tax. Only about 1.7 million of the 11 million registered workers are registered taxpayers. Furthermore, foreign workers who do not pay tax send home billions every month.

Now even the rich would have to pay tax and the richer you are the more you pay because the rich would spend more, plus those who have thus far had a free ride now need to contribute to the tax coffers.

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