Friday, April 23, 2010

Goods and Services Tax GST

for my reference..saje letak sini,nnti senang nak cari semula

GST made simple - 2010/04/10

By: Sharifah Hapsah Shahabudin

ON Dec 16 last year, the Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah tabled the Goods and Services Tax (GST) Bill, which is expected to be implemented in the middle of 2011.

A clear political will is seen with the tabling of the GST Bill, a matter that has been on the table since its announcement in the 2005 budget.

People's understanding and consequent acceptance are critical success factors. Taxation is not something we warmly welcome. Apart from the normal aversion to taxes, GST is not something that is readily grasped by the lay person. Therefore, it is essential to dispel suspicion and skepticism or even politicking, by stepping up awareness and education programmes for better community understanding.

For instance, the allegation that GST is an additional tax to burden and impoverish the rakyat should be put to rest because all of us -- rich or poor -- are already paying a similar consumption tax called Sales and Service Tax (SST).

GST, will actually replace the Sales Tax Act 1972 and the Service Tax Act 1975. In fact GST will eliminate the double or multiple taxation weakness inherent in the SST.

The Alumni Association of the Administrative and Diplomatic Officers is to be congratulated for holding a discussion on GST at its policy dialogue on March 4. It gave a chance for the government to explain how GST will reduce our reliance on petroleum and income tax revenue, how it protects the low income rakyat and how it makes the current taxation system more comprehensive, efficient, effective, transparent and business friendly.

Most importantly, it gave the government a chance to explain its preparedness and readiness in implementing GST, such as adequate computerisation, training of administrators and tax collectors, anti-counterfeit measures for Value Added Tax invoices and other frauds, as well as effective anti-corruption measures.

The mid-2011 dateline gives the government more than a year to explain the proposed model for Malaysia and how it will impact people, business, the economy and government.

Lay consumers who are anxious about a new system of taxation should be reached and engaged through dialogues, focused meetings and the media, particularly through TV. Problems aired by the consumer should be attended to so that misperceptions can be corrected.

Consumers, who are bearing the tax, have to be assured that the GST rate will not be increased beyond the proposed four per cent for a reasonable period of time after implementation. In this regard perhaps the static SST track record since the 1970s brings much relief.

Consumers should also be educated about the special features of the Malaysian GST model designed to relieve the burden of the people at large, especially the poor and the lower income group.

The zero rated and exemptions from GST cover essential goods such as agricultural products (padi and fresh vegetables), basic foods (rice, sugar, table salt, flour, cooking oil), eggs, fish, meat and chicken.

The government's plan to publish a shopper's guide covering 350 items in the Consumer Price Index basket will help us lodge complaints against profiteering, which will be better monitored and enforced with the planned anti profiteering legislation.

In this way the government will ensure that savings enjoyed by businesses will be passed on to consumers. We hope to see the anti-profiteering legislation passed before the implementation of GST in the middle of next year.

Foremost on the public mind is what the revenue from GST will be used for. Although in the long run increases in revenue will come from direct taxes, the public still need to be convinced how this additional revenue will be used to fund development for the good of the country and the people.

For businesses and traders, it is important to provide clear and simple numerical examples of GST because the value added concept in the multistage tax payment by the intermediaries in the production and distribution process can be complex to many.

A clear and simple manual may be necessary to familiarise them with the GST system, and widely disseminate it through trade associations before it is implemented. A direct line or email enquiry needs to be established and effectively manned to provide guidance.

Businesses need to be convinced that as intermediaries, GST reduces cost to them; that they gain because collection is through a credit system where GST incurred on inputs is offset against GST charged on outputs. However, this requires proper computerised accounting and documentation systems for all their records.

Do these businesses already have a system in place for them to access tax rebates? Under the Singapore GST law, for example, every GST-trader need to have accounting records and source documents for a certain number of years. At the suggested threshold level of RM500,000, 22 per cent or 121,000 establishments are expected to be registered, with most small and medium-sized industries being exempted. The government must have a plan to assist the traders and to set the time frame for them to get ready for GST.

The one-time compliance cost is not expected to be prohibitive. Incurring it should not be perceived as a hindrance but rather a step to achieve vast improvement in the maintenance of proper accounts and financial records, thus enhancing the competitiveness of the economy.

Undoubtedly businesses will have many other questions such as the time frame for refunds. The government plans to incorporate the period for electronic and manual submission into the regulations. This will help convince the public on the viability of the refund system and erase fears that it will increase the actual and opportunity cost to the producers.

• The writer is vice chancellor of Universiti Kebangsaan Malaysia

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