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GST: Heavier burden for low- and mid-income households

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Why GST when the amount of money that can be raised from this tax is paltry compared to the money lost in corruption, wonders Steven Sim.

Cartoon courtesy of cartoonkafe.com and Merdeka Review
Cartoon courtesy of cartoonkafe.com and Merdeka Review

Yesterday, MCA’s Chua Tee Yong voiced his support for Umno’s goods and services tax (GST) agenda saying that GST is good because it will “redistribute wealth from the rich to the poor as the higher income is expected to pay more GST”.

I have said from the first day that GST on its own is not the problem. But to implement GST now is untenable, given the situation of our country where only 20 per cent of households are paying income tax and 80 per cent of households are receiving government handouts in the form of BR1M, coupled with a deeply entrenched and rampant culture of corruption in the government which costs the country tens of billions of ringgit in tax payers’ money.

In May, Idris Jala said that the new revenue raised from the GST is important so that the BN can implement its political agenda. This political agenda will cost us dearly. My colleagues in the Penang Institute have shown recently that GST will hurt those from lower- and middle-income families more than those from the higher-income ones.

Based on the Household Expenditure Survey in 2010, household income/expenditure curve, and taking into account the exemption on essential items, they found that the highest earning households with an average monthly income of RM30,815 pay 1.56 per cent GSTI (GST as a percentage of income), while the lowest earning households with average monthly income of RM605 pay 2.62 per cent GSTI.

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Mid-level income households, those earning about RM2579 a month, pay 3.07 per cent GSTI.

In other words, the poor and the middle-income households will be more heavily burdened than the rich if the government implements GST.

The latest Auditor-General report showed that we lost RM6.5bn due to corruption and wastage. The report only surveyed a fraction of the government’s operation. To have a better picture, in 2009, the Auditor General said that the country lost RM28bn a year due to mismanagement.

How much will the GST raise? If set at 7 per cent, it is estimated to raise RM7.5bn. This amount is paltry compared to the money lost in corruption. Why GST when we should be curbing corruption? What is the guarantee that the money raised from GST will be “distributed to the poor” and not again lost to corruption?

Chua Tee Yong should not mislead the people just to help Umno realise its GST agenda to squeeze more money from the people.

Steven Sim is the Member of Parliament for Bukit Mertajam.

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