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Saturday, May 16, 2015

Malaysia tweaks GST scheme

 Malaysia tweaks GST scheme
Kuala Lumpur - As Malaysia settles into the sixth week of a new 6 per cent goods & services tax (GST) that has attracted its fair share of consumer complaints, the treatment of prepaid reloads has received the most flak even though the additional charge had amounted to as little as 60 sen (S$0.22).
GST will now be based on usage, communications and multimedia minister Ahmad Shabery Cheek announced this week after users of prepaid mobile services protested at having to fork out an additional 60 sen for a RM10 top up as telecommunication companies had previously absorbed the amount under the sales and service tax.
Because lower income earners and students form the bulk of pre-paid users, a surprising amount of time and effort was expanded by the ministry, telcos and customs department on the issue.
Even so, in the scheme of soaring daily expenses, the public dissent over a relatively small increase is emblematic of how accustomed or reliant on subsidies many Malaysians have become.
Khoo Kay Peng, the executive director of Socio-Economic Development & Research Institute (Sedar) attributes much of the noise and unhappiness over GST to many households still not earning enough and people feeling the pinch of additional costs.
But as he pointed out, "Malaysians are not used to being taxed.
"And for the longest time (about two decades) they've been used to being subsidised - petrol, food, electricity and now cash hand-outs under BR1M (for lower income households)."
Malaysia's average household income is rising - reportedly to RM5,900 last year - but many households still earn less than RM4,000 a month. Not many pay tax - only some 2.2 million out of 13.2 million employees, and at the corporate level, only 16 per cent of 1.2 million registered companies.
A broad-based consumption tax that applies at every level of production, the GST will rake in much more than the sales & service tax that ranged between 5-15 per cent but was single tiered. Mr Shabery said that the new directive on top-ups was more suitable as the user would not be taxed before using the service.
Still, many have pointed out that the net effect would be much the same. Instead of receiving RM10 of airtime for a RM10 top up, one user calculated it would be reduced to RM9.43 worth.
"Same only except collect later not upfront. No savings for user at all," posted kathytan online, while peteramsd noted that the telcos would have to reconfigure their IT systems because of this new directive and were likely to pass on the costs in higher SMS or call charges.
In time, users of prepaid mobile services will get used to the tax - at least they can leverage apps such as WhatsApp to reduce charges.
But the to-do over the past weeks is all the more perplexing given that only two years ago, Mr Najib, who also holds the finance portfolio, saw fit to allocate RM300 million under Budget 2013 on a smartphone scheme for youths aged 21 to 30.
A RM200 rebate was offered to those that wished to purchase a 3G smartphone, raising the ire of many taxpayers who questioned the wisdom of such an allocation or subsidy when Putrajaya was trying to trim its large fiscal deficit. - Asiaone

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