GST should not be reintroduced, impose CGT instead

Mohd Jamizal Zainol


LETTER | The debacle on the GST resurfaces after Dr Mahathir Mohamad responded that GST may be reintroduced again should Malaysians ask for it. Even though it is cynical but the argument of whether the GST is a good tax is neverending.

To me, the GST is a regressive tax and against Islamic principles. Regressive in the sense that it taxes on consumption instead of on income and profit. It against Islamic principles because it does not conform to zakah (almsgiving) concept when zakah is only obligated on Muslims when our wealth reaches a certain minimum limit.

Based on that, I am of the view that a tax system should be fair. It is only considered fair when it derives from profit or income of the person. It is unfair to tax based on consumption because there is no profit or income made from consumption. 

How it is considered fair if a mak cik who buys groceries for her daily use and sustenance for her daily wellbeing is taxed? No reasonable person could accept this as fair.

There is the argument that developed countries have implemented the GST so why not Malaysia? I think this argument is flawed because Malaysia is still a developing country. The household income in developed countries is very much higher compared to Malaysia. For example, the household income in Finland is US$24,000 in 2016 as compared to Malaysia is RM5.226. There is a huge gap and hence in developed countries, they might have extra income to be taxed on by the government.

There might come a question of what tax regime is appropriate to be implemented in Malaysia. To my mind, as a developing country, Malaysia should produce more. To produce more, the government should encourage producers to flourish by imposing a minimum tax. Having a minimum tax encourages industries to flourish and as a result, more producers can pay tax.

The tax rate does not reflect tax revenue. There are differences between these two concepts. It is a misconception that by raising the tax rate, tax revenue will increase. In fact, raising the tax rate will keep producers away and kill industries. As a result, the government’s revenue will be impacted and heavily reduced

As a way forward, the government should find an alternative to increase its revenue. I would suggest that the government focus its attention on the super-rich who makes billions from their capital gains. A capital gains tax can be an alternative in place of GST. A capital gains tax only taxes those who gain from excessive profits. All reasonable persons reckon this tax is fair and just. 

Sometimes by having clear philosophy and fundamentals, we can find solutions to problems.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

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