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GST will allow Umnoputras more 'Disneyland' trips

The Malaysian public is not fully aware of the implications of the goods and services tax on the ordinary people. The GST is a multi-stage tax system. Everything the sellers sell - from manufacturer, wholesaler to retailer - collect GST for the government. The current sales and service tax  (SST) is a single-stage tax. Only one party along the supply chain collects  the SST for the government. If the manufacturer collects the tax, the rest are not allowed to collect.

As an example the current sales tax for toilet soap is 10%. With GST, the manufacturer pays 4% to the government;  he then sells to the wholesaler, the wholesaler pays the government another 4% when he sells to a retailer and when the retailer sells it to the consumer, he pays another 4% to the government.

The consumer actually ends up paying more than 12% in cumulative GST for the same piece of soap or 20% more in taxes. (10% vs 12%+++). If the supply chain is longer than the three stages mentioned above , the consumer ends up paying 4% more for each additional  stages. As an example, from the manufacturer to the agent (4%) to the wholesaler (4%) to the retailer (4%) to the consumer (4%).. Total 16% ++++ (vs 10%) or 60% more in taxes.

As the former Research Officer of the Selangor Consumers Association, this is a very important issue for me and the people. The peoples’ money is completely abrogated by the government for its expenditure. The socio-economic impact on this will be very high on the ordinary citizen. The government has been very cunning in saying that it will disallow the GST from the basic foodstuffs and basic services such as water, electricity and telephone. It is again lying that the ordinary people will not be affected by this syndrome.

As an example, presently a kilogram of good tomatoes costs RM1.50 and during rainy season it may even cost RM4.50.  The government’s consumer affairs ministry did nothing to work out a possibility of a price ceiling. Tomatoes are very much used by almost every race in Malaysia.  For the present, the supermarkets and the ‘pasar malam’ and wet market stalls buy them from the small farmers in Cameron Highlands.  But this will not continue to be the same for the next five years.

Let us assume that a conglomerate (‘SD’) looks at tomatoes as an economic items. There are 350,000 families in Malaysia. Right now, each family uses for tomatoes RM3 per month x 12  = RM36 on the average and this with the 350,000 families x RM36 = RM12,600,000. Let us say SD produces the tomatoes and controls the cartels.

It then increases the price of tomatoes to the wholesaler by 10% because of rising fertiliser prices and water (although it is free in Selangor). It sells to the wholesaler at a price of RM1.20 at a profit  of  20 sen per kilo. SD pays approximately RM5 per kilo as GST to the government  and the wholesaler now sells to the market stall or supermarket at  a profit of 20 sen ie, RM1.20 + 0.20 sen +0.56 sen  (GST paid to government). He will collect the 0.56 in GST from the market stall or pasar malam seller. The market stall or pasar malam seller will now sell it to the consumer for a profit of  20 sen  ie, RM1.60 with a GST of 0.8sen.The price has to increase by 10 sen so that consumer pays 0.8 sen extra as GST for a kilogram of tomatoes.

The government makes about 20 sen for every RM1.60 kilogram of tomatoes. Do you think this is fair for a person who earns about RM1,500 per month with three school-going children? Do you also think the government is also fair to the poor people in the country?

Middle-class people who buy cars from  foreign companies such as Toyota must have already paid for the approved permit for some Umnoputra. The car is then released to the distributor who must pay 4% GST for the RM100,000  new car ie, RM4.000. This goes to the government. The distributor sells the car to the car sales company with a profit of RM20,000. The price is now RM120,000.

The distributor pays the government  RM4,800. The car seller sells it Mr Chua (an imaginary buyer) at a profit of RM10,000. The price is now RM130,000 for Mr Chua and he pays the government GST of RM5,200. The government can easily collect about RM15,000 via Mr Chua.

I will ask the readers to check on the calculations and correct me if there are mistakes and also bear with me. This is a very sensitive issue and it is also a very important issue for our future. Parents have to pay more to keep the government in place. By this very GST, many people will enjoy their allowances, perks and the ostentatious trips overseas. But many people, especially the very poor people, will find no answers for their future.  

But if the opposition is strong and sincere about their role and responsibilities, they will take up this issue vehemently in Parliament and ensure that the government does not bulldoze the policies of the International Monetary Fund at its whims and fancies. But the opposition has lost its colour and its direction.  

It simply means that Anwar Ibrahim has not been able to provide the kind of leadership we need to form an alternative government. He is a great man and a great leader. He has to now prove it.

The suppression of other people’s views  by the so-called ‘Party Rakyat coterie’ within PKR and  Pakatan Rakyat appears to be  an impediment to evolving a much wider policy.

Leaders within PKR such as Dr Syed Husin Ali, Sivrasa Rasiah,  Tian Chua and Elizabeth Wong have very much retained their Party Rakyat roles. Its old peasant-based socialist ideology has never been welcome wthin the ‘reformasi’ movement. There has been more activism and less of law-making. Zaid Ibrahim must speak out with Chua Jui Meng if they are sincere in making Pakatan Rakyat an entity for the future.

It is time that Anwar Ibrahim rolls up his sleeves and gathers his old stalwarts and clean up the Pakatan headquarters and bring through the identity of ‘reformasi’. People are looking for change. It must given with new hands. You cannot simply pass the time with the Party Rakyat fellows anymore than you did.

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