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UN report: M’sia’s poorest households worst hit by GST

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Lowest-earning households are worst hit by the Goods and Services Tax (GST), a United Nations report said.

Malaysia’s Millennium Development Goals Report 2015 was jointly released by the Economic Planning Unit of the Prime Minister’s Department, in Putrajaya today.

According to the report, households on the bottom 40 percent (B40) of the income spectrum make an average RM2,537 in 2014, a rise of 12.8 percent since 2009.

However, expenditure has also caught up, with the average B40 household spending RM2,015 of their monthly income, or 79 percent of their income.

The GST, introduced at six percent last year, shaved much of what little savings the B40 households can make, it said.

“With the GST at six percent in early 2015, the bottom 40 percent household income balance would be reduced to RM400 from RM522 previously.

“As the GST affects all households equally, those at the lower end of the B40 spectrum will feel the effect more than those in the upper parts of the spectrum,” it said.

There are 2.7 million households that fall in the B40 category.

Critics of the GST have long argued that the consumption tax is regressive, as it penalises lower income households more than their higher income counterparts.

This is because lower income households spend a higher proportion of their income.

However, the government argued that welfare aid like Bantuan Rakyat 1Malaysia negates any regressive effects on lower income households.

The Customs Department collected RM30 billion in GST revenue as at Dec 31, 2015.

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