Pakatan Rakyat leaders have been harping and pleading to the Barisan Nasional government to postpone, stop or suspend the plans to implement of the Goods and Services Tax (GST) over the past 2 years. One of the key reasons often cited is the inevitable inflationary pressures which will result in significantly higher cost of living resulting in higher burdens for the rakyat in an already difficult economic environment.
The various Ministers in Parliament will often reply with the astonishing claim that the GST will result in very marginal increase in overall prices. They even argued that most products will actually face a drop in prices as a result.
When winding up the debate for the GST Bill in 7 April 2014 last year, Deputy Finance Minister, Datuk Ahmad Maslan had proudly declared that
…daripada 689 barang yang dibuat kajian, 73 barang atau 10% naik. 329 barang atau 48% tiada perubahan dan 287 barang atau 42% turun harga.
However it appears now, a day before the GST is to be implemented, the Royal Malaysian Customs is in a state of panic over the significant price hikes Malaysians will be facing upon the implementation of the GST.
Customs Director-General Datuk Seri Khazali Ahmad decreed yesterday that businesses must not increase profit margins for the next 15 months following the introduction of the GST. Khazali warned that those who flouted the moratorium will be penalised.
“So, for example, if their profit margin was 10 per cent, they cannot increase that for the next 18 months from January this year,” he said.
The Director-General is spewing complete and utter nonsense when for the first time ever, we hear that the Government is planning not only to control prices of certain basic goods, but now also on the “profit margins” of normal goods and services.
Datuk Seri Khazali Ahmad seems to have forgotten that we don’t live in a communist country like the Soviet Union or the Mao Tze Tong China of the past where the Government controls all prices and profit margins. With the exception of price-controlled items, which are zero-rated anyway, there are no laws in Malaysia which tells a business how much profit it can make.
Why should a poor makcik who operates a warong be penalised for increasing her teh tarik prices by 20 sen when tycoons operating hotels get away with charging an exhorbitant RM18 for the same drink?
Datuk Seri Khazali’s warning is not only unlawful, it is conceptually ridiculous and worse, impossible to administer. How would the Customs officers even be able to determine the cost of the products after taking into account the shop rentals, labour cost and service quality when attempting to “measure” if there has been an increase in “profit margin” which is deemed punishable?
Malaysians are doomed and resigned to significantly higher prices today – as can be seen by the mad rush to purchase pre-GST goods over the past week by Malaysians throughout the country. However, the fault doesn’t lie with the traders. Most of these small businessmen have no choice but to increase prices even beyond the 6% GST imposed purely because the cost of doing business has increased significantly.
They have had to invest in new GST-enabled accounting software systems as well as hire new and additional staff to cope with the tax-administration work. Unless the Government intends to let all these companies reimburse their cost of GST “upgrades”, surely they would have a right to at least recoup their operational cost which was forced upon them?
Instead the fault lies squarely with the ignorant and obstinate Cabinet Ministers who refused to listen to logic and rationale, but insisting on believing its own incredulous study which claimed that only 10% of goods and services will face a price hike, while a whopping 42% will actually enjoy lower prices. If the prices of 90% of goods will indeed remain lower or unchanged as promised by the BN Ministers, then why is it that the Customs Director-General so worried now that street prices will hike significantly starting tomorrow?
Instead of threatening the man on the street trying to eke out a living in a difficult environment, Datuk Khazali should instead focus his task on ensuring that whatever new taxes which have been imposed are collected efficiently and ensure that there are no tax evasion among the big companies as well as no fraud which will cause massive losses for the Malaysian government.