We start of this series of request to the new government by addressing the GST issue where it is really contradicting to most Malaysians. Knowing that the manifesto by Pakatan Harapan proposes to remove the GST in the first 100 days, we think that going back to SST at 10% would see more inflationary pressures on day to day consumer products.
At the current moment, GST is an addition of 6% to goods but along the way in the middle of the supply chain, GST added inflationary pressure to a product. Meaning to cope with GST and its late refunds, normally people increase prices to cater for this delay.
Since there are many layers before the product reaches a shopper, these ‘added GST delay’ would increase the price of the good before even reaching the end user where the GST should be paid in full without refund.
But replacing it with SST might create adverse effects from the intention.
Abolish & Implementing SST 10%
When a product rises in price, do you see the price going down? Businesses have overheads to cover and annual increase in salary is also decreasing their margins.
Just a simple scenario, when price of diesel went up, we see most people rising price of goods blaming high cost of transport. But when fuel prices declined from the RM2+ to RM1.80 we don’t see prices dropping.
A good example is those operating petrol stations complaining about loss in profits when oil price declined but kept quiet when oil rises. What a hippocrite…
To us, replacing the GST 6% with SST 10% would immediately see an immediate increase in inflation of 4% net off from the SST 10%. The GST implemented earlier had caused an irreversible effect to inflation of goods and services. With GST being abolished, these business operators would just stay quiet forgetting about the ‘added GST delays’ earlier and immediately realizes the opportunity to raise prices again.
SST would create tn opportunity for business operators changing the 6% GST to 10% of SST after its implemented. That is how we got the 4% instant inflationary gain. These happened not because of what type of tax would be implemented but the nature operations by a business would take advantage when a loop hole appears.
We really can’t allow those businesses to take advantage on the rakyat once more with a major change in tax on goods & services.
What We Think The New Government Can Do
(1) Rather than abolishing GST, the government should reduce it by up to 3%. Immediately this corrects inflationary pressures where the rakyat feels a relief on the 3% reduction and the government would still be able to collect revenue and buffer the loss in revenue by abolishment of the GST.
Slowly decreasing the GST rate year after year would see a softening impact to cushion consumer shocks and neglect businesses from taking opportunity with loop holes that are over-looked.
(2) To fulfill their manifesto, the government can re-introduced the SST at 6% or lower. The GST had turned into an ad-hoc tax after such a long time from implementation. The effects on middle chain margins adjustment had stabilized and we think that abolishing it would not affect the chain.
That is why only a lower tax rate on the end user would be able to relief the burden of the people.
(3) If really GST would be abolished and replaced by SST, we hope that the new government would take greater initiatives to curb on businesses who would leverage on this opportunity for profiteering. Good governance is also key in this issue and we wish that this transition is as smooth as possible.