MARCH 27 — In a few days it will be one year since the implementation of the Goods and Services Tax (GST), a consumption based tax which has effectively altered the way taxes are collected in Malaysia. Although the GST has been widely unpopular amongst consumers and businesses alike, many economists consider GST as the most efficient way of widening Malaysia’s tax base. Currently, almost everyone pay taxes.
While there were teething problems at implementation stages, the Malaysia Consumers Movements (MCM) commend the Ministry of Domestic Trade, Cooperatives and Consumerism (MDTCC) and the Royal Customs Department, who have worked extremely hard in curbing profiteering activity and ensuring that price increases were not excessive. Enforcement officers have acted promptly on complaints lodged against unethical businesses for unfairly increasing prices, while prosecuting a few for related offences.
The introduction of GST was part of the Government’s overall tax reform programme towards making the taxation system more efficient, effective, transparent, business friendly and at the same time capable of diversifying means of revenue, targeting a self-sustaining economy, especially in facilitating the realisation of a vision to achieve high income developed nation status by 2020.
The Customs Department has reportedly collected RM51 billion since the implementation of the GST in April last year, as compared to only RM37.2 billion collected before the GST. The Prime Minister in his speech during the 34th World Customs Day reminded the country's civil servants that they are still able to keep their jobs, all because of the goods and services tax (GST).
It the midst of a volatile economic outlook, it is therefore clear that the GST has indeed provided a lifeline to the government in terms of revenue collection but unfortunately this has come at an expense. Consumers today are grappling with high cost of living issues while business complain of high cost of operating, forcing consumers to tighten their belt and businesses to retrench staff.
While GST has now become an important source of revenue for the government, it is important to note that the amount of taxes collected through GST will be highly dependent on the strength of domestic private consumption, an element which is influenced by consumer confidence in the economy. It is common notion that the amount of people shopping at retail outlets is a good indicator of the levels of consumer confidence in the economy.
According to industry report compiled by the Retail Group Malaysia (RGM), Malaysian retailers are not too optimistic on the growth for the sector in the first quarter of 2016 and expect a negative year-on-year growth of 0.4 per cent as the buying spirit of consumers continues to remain low despite the heavy price discounts and aggressive promotions. Consumers are fearful of high prices and are increasingly reluctant to spend. The ongoing retrenchment exercise in the country from key economic sectors is expected to further slowdown the growth of the Malaysian retail industry.
Bank Negara in its report has projected our economy to grow 4.0-4.5 per cent in 2016, compared with 5 per cent growth last year, second straight year of slower growth while The Statistics Department indicated that the consumer price index (CPI) in February rose to a seven-year high at 4.2 per cent from a year earlier. The inflation rate is highest since December 2008 when it hit 4.4 per cent. This rise was attributed to higher costs for food and consumer goods.
These not very convincing statistics calls for us to review, rethink and refine solutions for riding the projected storm ahead. The MCM is of the opinion that we can all make a change by leveraging on the current scenario to mitigate potential adverse impacts, via the following strategies:
1. Stop the bickering – politicians and civil society leaders must immediately stop squabbling as negative news impacts consumer and investor confidence. What we say, and we do is backfiring on us, negatively portraying our country’s image. We must collectively demonstrate political stability, which is a key factor taken into consideration by investors when making investment decisions and consumers when making personal finance decisions. Malaysia practices parliamentary democracy where leaders are elected every 5 years. It therefore ignites sheer concerns when attempts are made to dislodge sitting elected government by force. Street demonstration is not our culture, and it shouldn’t be!
2. Corruption is detrimental – Government must demonstrate political and administrative will when implementing austerity measures and fighting corruption. While the recently announced austerity efforts are welcomed, it may not be enough to deliver the right amount savings. There is a big time need to plug leakages and tackle corruption. The recent misappropriation of government funds scandal totalling RM107 million by a senior government official surely sends a wrong message to consumers who are being asked to change lifestyle to cope with cost of living issues. Questions surfaces if there are more of such cases?
3. Promote healthy competition – It is important for the government to promote competition and speed up further liberalisation of key economic sectors. Monopolies are detrimental and must be dismantled as it harms consumers. There is a need to reassess the need of approved permit policy as doing away with it could help bring down prices. At the same time, efforts must be made to improve business efficiency by eliminating bureaucratic red tape as it significantly increases cost of doing business.
4. Transparency in action – Implementation of policies, especially those which have direct impact on consumer welfare must be openly deliberated. It is high time that stakeholders at all levels are consulted and their expectations adequately managed when implementing decisions. Unilateral decisions must be stopped immediately. The era of government knows best is over. The point being, whenever there is any price revision announcement, it distorts cost elements throughout the supply chain, and more often than not, negatively impacting consumers.
5. Halt price increments – Considering the current economic climate, the government and businesses must pledge not announce any more price increases. Consumers are still grappling to deal with what was announced in 2015 and any new increases will definitely not be of any help.
6. Ethical trade practices – Businesses must demonstrate integrity in actions across the value chain. Profit is undeniably critical, but it should not be derived at the expense of consumers suffering. In this regard, business leaders must re-evaluate strategies, upholding high standards of social responsibility which must go beyond mere CSR or brand-building gimmicks. There is only so much that the government can do to audit, here, businesses must own up!
7. Prudent consumption patterns – This is an opportunity for consumers to re-examine our own consumption patterns and make adjustments where necessary. We must appreciate reality that the era of cheap goods and services is over. Malaysia practices a competitive open market economy and it is therefore unfair to completely shift blame on the government for failing to reduce prices. As a matter of fact our own consumption pattern drives prices. We must avoid wastage and overconsumption, where we purchase things, not to fulfil our basic needs, but to fill some voids about our lives merely to make some social statements about ourselves.
8. Ramp up enforcement – It is commendable that the MDTCC has done very well in monitoring, tracking and acting against errant businesses which unfairly raise prices. The question being, why only expect the regulators to do the auditing when in the era of social media, we are all empowered to highlight real time issues and ensure they are addressed in a timely manner. Name and shame those manipulating the system, why must we keep silent?
It is probably time now for all of us to close ranks and sail the storm together as one team. We have toiled together and built a great nation; it is now incumbent on us to ensure that we take it to greater heights.
We hold the trump card, in charting the destiny of our nation!
* Darshan Singh Dhillon is president of the Malaysia Consumers Movement (MCM).
** This is the personal opinion of the writer and does not necessarily represent the views of Malay Mail Online.
