Rich will pay more GST, says Idris

Unlike what critics claim, it is the rich who will be the most affected by the Goods and Services Tax (GST) as they are the ones who consume the most, said Idris Jala, the Minister in the Prime Minister's Department.

In a blog-post today, he said the poor will only see “minimal impact”, as essential items are either zero-rated or exempted from the GST of six percent which will come into effect in 2015.  

“There will be no longer the requirement to pay both sales tax (up to 10 percent) and service tax (6 percent) upon implementation,” he said.

Critics have said that the GST is a regressive tax that will penalise the poor more, as those in the lower income consume more of their income compared to the rich.

While the rich may pay more GST in absolute terms, the poor will pay more in proportion to their income.

Critics have also argued that the GST will impose tax on 80 percent of Malaysian households who now do not earn enough to pay income tax.

Idris said that, with the GST, the government can reduce corporate and individual income tax, and review the latter to take into account the “grouses of the working class”.

In tabling the 2014 Budget in his capacity as finance minister, Prime Minister Najib Abdul Razak said income tax will be reduced by 1-3 percent in tandem with GST implementation.

He also said that removing the sugar subsidy will mean that government can better target subsidies to those who need it the most.

The government is also showing restraint in expenditure with the 2014 Budget seeing a modest increase of less than two percent compared to 2013, he said.

“The government is not on a spending binge,” Najib had added in tabling the budget speech in the Dewan Rakyat on Oct 25.