GST maybe a ‘saviour’ to Putrajaya but for Sabah it is a grievious dilemma

GST maybe a ‘saviour’ to Putrajaya but for Sabah it is a grievious dilemma 16/6/16 Lets assess how Goods and Services Tax (GST) had been treating you as a consumer since 1st April, 2015. Are all consumers happy to be paying GST on top of the normal income tax and other taxes? There are certain quarters who had been protesting in the open about GST and its implementation when the Government is not ready to do so. Certain groups would be affected one way or another for all consumers be they income tax payers or otherwise prior to GST when GST is chargeable on all/most items to the consumers. Is GST fair or not when Income taxes for individuals and companies have largely remained so as before GST? GST is a very broad tax scheme across the board of almost all consumer items at a fairly high starting rate of 6% although there are some zero and some exempt rates making a total ball game in the way business is done with greater recording procedures to be applied. Many trade/private transactions previously not subject to any tax are now chargeable to GST even for some commercial properties owned and transacted. I hope some proper research be done with the implementation of GST as how far it has impacted business specifically and generally? I think it is timely that such research be done now we have more than one year of GST in Malaysia so that adjustment be done with the rates and the way of the implementation of GST. We really need the feedback from the Royal Customs Department (RCD) and the consumers at large and the tax agents concerned. At the initial stage, RCD was very concerned with the numbers of business establishments to be registered with RCD and the hefty penalties levied for failure to register their qualified businesses. Massive GST collections at variance The government has collected a total of RM27.012 billion through the Goods and Services Tax (GST) from April 1 to Dec 31, 2015, said Prime Minister Datuk Seri Najib Razak as reported in the mass media. Najib, who is also the finance minister, said Malaysia’s economy is able to remain stable now due to the GST, adding that its collection to January, 2016 amounts to RM51 billion. So how do we reconcile the two figures within such a short time? RCD also spent less than RM1billion for all the programmes and incentives with softwares in preparation of the implementation of the GST in April, 2015. It is interesting to note that Malaysian Institute of Accountants is organising a nationwide seminar on the “Latest Customs audit findings, accounting entries and problem solving” possibly to smoothen the implementation within two years. Prices gone up Whatever the Government may claim that GST is not a burden to the people, but what had been observed generally is that prices of most goods and services had gone up quite significantly within the last eighteen months. Some prices had gone up as much as 40% and while certain items have gone up more than 100%. When prices have gone up to such unsustainable levels, what do consumers do to help themselves when individual budgets have shortfalls? Lifestyles and standard of living is sure to be adversely affected. The Government may argue that it had provided BRIM for the poor, but many consumers believe that BRIM at the present level annually is inadequate to address the gap of extra expenditure where GST is levied. So most consumers would have less and less disposable income for the basic and essential items when the low income remains low for certain groups of people. Who do we blame for the sudden upsurge of the prices level? Most businesses incur much expenditure to be GST compliant and hence are forced to pass on such expenses to the end consumers. Even many Government agencies, local authorities and related bodies do mark up their prices on their fees drastically causing consumers to pay much more for the essential services and products offered by them. The seminars that are likely important and compulsory are now priced much higher than that of the pre-GST period. So has the Government turned a blind eye to such “immoral”/burdening activities? Sometimes such high fees are not revenues to the Government and God knows where have such fees and charges gone to? In addition to the hefty price increases all round for all the consumers and business establishments following the especially with the introduction of GST and partial/full reduction of subsidies for certain essential items, the other worrying aspect is the hefty penalties of GST for a range of offence for registered companies of up to RM50,0000 for each item. Such penalties so paid would be steep burden for the business community and likely passed on to the consumers at large or such companies could go out of business in the worst scenario. Penalties I would like to add that there had been plenty of penalties or compounds for the taxpayers and business communities in many ways. Have such penalties possible in tens of Billions Ringgit over the decades as collected being used in any free programme to educate such offenders to upgrade them to be more knowledgeable and well versed/improvement in their daily operations? Or were such penalties being used for other allocations which can be less beneficial or even wasteful? Is there any policy of the Government that zero penalties be achievable? Is there any index of the penalties to monitor such scenario? All these penalties or compounds add up to a substantial amount of costs of doing business. Sabah is sort of double taxed Now we come to Sabah case. The Chief Minister told the State Legislative Assembly on 23 November, 2013 that State Sales Tax (SST) of 15% be retained as a State revenue and he specifically stated as this and quote: “The SST is imposed on crude palm oil, slot machines and lotteries.” But is this the true position when SST was imposed on all local manufactured items prior to GST? Many parents are also feeling the financial pinch when school materials such as text books and exercise books are subject to GST now making big families real tough to keep it up for the education of their children in addition to put adequate food daily on the dining tables. So how could such scenario affect the education of their children when the bread earners cannot make ends meet? Ironically, such school materials like exercise books and pencils etc are items for the consumers at large, hence not likely to be exempted or zero rated. So the State and Federal Governments have to find ways to reduce such burden to young families. So I certainly think that the research of the impact of GST in Sabah being the second poorest state if not the poorest in Malaysia should bring to bear on the Federal Government to implement a slightly different approach in Sabah and possibly Sarawak in the context of GST. Development Gaps to be addressed The following undesirable status must be given serious consideration when the Prime Minister recently acknowledged the development GAPS in Sabah. 1. Sabah and possibly Sarawak be given the chance to catch up with the Peninsula Malaysia with a zero rate in GST until 2019 when industries can catch up or upgrade and better develop in the Borneo States as GST system would be an impetus to promote greater industrial development but we are very much behind in that aspect hence GST at 6% can be a hindrance to develop a range of industries to be competitive. Is GST in Sabah a legal tax constitutionally without the State Assembly passing a bill on it? 2. The important and strategic port business can be the catalyst to growth in Sabah when the Sabah ports faced a downturn in revenue from the introduction of GST in 2015. 3. Sabah still retains SST meaning some sectors are doubly taxed and such taxes are really borne by the already burdened consumers. 4. It is learned that the national fiscal system is no different even after GST as far as Sabah and Sarawak are concerned in the distribution of allocations in annual budgets and 11th Malaysia Plan (2016-2020). Why is 40% of GST collected in Sabah not coming back to Sabah. If there is no system in such identification when many international companies operating in Sabah account for their GST nationwide in Kuala Lumpur, Sabah is the worst loser here when distribution of the financial resources/revenue is done as distorted revenue collected. 5. Sabah is still “dreaming” of the MA63 pledge/promise of 40% revenue in Sabah back to Sabah for decades (can be up to arrears of RM100b) and the dilemma is of course the national infrastructure on revenue and expenditure very much centralised cannot identify Sabah’s portion for the past decades. Even MAS, the national airline operating out of Sabah once claimed in the earlier years to 1990s that it did not make a single cents out of Sabah sector despite very high flight charges. Without separate accounting for Sabah operations, how could such statement be made? Now is Air Asia making much from Sabah’s sector? The Federal Government has always claimed that it has incurred much expenditure in running Sabah but I would like to remind them that costs of collecting revenue are irrelevant in this aspect. The revenue collection could have been left to local people to do at a saving while Borneonisation is also fulfilled. 6. Nothing much to boast about Pan Borneo Highway as it is long overdue. 7. The security of Sabah also the national security even with ESSCOM is not much better for the genuine citizens of Sabah as the messy history of complicity is very much exposed. GST have brought much headache to many in Sabah especially for the sudden implementation and maybe more suffering would come when RCD starts its monitoring in desk/tax audits and investigations in a few months time. In such process, Sabah’s economy could be very much challenged as exacerbated by GST when oil and gas may not look so good with many substitutes in energy in advanced stage of development including cars to be driven by hydrogen in water. Maybe the development gap may remain and even be wider still. Positive development on the seven items above and several more need special and specific attention and action now. The Governments especially the State Government cannot be complacent and lax anymore. Joshua Y. C. Kong, Former Deputy President of Consumer Association of Sabah & Labuan FT