Think tank Penang Institute has rebutted Minister in the Prime Minister’s Department Datuk Seri Idris Jala’s claim that the Goods and Services Tax (GST) will mostly affect the rich.
The institute tabulated figures from Bank Negara’s estimates of income and expenditure, and revealed in a study that the GST will instead strain the finances of the middle-class, youths and the poor.
It is a regressive tax, according to the institute, "a tax that takes a larger percentage of income from low-income groups than from high-income groups".
The study showed middle income households will "suffer cash outflows of up to RM 1,123 per year, because of GST payments exceeding income tax savings".
But the worst hit households are those earning about RM2,500 a month, including technicians, clerks, services workers, farmers and fishermen. They are expected to pay 2.67% of their income in GST.
And when the tax comes into effect on April 1, 2015, those residing in West Malaysia as well as single-person households are expected to bear a bigger brunt of the tax at 6%.
On low income households, the study showed that 2.35% of their income will be toward the GST, while high income households – those with an average monthly income of RM 30,815 – will bear only 1.32%.
Idris, who is also Chief Executive Officer of The Performance Management and Delivery Unit (Pemandu), said last month that the tax would affect mostly the rich as they are heavy consumers.
The poor, he said, would suffer less since they receive the Bantuan Rakyat 1Malaysia (BR1M) aid, and most necessities would be either zero-rated or exempted from the GST. These include basic food items, public transportation and education.
Putrajaya’s decision to introduce the GST in its Budget 2014 last month is part of the government’s efforts to reduce its deficit to 3.5% of the growth domestic product (GDP) by 2014.
Malaysia has a debt-to-GDP ratio of 53%, close to its debt ceiling of 55%. – November 8, 2013.
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