Enough is enough blame BN Government and mismanaged GST

Enough is enough blame BN Government and mismanaged GST

What DPM  Zahid said can be construed as fake news and I quote  “The rise of market prices were not caused by the Goods and Services Tax (GST) but the actions of middlemen and “cartels” who manipulated prices for their own gain.”

It is useless to deny the fact of GST that had given rise to general rise of market prices when that is known and obvious.

BN may even lose General Election 14 due to the lopsided implementation of GST by the Government agency which itself was and still is unsure of the whole process of implementation since April, 2015. Many rules and guidelines had been changed and still changing after three years of implementation of GST. Such changes can give rise to all sorts of costs as far as the software protocols are concerned.   Staff implementing the GST would need to attend regular updating costly seminars on GST and such costs are passed onto the consumers inevitably.

Another expected consequence of GST immediately was that consumers had to assess their capacity to absolve the additional costs of GST as 6% which was excessive as a starting rate. The purchasing power suffer much and as much as a 40% sudden drop in most businesses as reported.  With such decline, many small businesses were forced to close down leaving many employees jobless suddenly. Such scenario does impact the cost of living rising when the Government prior to the implementation of GST was saying GST would bring down the cost of living generally insisting the consumers go for exempt and zero rated items. But exempt and zero rated items also had prices rising simultaneously.  The whole scenario was exacerbated by other factors like the alleged total withdrawal of subsidies on fuel and the system of fluctuating weekly fuel prices at the pumps and the weakening of the Ringgit against all major currencies especially wages and income for most people had been stagnant..

Actually GST is a progressive system in the management of the affairs of all companies to be appreciated as it can upgrade the reporting process of properly operated businesses.  There are many softwares in place to assist companies to do that unlike in the early days of UK implementing VAT or GST using largely manual systems. I had just arrived in London in the early 1970s when VAT was first introduced there.   I was an accountancy student working in between full times courses.  There was not much complaints about VAT and the enforcement was quite lenient and accommodating in the teething problems then.

The Malaysia experience is “frightening’ with the GST Act loaded with very heavy penalties and compounds for whatever errors done even unintentionally.  There appears to be no leeway for any errors or simply carelessness in managing GST on behalf of the Government in the collection of revenues. The workload of managing GST is really very heavy, costly and likely abnormal.

Now the Government wants to “excuse” itself for the rising costs and prices mainly due to GST but when BN loses GE14, the government may blame GST/VAT as seen in some countries as the root cause for change of Government. The grievances are aplenty in three years so much so that some political parties want to withdraw GST once in Putrajaya. 

Withdrawing GST would be short sighted effort and a major disturbance to the economy as readjustments would be costly back to SST. Prior to 2015, I had advocated for a low starting rates as 2 or 3% for Peninsula and zero rate for Borneo States for 5 years as a learning and adapting period. Now it is all foregone and beyond redemption as some prices have doubled and more. I know it as I do shopping regularly and there have been no intervention by the Government or any consumer NGOs to monitor prices.

At this stage of this article, it is timely to give some of the key factors for sudden prices increase since GST and there are as follows (not exhaustive):-

1.       The system and the implementation thereof was quite complex thus it was very costly to comply for the relevant/registered companies. The costs of conversion had been substantial and some into a million of Ringgit and more and with little subsidies from the Government in most cases. So such costs incurred were passed onto the ultimate consumers with increases of consumer goods and services. Blame who now?

2.       Costly IT staff working with scarce accounting people to do conversion, training and then manage GST and all costs passed on to the consumers at large.  Penalties and compounds costs would be similarly passed on.

3.        Inevitable inclusion of the input GST albeit claimable at a later stage against output GST due to the timing difference could be treated as costs of production of goods and services due to imperfection in handling such costs ingredients.  Easy for some to buy overheads or raw material goods by the manufacturer with the billing as GST inclusive and no effort to re-calculate such items minus the GST portion. So in such cases GST would be treated several times to cause price increases from the suppliers of  raw  materials to  the end products via a passage of several agents like manufacturers ( including intermediate manufacturers for partial parts/ingredients etc), wholesalers, agents, retailers, before reaching the ultimate consumers.  Is there any audit done on the costs management?  The rate of 6% would really cause a big discrepancy if such mistreatment of costs occur in such processes. Some call it as “24%” in prices escalation.

4.       The Sabah factor is giving rise to more adverse impact on the purchasing power of the Sabah’s consumers as there is great disparity of Borneo with Peninsula Malaysia with various aspects like level in industrialisation, wealth distribution, backwardness in all infrastructures, lacking higher education, health facilities status and yet Sabahans have to pay same rate as 6%.  Sabah is more of consuming society rather than a producing nation hence we are at a great disadvantage economically.  Sabah should have more items in zero rates if not at zero rates for most consumer items like processed food. This would bring some relief until Sabah catches up the rest of the nation in various industries for a period of 5 years until we go on stream in competitive economy in industries. To add more disadvantage, Sabah still have to pay Sales Service Tax  of 15% as was done prior to GST.

5.       Is the Federal Government really sincere to honour the terms of MA63?  Lets say for the 40% of revenue of Sabah or for the past few decades to be returned may encounter calculation problems due to lack of data for that purpose, but for GST since 2015, has any amount of 40% has been returned to Sabah to bring some relief to the burden/adjustment of people of Sabah?

Does the Government really care or show any concern about the livelihood of the people of Sabah in the face of risen prices when the consumerism is very weak in Sabah?  Maybe only lips service to that aspect.

Cartel has been with us for decades but why blame it now and so it is fake news when most prices had been increasing in recent decades and with GST such prices were expected to decline but misplaced by the Government with fake messages for decades.

Joshua Y C Kong, 5 April, 2018