Cabinet Minister Idris Jala's argument that it is the rich who will pay the most in the Goods and Services Tax (GST) does not meet internationally accepted measurements on taxation, a think-tank  maintains.

According to the state-owned Penang Institute, it is international practice to measure the impact of a tax on income groups by looking at tax paid as a proportion of income, and not at the tax paid in absolute terms.

NONEIn a statement, its fellows Lim Kim Hwa (left) and Ooi Pei Qi said that this is also the method used by the United States tax administrator, the IRS.

"Indeed the IRS defines a regressive tax as "a tax that takes a larger percentage of income from low-income groups than from high-income groups.

"This also adopted by the Macmillan Dictionary and the Collins Dictionary. Hence, a tax is measured relative to income levels to determine the impact of the tax on the rich vs. poor," they said.

Their research found that the GST is regressive, and that cash aids like the Bantuan Rakyat 1Malaysia (BR1M) do not truly cushion the lower and middle income classes, as argued by Idris.

This, despite taking into account spending on items which are GST exempt or zero-rated.

Middle-income worst hit

Using Bank Negara and Statistics Department data, they found that the "worst hit" - those earning RM2,500 per month-pay 2.67 percent of their incomes in GST.

"The lowest income households (with average income of RM605) will pay 2.35 percent of their income in GST. However, the highest income households (with average monthly income of RM30,815) will bear only 1.32 percent GST burden," they said.

But when the BR1M and savings from the new income tax structure is concerned, they said, it is the middle income which bears the brunt.

Low income households are better off by up to RM488 because of the BR1M, while the highest income households will have an extra RM3,127 cash in their pockets.

"The middle income households will suffer cash outflow of up to RM1,123 per year, due to GST payments exceeding income tax savings," they said.

The middle income households are defined as households earning between RM30,000 to RM150,000 a year.

Idris, in supporting the GST, said the rich will pay more GST as it is a consumption tax, while the poor will face "minimal impact" as essential items are zero-rated or exempt.

He added that the implementation of the GST allows the government to heed the "grouses of the working class" by reducing the personal and corporate income tax by 1-3 percent according to income brackets.