MCA backbencher Chua Tee Yong, MP for Labis was reported in the press as supporting the proposed goods and services tax (GST) saying that it “can redistribute wealth from the rich to the poor as the higher income is expected to pay more GST”. (http://www.malaysiakini.com/news/244737)
I would like to point out that Chua’s statement is without basis.
Low- and mid-income households affected most
In a recent research done by the Penang Institute, we have shown that GST is actually a regressive tax.
Based on the Household Expenditure Survey in 2010, household income/expenditure curve, and taking into account the exemption on essential items, we found that the highest earning households with an average monthly income of RM30,815 pay 1.56% GSTI (GST as a percentage of income), while the lowest earning households with average monthly income of RM605 pay 2.62% GSTI.
Mid-level income households, those earning about RM2579 a month, pay 3.07% GSTI.
It is obvious that the GST will affect low and middle income households more than the high income ones.
The households most affected by GST in terms of paying higher GSTI are, single-person households, young households (less than 24 years old, Bumiputera households, those in Peninsula Malaysia, and those working as clerical workers, skilled agricultural and fishery workers.
| Monthy expenditure bracket | Average Monthly Expenditure (RM) | Average Monthly Income (RM) | GST against Expenditure -GSTE (%) | GST against Income – GSTI (%) |
| Less than RM500 | 421.06 | 605.49 | 3.03% | 2.62% |
| RM500 – 599 | 594.03 | 867.23 | 3.12% | 2.66% |
| RM600 − 699 | 699.88 | 1031.63 | 3.27% | 2.76% |
| RM700 − 799 | 808.28 | 1203.55 | 3.42% | 2.85% |
| RM800 − 899 | 916.61 | 1379.24 | 3.56% | 2.93% |
| RM900 − 999 | 1022.63 | 1555.17 | 3.55% | 2.90% |
| RM1000 − 1999 | 1590.77 | 2579.15 | 4.01% | 3.07% |
| RM2000 − 2999 | 2620.62 | 5014.71 | 4.43% | 2.87% |
| RM3000 − 3999 | 3691.89 | 7876.98 | 4.63% | 2.69% |
| RM4000 − 4999 | 4784.18 | 11543.41 | 4.71% | 2.42% |
| RM5000 and over | 8084.56 | 30814.8 | 5.04% | 1.56% |
(Source: Lim Kim Hwa & Ooi Pei Qi, “Implementing Goods and Services Tax in Malaysia”, Penang Institute, October 2013)
MCA’s GST criteria exclude dealing with corruption
It is also interesting that the so-called criteria which Chua and MCA set for the implementation of the GST do not contain any criteria to curb corruption and stop the leakages.
My colleague Ong Kian Ming, MP for Serdang has recently estimated that on the basis of the 2012 Auditor-General’s report alone, the government lost RM6.5 billion in wastages. It has to be reminded that the report only surveyed a fraction of government operations and spendings. The 2008 Auditor-General stated that the country lost RM28 billion a year due to various mismanagements including corruption.
At 7%, the GST is estimated to bring in RM7.5 billion in revenue for the federal government. This amount is paltry compared to the money wasted and lost due to bad governance by the government which MCA is part of.
Chua, let’s debate on GST
Therefore, Chua’s argument is wrong and unacceptable. I urge him to retract his statement, otherwise he is obviously trying to mislead the public to support UMNO-BN’s agenda to raise further revenue to sustain the crony economy which they practice.
If Chua does not agree with my statement, I challenge him to an open debate on GST to show that GST is not suitable for the country at this moment.
I urge MCA and BN to take a lesson from Belanjawan Alternatif Pakatan Rakyat 2014 which we launched today where we showed how savings can be done without resorting to GST.