Friday 29 Mar 2024
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KUALA LUMPUR (April 7): The Edge weekly in its latest edition reported that it might be natural to think that the Goods and Services Tax (GST) is regressive, where the burden on the poor is heavier since they pay the same amount of tax as those who earn a lot more. And it is hard to escape the tax net.

The reality, however, could be different, it said its cover story.

The Edge’s Samantha Ho and Esther Lee wrote that granted, the bottom 40% of the population (B40) are adversely affected by the extra tax that was introduced in April 2015, but they may not be the hardest hit.

The magazine explained that the B40 have benefited from various forms of aid, such as cash transfers under the 1Malaysia People’s Aid (BR1M) and a special one-off cash assistance for BR1M recipients in 2015 during the “GST transition period”.

It added that on top of that, more than 20 different food groups and basic necessities have been zero-rated, making the list of GST-exempted supply the longest in the region, if not the world.

“We can’t definitively say that the B40 are worse off because of GST since the list of zero-rated supply makes the tax less unfair to them,” says Adli Amirullah, an economist with the Institute of Democracy and Economic Affairs told the Edge.

He opines that the list is enough to cover basic necessities that must remain affordable for the B40, such as livestock, meat and poultry, fish, salt, cooking oil and rice.

Moreover, says Adli, compared with the middle and high-income earners, the B40 spend a significantly larger portion of their income on food and non-alcoholic beverages, the prices of which have shown no discernible spike since GST was implemented (see chart).

Meanwhile, according to Customs Department Director General Datuk Seri Subromaniam Tholasy, internal studies done before the implementation of GST showed that low-income households spent 33% of their monthly income on “basic food” compared with less than 9% for high-income households.

“The zero-rated supply list has taken care of the low-income earners,” he tells The Edge. “Some 67% of their consumption is not taxed. For example, we don’t charge GST on water or on the first 300 units of electricity.”

However, others have different views on the matter.

For more on what other experts say on this issue, read the Edge for the week of April 9 – April 15 available at newsstands now.

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