1. GST -zero rated in Sabah

Second update : 13/10/13

As far as Sabah is concerned, even if it is ZERO rated for GST, the prices of goods and services would likely to go up because there are many components already effected by other price rises especially products and goods imported including items from Peninsula Malaysia.  So how would Sabahans fare as end consumers?  Joshua


Updated: 13/10/13
http://www.blogger.com/blogger.g?blogID=5324408738746903480#overview

 Profligacy of at least RM30 trillions since 1957/1963 and still ongoing (also see all Auditor General's Reports especially the recent ones) is making Malaysia a really BANANA republic if GST (Government Shut Through) is to be introduced just to reduce the "sick and dead" deficit likely to be worst when other nations would not even take Malaysian Bonds.  While we are all worried about Government Shut Down (GSD) in the USA, Malaysia is sure to see bankruptcy across the board for all businesses if GST as it is to be introduced with BAD faith and BAD motives when the Government of the day really does not know what it is doing except be involved with thugging, thiefing, robbing of the activities of CRIMINALS.  GST or Value Added Tax (VAT) had been proven to be an asset in most countries especially in industrial countries with value added in productivity and proper implementation but in Malaysia it is Government Shut Through for its incapable to implement GST after so many years of talking when Malaysia is simply sliding to oblivion.  

One question I want to ask - How many accountants in Malaysia have hand-on experience of VAT or GST in England - one of the first countries to implement VAT? I had done at least three years of VAT services in the late 1970s and this service and experience is invaluable.  Joshua   13/10/13








The purpose for GST or VAT is not to reduce fiscal DEFICIT but to improve the general well being of all if properly implemented and ZERO RATE for Sabah...and of course if done smoothly in good economy scenario, the CRIMINALS in government may collect more revenue or go the way awry as usual with BN=Barang Naik for Be End devils -- Joshua

GST in Malaysia 2013 or later?

Would the Budget 2014 include this item Goods and Service Tax (GST) or also known as Value added Tax (VAT) generally?

While Malaysia had been implementing the Service Tax for almost 20 years, it is indeed a bit too late and too difficult to implement the GST in 2014 or 2015, 0r 2016 as the economic scenario does not really permit it to bring the expected benefits to the nation.

GST at this point in time when Malaysia is facing increasing deficit and cash outflows and Malaysia is having more than 2Malaysia in terms of development with the lopsidedness inevitable from Kedah to Sabah in the context of urban vis-à-vis rural for each state concerned.  When GST at one single system for the whole nation, the existing disparity would worsened beyond recognition.

The whole system of handling prices and prices increases would result in chaos for the consumers largely on fixed income would not be in the position to cope with sudden price increases in most items including essential items which maybe zero rated or exempted from GST.

The immediate consequence would be many consumers cannot afford to spend as prior to GST as at the present moment many already finding themselves with declining consumption.   When consumers cannot afford to spend, how can most of the businesses be conducted normally and could result in dwindling business with likely imminent closures if the consumption remains stagnant for some weeks or months especially in those businesses needing daily trade to be sustained.  So it is likely a vicious circle for the economy going stagnant in most sectors. 

The other problem is that when GST is first to be introduced in the present economic climate, the traders would up their prices as a natural response in the face of uncertainties of input price rises.  That would be a good thing if the economy expands but what would happen if the economy shrinks?  Even with 20cents subsidy withdrawn for petrol, the retail prices in most items were upped with significant adverse impact for the purchasing power of the consumers.

How would the nation deal with this scenario especially in Sabah with very little industries?  Is Palm oil – the major item for Sabah production as a vegetable oil an essential item be zero rated?  But Sabah does import processed cooking oil from palm oil factories in Peninsula and surely this selling price would be increased because the factories maybe facing increasing costs it their production of palm oil.  Cooking oil is an important ingredient for catering etc hence consumers would have to pay more for the food.

For Peninsula Malaysia, only a few states like KL, Selangor, Penang are industrial states while the other states are less productive in industrial items.

GST is most beneficial for industrial activities and Sabah is not an industrialized state.  So Sabah would face imminent disaster of a scale unknown at the present moment. 

It was indeed a very surprise that Jala decided on 7% GST for the nation and expected to collect RM7 billion extra in GST a year.  This figure may seem impressive on the face of it but the associated disaster not considered for Sabah could be precipitated almost immediately mainly Sabah depends on the imports from Peninsula factories whose prices would be increased possibly substantially for Sabah.

The problem is that once the GST is implemented at a high rate, the imminent damages to the economy and welfare of the consumers could not be reversible?

So the big question in Malaysia very much dependent on USD and trade with USA now under Government shut down could be into insolvency with the worst impact on Sabah –very much a neglected state in all areas.  

Other questions are as follows:-

1.                   So have anyone done a fully researched paper on how GST at various rates impacting Malaysia vis-à-vis Sabah

2.                   The minimum wages for basic workers to survive depending on the rates of GST?

2.1                  If wages need to be increased, how much would be sufficient?

3.                   The level of prices increases especially for the essential items depending on the GST rates?

4.                   Would fuel attract GST?  If so how would this impact the economy as rural Sabah would be hard hit?

5.                   Would houses attract GST and if so how the prices go up especially those houses under construction when all raw materials would go up in price too?

6.                   While GST inputs and outputs would be offset in a two or three month cycles, how would such cycles affect the cash flows of the businesses?

7.                   At the moment, Service tax collected in Sabah is retained in Sabah and would GST be retained in Sabah and if so how much would likely be retained in Sabah possibly to bring reliefs to some sectors?

8.                   If GST collected in Sabah is retained in Sabah, would there be a restriction that such increased amount be disallowed to be applied for development projects unrelated to trade for matching purpose?

9.                   If GST is implemented, all existing taxation like corporate and income taxes would be adjusted downwards and how would this be addressed with the initial burden of GST?

10.               It maybe inevitable that black market would thrive once GST is implemented and is there any acceptable level before the disruption bites into the economy?

11.               Corruption for the implementation agency can be a factor and is there any provision for this to be thwarted?

12.               For Sabah is there a model for GST given the prevailing economic indicators at various rates of GST in the context of productivity and consumption and the level of risks that the economy can be adversely affected with hardship for most people especially Sabah people are already finding it hard.  If there is no model done, then Sabah should not see GST in the immediate future.

[NB:  these questions are not exhaustive]

Conclusion:-

Previously I had advocated that GST rate for the nation is 2% to enable acceptance to over ride teething problems.  For Sabah I would call for zero rated or not exempted so that Sabah can still claim for the re-imbursement of the GST paid by the importers of goods from the peninsula factories.

I have done my piece and would invite others to play their parts in whatever capacities they are capable.

Thank you,

Joshua Y. C. Kong

Hand-on experience in UK VAT in 1970s.