KUALA LUMPUR, June 15 — Putrajaya today insisted that the Goods and Services Tax (GST) levied on the public is equitable and not regressively taxing the poor more than the rich.
In denying claims that the consumption tax affects lower income groups proportionately more than the rich, the Finance Ministry argued that those earning higher salaries end up paying nearly double the taxes compared to those in the lower income strata.
Citing its study, the ministry said those earning a monthly income of RM2,000 or less spend RM51.89 or 2.59 per cent of their income on GST, while those earning RM8,000 a month spend RM290 or about 4.14 per cent of their income on the tax.
“Based on these studies, it is found that the perception is untrue that low income earners pay more compared to high income earners when GST was implemented,” it said in a written parliamentary reply to DAP’s Sibu MP Oscar Ling Chai Yew.
“In fact, those in the high income group will pay more compared to those in the lower income group as they (high income group) spend more on items and services that come under GST.
“This proves the GST model that was proposed is progressive,” the ministry said.
The study cited by the ministry showed, however, that consumers were paying more compared to the superseded Sales and Services Tax (SST), with those in the RM2,000 and lower income band paying RM36.83 or 1.84 per cent of their income while those earning RM8,000 a month spent RM168 or 2.8 per cent of their income monthly on taxes for consumption under the previous tax regime.
The ministry also acknowledged that inflation went up to 1.8 per cent in April after GST was implemented, compared to 0.8 per cent the previous month based on the Consumer Price Index (CPI).
“However, this level is still under control and not all items in the CPI basket (of goods) showed an obvious increase (in prices).
“The main contributors to the CPI hike are food and non-alcoholic drinks, alcoholic drinks and tobacco, housing, water, electricity, gas and other fossil fuels,” the ministry said, adding that there was minimal hike in transportation costs.
Putrajaya stressed that any increase in living costs as a result of GST has been offset by aid policies such as the Bantuan Rakyat 1 Malaysia (BR1M) programme.
“The government will monitor developments in prices of items from time to time and take various proactive steps in the interest of the rakyat.
“The government is confident the inflation rate will remain at a manageable level and at the same time the government will monitor developments in the GST to make sure inflation does not burden the rakyat, especially those who are in the lower income group and easily affected,” the ministry said.
