我对消费税的一些建议

顾名思义，消费税实施在个人的消费，而非个人收入，只要谨慎消费，所面对的影响胥视个人的消费幅度。此外，该税制能发挥自我监督的效用，相对于现有的销售服务税和个人所得税制，能减低逃税的机率。

征收消费税肯定将导致我国面临一次性通胀率（once-off inflation）。因此，政府所设定的18个月期限有点仓促。我国经济正置复苏初阶段，4％的消费税会否会对国内消费市场、人民负担到来冲击，及影响企业的资金流动？除了必需品如米、糖、食油和面粉外，政府必须谨慎鉴定其他豁免此税的领域或物品。我国的汽车目前已高幅度征税，再征收消费税而没有抵税措施将为人民带来不必要的负担。同样的，在房产领域，消费税会否让许多首次置业的人民百上加斤？这些是财政部必须正视的。

政府须确保消费税一旦实施，不会为国家和人民带来过大的通胀的压力，相反的要为低收入者提供抵税的措施，以免削弱低收入或大多数中等收入家庭的购买力。

政府也必须确保有关部门和单位严谨监督所有物品价格，以免不法商人重牟取暴利，物价调涨比预期中高。

在实施消费税前，政府须考虑：

1） 配合政治承诺，成立指导监督委员会

消费税是一项庞大的税收措施，委员会必须深入研讨税收对人民的影响、鉴定和拟策解决运作上的问题、拟定商业准则以及监督公众的教育计划。委员会的成员不该只局限于财政部，其代表应概括贸工部、中小型企业局、税收局的成员。要确保相关部门及单位充分配合，该委员会也需要强大的政治承诺的支持以全面进行监督。此外，税务专家和商界领袖的反馈意见也应受正视。

2） 检讨津贴分配制

目前，政府也为低收入群体提供了多项津贴和援助措施，以减轻他们的经济负担。然而，这些锁定受援者并没有直接受惠。例如，政府每年拨款7. 2亿万令吉津贴白米，可惜仍无法确保穷人受惠。

政府也可考虑其他抵税的措施如：（一）降低个人所得税和企业税；（二）削减国产税或进口税；（三）增加公共援助，例如为低收入群体提供直接补贴；（四）提高退休金；（五）降低汽车国产税。

3） 制定简单税制，以避免增加遵则成本（compliance cost）

为避免产生混淆和偏差，政府应设定统一费率。与此同时，为协助中小型企业，当局应考虑只向达到一定收入水平的中小企业征税（例如营业额200万令吉以上的企业）。这是因为并非所有规模的中小企业有所需的会计记录和系统，进行商品服务登记和估税。对这些小型企业，消费税将使他们的营运更复杂。

有关措施将让小型零售商、小商店和小贩豁免消费税，不但间接有助减轻消费税对低收入群体的冲击，也不会破坏政府的亲商政策。

4） 商业教育及公众教育

在全面实行消费税前，政府必须进行大量的宣导和教育工作，对象除了公众，也包括商家。有关当局必须不断地举办对话、讲座及研讨会，让公众的业者更深入掌握消费税的资讯。

例如，与特定的贸易组织或商业机构进行对话。这有助政府更了解如何协助特定业务的从事者适应和实行此税制，以免消费税成为不利商业的税制。

当局也须准备大量的册子和教育传单，并通过媒体进行宣导，甚至将宣导资料邮寄给纳税者，向大家说明消费税的细节。

实行前，当局也可到一些公司实地考察，评估该公司的业务和准备功夫。实行后，当局可设立咨询和援助专线，为人们提供咨询和意见。

此外，当局可通过地方代表和社区领袖，在基层社区举行座谈会或说明会，传达有关措施的信息。这是为了消除人民或商家对实施消费税制的误解。

总括而言，目前消费税的实行和运作细节仍属粗略，在实行前需要进一步研究和检讨。最重要的是，政府必须确保消费税制是亲商的措施，并且在执行前完成必要补贴的分配框架，确保人民承受最低微的影响。

adapted from malaysianinsider.com

NOV 28 — The government has recently announced that there will be tabling of first reading of the draft GST at the end of the December 2009 parliament session.

During the debate on the motion to support the budget for 2010 I mentioned briefly the need for the government to start the ball rolling on the implementation of GST to diversify the revenue base of the country and also to put in place a tax structure to see the country into the future.

Why is GST attractive and implemented in most countries like Singapore, Japan, Canada, Australia and New Zealand?

Basically, a value-added tax like GST is a tax on consumption, and not on income, hence the tax system inherently encourages savings and investments instead of consumption.

The tax also has a self-policing mechanism that discourages evasion, unlike in a sales tax system or an income tax system where it would be relatively easier to scheme to evade taxes. Studies have also shown that GST also captures part of the ‘shadow’ economy.

In spite of the benefits I have stressed in the budget that it is pivotal and essential that any implementation of GST should not be done in haste and any timeline suggested and targeted should take into account the current taxation framework, custom duties, sales tax or any direct or indirect tax existing in the country to avoid multiple taxation that will burden the rakyat.

Various countries that embark on GST also known as value added tax have undertaken taxation reforms but it is important note that no two economies are exactly alike.

Even the initial GST rate introduced, the type of exemptions and also the time of the economic cycle (i.e. whether the economy is in recession or strong growth) varies from countries to countries.
For example;
Canada implemented a broad based GST in 1991 at a rate of 7 per cent. The Canadian economy was in recession at the time the GST was introduced.

Japan introduced a general consumption tax from 1989 at a rate of 3 per cent. There were limited exemptions and the economy was experiencing strong growth coupled with falling unemployment.

New Zealand introduced GST in 1986 at a rate of 10 per cent. When the GST was introduced in New Zealand, economic growth was weak and uneven, inflationary pressure was high.

Singapore introduced a GST in 1994 at a single low rate of 3 per cent and economic activity in Singapore at that was quite buoyant.

As such, I support the government effort to start the draft on GST, to obtain feedback, response and also to plan for the implementation of the GST.

GST implementation will definitely result in a once-off increased in inflation thus the indicated 18 months target date seems to be too fast. At a time when the economy is just in its initial stage of recovery, a hasty implemented GST would severely impact the economy, burden the rakyat, cause confusion and affect cashflow of business. A GST rate of 4 percent has been indicated as a probable GST rate.

In my opinion, the rate of 4 per cent is lower than the existing sales tax but pending the list of exemptions, potential tax cuts and also grants that will be given to the lower income group to enable to sustain their living it would be difficult to assess the reasonableness of the rate.

Besides key concerns on whether daily basic necessities, cars and residential houses would be subjected to GST needs to be addressed. Cars in Malaysia are highly taxed and additional GST without offset would burden the rakyat unnecessarily. Likewise in terms of housing, most Malaysian are still trying to cope to acquire their first homes, thus GST is unwelcome news to them.

Thus it is recommended that when determining the rate of GST the government should not target for a substantial positive GST return compared to rebate and offset provided. This is crucial to avoid inflationary pressure that are already diminishing the purchasing power capacity of lower income families and also affecting most middle income families.

By adopting a lower rate and subsequently adjusting it when the economic situation is better it would not add unnecessary pressure to the rakyat. This is because the subsidies distribution method is still in the midst of revamping and would be crucial to mitigate the impact of the GST.

We may feel that we are ready for GST as Malaysia’s poverty rate is low. However, the reason for low poverty rate in Malaysia is because the income level per month used to determine the poverty is only RM720 in peninsular Malaysia. As such, after the GST implementation the income level used to assess poverty needs to be reassessed due to the inflationary impact.

In addition in Malaysia 38 per cent of the 5.6 million household in Malaysia has an income level of less than RM2000 a month. This shows that while GST can still be implemented the impact on 2.12million household needs to be weighed carefully as food and transport represent a high portion of their expenditure from their monthly income.

It is likely that even though a rate of 4 per cent increase in GST is introduced food prices or goods of basic necessities might increase higher than 4 per cent. Look at the instances when the subsidised price of sugar or flour prices increase, the corresponding food prices like the tarik or roti canai is substantially higher.

As such prior to the implementation the government would need to ensure the existing committee or ministry involved in the monitoring of the price of goods and service needs to be beefed up with necessary manpower and authority to avoid heavy profiteering by unscrupulous traders. If not, any implementation of GST would likely result in increase of prices of goods and services more than expected.
Nevertheless before implementing the GST, the following needs to be considered;

Setting a steering committee with the necessary political commitment
Implementation of GST is a massive tax initiative that warrants a steering committee for the following reasons:

To study the impact of GST to the people to identify and resolve operational problems to highlight the Ministry of Finance’s major concerns regarding the business community to prepare the business community for compliance to oversee the public education programme.

The job of implementation of the GST should not be limited to the Ministry of Finance. The Steering Committee should also be represented by the Ministry of Trade and Industry, SME Department, the Department of Customs and Excise and etc.

Strong political commitment is required to ensure that departments cooperate and to ensure a buy-in to make the GST successful. Without strong political backing it would difficult to get the necessary resources to assemble a steering committee with the necessary authority to carried out and monitor the implementation. Feedback from tax experts and business leader is also important to enable better preparation before the roll out of the GST.

Revamp the distribution of subsidy system and providing offset
There are various subsidies, allowances, and also benefits given to the lower income group to help alleviate the burden of the rakyat. However most of these subsidies do not reach the target group for e.g. RM720million is spent yearly on rice subsidy but sadly the poor still could not get the hands on the required quantity of rice. The government’s current initiative to use the list of names from e-kasih to distribute the rice subsidy had to be postponed as majority of those verified as requiring assistance by the Welfare department was not included.

A massive exercise is needed to revamp the e-kasih system which is plagued by red tape. e.g. the form is 24 pages and the approval process is long. It is vital to have just one database that can be used by all departments to determine the people requiring assistance. A proper system to reach out directly to those in need of assistance would enable the government to help mitigate the impact of GST.

Several offsetting measures should also be introduced to assist the rakyat to adjust to the new tax regime for example a) a cut in corporate and personal income tax b) probable cut in excise duty or import duty c) increase in public assistance by increasing the threshold of income for those to be eligible to receive the direct subsidy assistance d) increase in pensioners pay e) lower excise duty for cars.

A Simple Tax System to reduce compliance cost
GST systems with multiple rates and multiple exemptions would result in confusion by both the authorities and the public. This will likely result in countless and unnecessary disputes with the businesses on the scope of tax. Multiple rates and exemptions also pose higher compliance burden on the businesses. A complex system with multiple rates could potentially lead to more abuses. Thus a single flat rate should be considered.

Meanwhile to assist SME, the government in implementing GST should ensure only SME generating a certain level of income is subject to GST. This is because not all SME have the necessary accounting or record keeping system and staff force to ensure compliance with GST. Requiring all business to register for GST would complicate the implementation.

Thus, it would be more business friendly and efficient if a high threshold is determined (e.g. businesses with turnover of RM2million and above) or low target base (e.g approximately 30 per cent of the business in Malaysia) to compulsorily register for GST. This ensures that only large businesses which should already have the necessary resources are only required to be subjected to GST.

By implementing this small retailers, neighbourhood shops and hawkers are probably exempted from registration which indirectly helps mitigate the impact of GST on the lower income groups.

Business Education and Public Communication
The implementation of the tax must be supported by a massive communication exercise to engage the business community and the general public. The authorities must be ready to organise numerous dialogue sessions, seminar, and classes on the GST.

For example dialogue sessions with trade organisation or business should be focused particular to the line of business. These dialogue sessions would enable the government to get input from the businesses regarding how the GST would fit into the actual operations of particular lines of business. This is crucial to help to fine-tune the GST in order to prevent the GST system from becoming unnecessarily complicated and affecting business adversely.

Brochures and pamphlets should be available for distribution while media and even direct mail to potential tax payers could be used to enable the public to be aware of the GST and it details.

Before implementation, field visits to selected companies are also important to assess the readiness of the business. Likewise toll free help line should also be setup to provide advise people throughout the implementation of the GST.

In addition, it important that talk programs are held at the community level through the elected representatives, community leaders and even at the grassroots level. This is to dispel any misunderstanding of the reasons why GST was being introduced. The focus should be on communicating the rationale for GST, tax offsets for GST and the exemptions if applicable.

In summary, as the details of the GST is still currently sketchy , I believe that what is essential is that the government needs to ensure that the GST is business friendly and that the necessary subsidy distribution framework is ready before the GST is implemented. The initial rate should also be acceptable and would not create a huge hike in inflation on top of the yearly CPI during the period of uncertainty. Likewise appropriate support structures to facilitate SME are also important to avoid any confusion resulting in non-compliance as SME represent 99% of the businesses in Malaysia and employs 50 per cent of the workforce.