Villagers residing in rural areas will be most affected by the goods and services tax (GST) if it is introduced in the upcoming Budget 2014, Pakatan Rakyat said.

“The kampung people don’t know about this GST, and they don’t pay income tax. So they will be at the receiving end,” PKR’s Lumut MP Mohamad Imran Abdul Hamid told reporters.

azlanPakatan Rakyat was commenting on the expected GST introduction, saying that it is unsuitable at this time as the bulk of the Malaysian population do not earn enough to pay income tax.

DAP’s Petaling Jaya Utara MP Tony Pua also refuted claims that Malaysia will be backward if it does not implement GST as the rest of Asean, except for Myanmar, has GST.

“It has nothing to do with competitiveness. Hong Kong and the United States do not have GST,” he said.

PKR’s Kelana Jaya MP Wong Chen added that countries like Laos and Cambodia have GST not because they have a sizeable income tax-paying population.

“It is because they do not have an established mechanism to collect income tax, so they are taking an easier route by charging consumption tax. Malaysia has had the Inland Revenue Board for decades,” he said.

Wong added that even if the government decides to reduce corporate and personal income tax in tandem with GST, as practiced elsewhere, it make no difference to 80 percent of the population who do not pay income tax.

Elaborating on the Pakatan Rakyat shadow budget - a summary of which was presented on Monday - Pua said that the only “new tax” mooted is a steeper Real Property Gains Tax.

Review of existing tax structure proposed

Instead, Pakatan is proposing that a committee be formed to review the existing tax structure and address issues pertaining to the limited revenue.

Wong said there is now a problem of tax evasion because “people do not want to pay money to a government whom they do not trust”.

“We believe that with good governance, taxpayers will be more willing to pay, so there will be less need for the GST,” he said.

He added that Pakatan believes that the right time for GST to be introduced is when the average household income is RM4,000 a month.