Following the suspension of the six percent service tax on prepaid SIM card packs and reloads, Pakatan Rakyat now wants the government to scrap the tax and all telecommunication companies to be punished for price fixing.

NONE In a statement issued today, DAP national publicity secretary Tony Pua (left) accused the telcos of collusion and price fixing in breach of the Competition Act 2010.

"...the real issue at hand is the blatant and coordinated attempt by the telecommunication companies to raise prices concurrently, contemptuous of the competitive spirit," he said.

Last Thursday, all four telcos - Maxis, Digi, Celcom and U-Mobile, said in a joint statement that purchases of prepaid reloads and prepaid starter/SIM packs would be charged a six percent service tax, effective Sept 15.

The service tax which was increased by the government from five to six percent this year has been absorbed by these companies since 1998.

The announcement sparked a public uproar which prompted the government to intervene, and the telcos eventually agreed to suspend it pending discussions with the Malaysia Communications and Multimedia Commission (MCMC).

Although Pua admitted that the telcos had every right to decide whether to absorb or pass on the service tax to consumers, the fact that the statement was issued jointly meant these companies were colluding to increase the prices of their services concurrently, to increase the profits for all parties, without fear of any of the companies keeping lower prices to eat into the customer base of the others.

It was clearly against the Competition Act 2010, he said, which specifically bans anti-competitive agreements including price fixing, import cartel, bid rigging, territorial allocation, limiting production, market sharing.

Financial penalties

According to the MP for Petaling Jaya Utara, the anti-competitive agreements will be subject to financial penalties of up to 10 percent of the worldwide turnover of the enterprise over the period during which the infringement occurred.

"There is no question that the joint statement and attempt by the four telecommunication companies to raise prices by the same percentage concurrently is illegal because they are colluding to form a cartel for the purposes of price-fixing."

Although the act will only take full effect from 1 February 2012 onwards, Pua was of the view that the government, particularly the Ministry of Domestic Trade and Consumer Affairs, must take a stern position and warn the telcos in no uncertain terms that their anti-competitive behavior will not be tolerated.

NONE "The government must act to prove that the Competition Act will have teeth to protect the ordinary consumers and not be trampled upon at will by Malaysian corporate giants."

On the same issue, PAS youth chief Nasrudin Hassan ( right ) urged the government to abolish the tax instead of suspending it.

The movement wanted the government to adopt a more effective taxing mechanism which will not burden the users from the low-income group.

"If this tax system is allowed to continue, the groups that would bear the brunt of it would be youths, students, and low-income people who are now burdened by rising living costs.

"PAS youth also opines that the direct impact of this tax to the consumers is same as the impact of goods and service tax (GST) which will be introduced by the government soon," said Nasrudin in a statement issued today.

Quoting analyses from investment banks, he pointed out that the impact of absorbing the six percent tax to the telcos is negligible because it will only reduce their profit by one to four percent.

"Hence, PAS youth urges the government, which is responsible to introduce and collect this tax, not to profiteer from the usage of technology which is an inelastic demand.

"We hope the six percent service tax will be abolished in the coming 2012 budget, as a symbol that the government cares for the youth," he said.

Should the BN government fails to scrap it, Nasrudin added, Pakatan would be able to do it if it is elected into Putrajaya in the next general election under the concept of welfare state spearheaded by PAS.

Expect to pay prepaid service tax after GE