The goods and services tax (GST) will come into play in less than five (5) months and as mentioned previously, strong enforcement is the key to its successful implementation. The Perak Consumer Movement (PCM) is optimistic that a new tax regime will pave the way for a more sustainable economic growth, albeit in the longer term.
It is worth noting that the short to medium term post-April 2015 move needs accountability and transparency at all levels to ensure the efficient execution of GST. PCM is hopeful that the government’s significant allocation for GST monitoring and enforcement efforts in Budget 2015 will help to mitigate the probability of adverse risks resulting from profiteering activity.
This includes empowering the Price Monitoring Unit as well as establishing on the ground squads comprising consumers, village heads and consumer groups to monitor cost hikes, entrusting enforcement agencies to investigate and if necessary, prosecute offenders. Needless to say, these are commendable efforts, only if responsibly rolled-out.
While PCM supports GST, the looming concern stands - government agencies must address the likely inflationary consequences which would directly impact consumers and largely, Malaysia’s economic growth.
In general, the government anticipates the GST to strategically lower costs of at least 50 percent of products as compared to the current Sales and Services Tax regime. However, this will only become a reality if suppliers act dutifully, by passing on all cost savings to consumers.
The arising question is if suppliers will ethically maintain prices of goods and services within approved limits? Can government agencies attest that suppliers and retailers will not profiteer so the rakyat’s well-being is assured?
While big hypermarkets which control approximately 25 percent market share of food products are expected to become price setters due to better business scale, the PCM is concerned over the fate of traditional retailers or shop operators, as suppliers and wholesalers have an upper hand in price negotiations. In turn, consumers will be left to bear price hikes.
Generally, traditional retailers operate on thin margins and are unable to absorb even the slightest increase. So to speak, it is nearly impossible to effectively monitor and/or if necessary support this segment of retailers against the might of irresponsible suppliers as well as wholesalers.
PCM is of the opinion that all complaints on price hikes must be investigated supplier up, instead of retailer down while a public commitment is sought from retailers that cost savings received will be channelled to consumers in the form of price reductions.
PCM is mindful that while a product maybe GST zero-rated or exempt, there are indirect costs involved for the manufacturing of a product, eg transportation cost. This will result in price hikes, most often than not, leaving consumers to grapple with the escalating cost of living. The government therefore must be absolutely clear on mechanics of profit calculations so that investigation can be conducted transparently and effectively.
Indeed, the government must acknowledge the risk of contracting domestic spending if consumer confidence declines due to high inflation caused by suppliers who indiscriminately increase product cost, blaming it on the GST. Certainly, this will have a direct negative consequence on overall gross domestic product (GDP).
DARSHAN SINGH DHILLLON is president of the Perak Consumer Movement.