KUCHING: The Malaysian Trades Union Congress (MTUC) Sarawak Division objects to the implementation of Goods and Service Tax (GST) which will reportedly be introduced in Budget 2014 to be tabled this month.
MTUC secretary Andrew Lo described GST as regressive tax as it has more pronounced effect on the poor and working class because it consumed a higher proportion of their income.
“MTUC is not convinced that GST is the way forward and this goes against efforts to achieve High Income Nation,” he said.
Lo pointed out that GST would be a move from tax on income to tax on consumption.
“Experience from the past 30 years had shown that companies will resort to all ways and means to avoid tax, setting up shell companies as tax havens.
“As a result, government tax revenues are squeezed and these same rich powerful people are pushing for the government to further reduce corporate and income tax and introduce GST,” he said.
One such example is Singapore which substantially reduced corporate and income tax, tripling per capital income and attracting largest investment and human capital.
“But the real story is that ordinary Singaporeans have been squeezed out of this so-called success until the government suffered a political backlash.
“The tripling of per capital income benefit the rich much more, the large investment benefited multinational companies,” he said.
Lo also noted claims that GST was needed because only 10 per cent of Malaysians are paying income tax whereas the remaining 90 per cent do not due to low income.
“It appears that GST is an attempt to get them to pay more tax without raising their income and supporters of GST argue that the more you consume the more you pay.
“However a person who earns 1,000 times more than the average Malaysian is not going to buy 1,000 more pillows, or eat 1,000kg more rice or buy 1,000 more watches.
“Instead he will buy a gold and diamond watch, not in Malaysia but overseas, exploiting the GST loophole that allow tourists to claim GST refund,” he said.
According to Lo, experience has also shown that most countries that introduce GST experience wider income disparity.
“When Japan raised their GST in 1995 it was widely blamed for plunging the country into the longest ever recession that they have yet to recover from.”