Suggest the Factors to Be Considered by the Government Before the Gst Can Be Fully Implemented in Malaysia

Question 2 :

Suggest the factors to be considered by the government before the GST can be fully implemented in Malaysia.

Currently our government is having Sales and Services tax which is 10% and 6% respectively. The people have to pay extra 16% when they go out to enjoy their meals in the restaurant. Therefore, the government is going to implement Goods and Service Tax (GST) in our country. This is because the country in South East Asia only left for Malaysia, Myanmar and Brunei have not implement GST yet. However, there is some factors must be considered by the view of government if they want to implement the GST successfully in Malaysia.

1. Lack of Information and Confusion on GST

Consumers believe that implementing of GST rate will become a burden for them. It affects their daily cost of living especially for those lower income households and old folks. They do not understand clearly about GST and they worry that every goods or services that they purchased need to pay the extra 6% of GST. In fact, there is some exemption such as financial services (loan), residential property, toll highways, private healthcare and education, domestic transportation of passengers, land for agricultural purposes and land for government building and burial ground. The most important food such as rice, sugar, salt, flour and cooking oil are having zero-rated supplies. This means that people need not to pay extra 6% tax for these particular items. If they do not have very clear mind on what is taxed item they may pay much more extra money when they are shopping to grocery shop. Hence, for those who are lower income, they may not afford to buy extra things that they want to buy. In addition, the retailer or middle men may extra charge of 6% GST in hidden cost which may not noticed by the consumers. It becomes another burden if they just want to buy stationeries and books for their children. Therefore, government has to consider this factor which to make all the people know more clearly and deeply of GST.

1. Tools that Used to Communicate GST with Public

Government should consider the tools that used to propagate the information about GST to public because it is important for every Malaysians to know about the implementation of GST. Government should make sure everyone including kids, teenagers, adults and even old folks to know the actual meaning of GST. It may cause a big failure as public perception will be affected if government fails to communicate with public. Those people who fail to know how GST works will have negative perception as they would think that GST is just an additional tax that must be paid by them to government. In order to deliver the true message to public, government should consider the tools that used in the communicating plans. Government should not only up-to-date the latest information about GST through the Internet or official website, but also need to propagate the information through other channels or mediums. They should use other mass media as well such as television, radio, flyer and newspaper. Government should consider this factor because there are still have a lot of uneducated people in Malaysia which are the part of consumers as well. Therefore, government should educate those people who lack of education in order to know more about the GST before GST can be fully implemented in Malaysia. Perhaps, organize a campaign may be is one of the best choice too.

1. Afraid of increment on the percentage of GST rate / Afraid of risk of inflation

There are always two sides in a coin, it is good news for consumers as the tax rate is fixed as 6% only for most of the businesses such as restaurant, shops and so on. Implementing GST is able to avoid the inflation however it is one of the risk of inflation. The prices of general product are able to increase after implement GST. The fixed tax of Sales and Services tax currently is the burden of the people. The rate of 6% GST sounds great which will make the people feel that they may pay less. But at the same time, people will also afraid that will government increase the percentage of GST up to 15% to increase country’s revenue in future year since government has the power to control the GST rate. It is unanticipated when will the government increase the GST percentage. Now, only 1.8 million individuals from total 12 million in the workforce paid tax for their salary is more than RM 3,000, but with GST, the entire workforce (mean everyone, including poor workers, will be affected) will be required to pay tax (Alantanblog.com, 2014). According to Wikipedia, our neighbor country, Singapore was implemented GST on year 1994, at 3% however its current rate had been already increased to 7% on year 2007. As Singapore was a developed country and its currency was valuable than Malaysia, so undoubtedly the citizens of Singapore can afford the increment of GST rate. However for Malaysia, its value of currency was lower than Singapore and Malaysians might not be able to afford the increment of GST rate. Therefore, government needs to consider this factor before they implement GST.

1. Costs of Implementing GST

Every business needs to replace their current tax system by setting up the GST system if GST has been officially announced to be implemented in Malaysia. Company will feel dissatisfied as they think that they do not have the responsibility to bear the costs of implementing a new tax system. Likelihood, some business will refuse to update their system and thus, it is resulting in failure of fully implementing GST in Malaysia. In addition, all companies have to adapt this new system and learn how to use it. This will mostly affect the Human Resource Factor and it should be considered by government before GST can be fully implemented in Malaysia. Company need to hire new staffs and experts or provide training for existing staffs to ensure the business is compliant with the GST requirements. It requires businesses to register for GST to use Input Tax Credit. Besides, GST also requires businesses to upgrade their current accounting system to keep track of GST amounts. In order to ensure all data can be properly running, it requires software vendors to do testing on it to prevent potential intrusion. Government should consider who should be the one who bears these costs and decide will any government subsidies be provided to businesses to cover the upgrading expenses in order to encourage businesses to implement GST system.