The current tax system is unfair to the middle class and lower income groups. Do you agree?

We Agree...

"First of all, I would like to agree that the current tax system is unfair to the middle class and lower income group, I would like to discuss about Good and Services tax (GST). Daiso Japan before GST is Rm5 shop, what mean Rm5 shop? Because each item they only selling in Rm5 only, that’s why not only during weekend or public holiday, even weekday also crowded in that shop, most of them is from middle class or lower income groups. Can see that Daiso is making another trend to target Malaysia market.
But after Good and Services tax (GST) , We can see that Daiso price From RM5 increase to RM5.30,that’s mean increase the price , that related to customer, customer have to pay extra RM0.30/6% to purchase each item in Daiso. There is influences customer purchase power and increase consumer spending. The customer is more harm than benefit."

F&B line

"The implementation of the Goods and Services Tax (GST) has now replaced the previous Sales and Services Tax (SST). SST was at 10% for sales tax and 6% for service tax respectively. With GST in place, that means companies should not be collecting service tax anymore.
In other words, the calculation of your restaurant bill is now:
110% (food, drinks and service charge) x 6% (GST)."

What exactly is the service charge? Firstly, it is important to know that service tax and service charge are not the same thing.

By Robben

References:

"About DAISO │ DAISO JAPAN". Daisoglobal.com. N.p., 2016. Web. 3 May 2016.
Ramachandran, Sonia. "What? Six Per Cent GST On Food Price And Service Charge Too!".Theantdaily.com. N.p., 2016. Web. 3 May 2016.
"What Is Service Charge? Do I Have To Pay It?". S AYS.com . N.p., 2016. Web. 3 May 2016.

"I agree that the tax system in Malaysia is unfair to middle and lower income groups. Let’s look at the latest tax that implied by Government in Malaysia, GST (Goods and Services Tax). GST is a broad-based tax that will affect most of the Malaysian who are not a taxpayer. Government in Malaysia claims that the implementation of this tax will not burden their people as they did not increase the income tax rate but decrease the rate due to the implication of GST. This action is to alleviate the increasing in cost due to the GST. However, an individual do not need to pay income tax if his or her salary is below RM2, 500. So, the reduction of income tax rate is totally having no affection toward lower income groups. In reality, GST is increasing the burden of them as they are considered as low income groups and are not taxpayers previously. Obviously, their burden is increasing as they need to spend more money on what they purchase due to the implication of GST. Besides, they are now becoming taxpayers by paying the GST. Apart from that, GST also increase the burden of people who are in the middle class. People who are in the middle class need to pay not only GST, they also need to pay for their income tax due to their income are already exist the amount of RM2, 500. According to the Effective Year of Assessment 2016, from 1th January 2015 onwards, the tax rates for individual residents of Malaysia reduced by 1% to 3% in order to alleviate the increasing of goods and service cost. However, it is not a zero sum game. The burden of middle income groups will increase as they need to pay both income tax and GST."

By Li Houng

References:

Focus, E. (n.d.). Malaysia - Income Tax | ExpatFocus.com. [online] Expatfocus. Available at: http://www.expatfocus.com/expatriate-malaysia-taxation [Accessed 3 May 2016].

Gst.com.my. (n.d.). GST Timeline in Malaysia, GST submission date and Consumption Tax Chronology in Malaysia.. [online] Available at: http://www.gst.com.my/gst-malaysia.html [Accessed 3 May 2016].

Liew, H. (2015). Malaysia Income Tax Guide 2015. [online] SaveMoney. Available at: https://savemoney.my/personal-finance/malaysia-income-tax-guide-2015/ [Accessed 3 May 2016].

We Disagree...

"In Malaysia, the current tax system which known as Goods and Services Tax (GST Malaysia) is formally implemented since 1 April 2015 and GST rate is fixed at 6 (%) per cent. On the other hand, sales tax and service tax will be replaced. Actually, the purpose of applying GST is to make a more comprehensive, effective and transparent tax system.When GST is introduced the price of a product will become reduced.

When it comes to the statement of current tax system is unfair to the middle-class and lower-income groups in Malaysia. It is not true that those earning below RM4,000 per month who are not liable to pay income tax because of the implementation of tax under GST. This perception is not correct as the scope of charge for both types of tax is exactly different.

The scope of charge for income tax is based on the amount of monthly income received by an individual whilst the imposition of GST is based on the consumption of goods and services.

In fact, those not liable to income tax still pay sales tax and service tax on goods and services that they consume."

"The problem is, most consumers are not aware that the tax element has been embedded in the price of goods and services sold by the retailers. It means that the final price of consumed goods is actually tax inclusive where consumer will not be charged for a higher rate of sales and service tax under imposition of GST.

As a matter of fact, the imposition of GST will not make any difference to the tax burden of those earning below RM3,000 monthly due to they would only have to pay tax on the consumption of those goods and services. As a result, I disagree the argument of current tax system is unfair to middle and lower incomers due to the reasons mentioned above."

By Yee Earn

References:

Goods & Services Tax - GST Malaysia | NBC Group. (2014). How GST affects you in Malaysia? | NBC Group. [online] Available at: http://www.nbc.com.my/gst/faqs-malaysia-goods-and-services-tax-gst/ [Accessed 3 May 2016].

Kumar, D. (2016). What are the good sides and the bad sides of GST (goods and services tax)? - Quora. [online] Quora.com. Available at: https://www.quora.com/What-are-the-good-sides-and-the-bad-sides-of-GST-goods-and-services-tax [Accessed 3 May 2016].

"According to a professor of USM in economic, the middle class in Malaysia is in the income range of Rm4000 to RM20000 per month while low income groups are people with income that less than that. Individual whose monthly salary is less than RM5000 are not chargeable to Malaysia income tax. This mean that the middle class and lower income groups typically entitle with tax breaks with their tax-free income, which is below RM5000. However, those residents with salary that are above RM5000 will need to pay for the income tax. The rate of the chargeable personal income tax also had been reduced. This allowed the people to get back more pocket money from the government. Nevertheless, the government give financial support to people in these two categories. They launch the 1 Malaysia People’s Assistance Scheme (BR1M) and the 1 Malaysia People’s Housing Scheme (PR1MA) to help those who are unable to afford in buying a house, especially the low income groups. Also, government implemented “The Youth Housing Scheme” which benefit of young couples with a wages of less than RM10000 per month. If they are going to purchase their first properties, they will entitle discount on stamp duty and loan instruments. Moreover, the government will give financial support of RM200 each month for the first two year on their loan repayments. Due to the reasons above, I disagree that the current tax system in Malaysia is unfair to the middle class and lower income groups as they gain more benefits than disadvantages from the tax system. "

By Lin Wei

References:

2015/2016 Malaysian Tax and Business Booklet. (2015). 1st ed. [ebook] p.3. Available at: http://www.pwc.com/my/en/assets/publications/2016-malaysian-tax-business-booklet.pdf [Accessed 3 May 2016].

Mohamed, R. (n.d.). How will you classify salaries in Malaysia as middle class, upper middle class, and higher class with respect to financial stability? - Quora. [online] Quora.com. Available at: https://www.quora.com/How-will-you-classify-salaries-in-Malaysia-as-middle-class-upper-middle-class-and-higher-class-with-respect-to-financial-stability [Accessed 3 May 2016].

S. GREWAL, I. (2014). Malaysia’s middle class challenge - Making Progress | The Star Online. [online] Thestar.com.my. Available at: http://www.thestar.com.my/opinion/online-exclusive/making-progress/2014/10/14/malaysias-middle-class/ [Accessed 3 May 2016].

"There are 2 other indirect taxes already present in the Malaysian tax system. One of them is the Sales Tax, and the other is the Service. Combined, they are usually referred to as the SST. The Goods and Services Tax in Malaysia (GST) was initially mooted by the federal government in 2011 to replace the existing Sales and Service Taxes, but was met with much resistance from the public at large, partially due to the implication of a price hike in essential goods and services, but also partially due to the lack of clarity around the current consumption tax systems in Malaysia. In this situation, I agree that GST is unfair to the middle and lower income group. Businesses are expected to continue facing challenges carried over from last year as ongoing subsidy rationalisation and higher raw material prices translate to higher costs in business.

Additionally, the implementation of the goods and services tax (GST) is affect the small and medium business and which could unfair to the lower spending. There are some impacts to the lower and middle income business as they are required to have GST-compliant accounting systems. The upgrade will lead to some change of internal processes and procedures.

Also, businesses may need to purchase new ICT hardware and recruit additional employees to handle the GST compliance work. However, businesses with annual revenue not exceeding RM500, 000 are not required by law to register for GST but they still need to pay to the suppliers that are registered with GST. They are not able to claim the input cost on their purchase of raw materials. This may be disadvantage for the small and medium business compare to the company have registered. These issues will cause the old people who do not know to use for the technology and they have to shut down their business due to this reason. "

By Ke Sin

References:

Ho, Fiona (2015): „To GST Or Not To GST? – What Small-Time Business Owners Need To Know | iMoney“. iMoney Malaysia. Abgerufen am 03. 05. 2016 von https://www.imoney.my/articles/to-gst-or-not-to-gst-what-small-time-business-owners-need-to-know.
Liew, Hann (2016): „GST in Malaysia - How the Goods and Services Tax affects You“. SaveMoney.my. Abgerufen am 03. 05. 2016 von https://savemoney.my/personal-finance/gst-in-malaysia-how-the-goods-and-services-tax-affects-you/.
(2015): „Businesses continue with their preparations for implementation of GST in April - Community | The Star Online“. Thestar.com.my. Abgerufen am 03. 05. 2016 von http://www.thestar.com.my/news/community/2015/01/01/the-race-to-get-ready-businesses-continue-with-their-preparations-for-implementation-of-gst-in-april/.
(2014): „How To Start GST? Get Your Company Ready with GST“. Goods & Services Tax - GST Malaysia | NBC Group. Abgerufen am 03. 05. 2016 von http://www.nbc.com.my/gst/how-to-start-gst-get-your-company-ready-with-gst/.

(2013): „Nine things you must know about the GST“. KINIBIZ. Abgerufen am 03. 05. 2016 von http://www.kinibiz.com/story/issues/52351/nine-things-to-know-about-the-gst.html.