Wednesday, May 29, 2013

GST, Cukai Jualan, Inflasi dan kenapa peniaga DAP tolak pelaksanaan GST?

GST And Inflation

My rant for the day.
Here are the facts:
  1. Malaysia is one of the last countries in the world to implement a full fledged value-added tax. The only countries of note that have yet to implement a VAT are the United States, Hong Kong, Brunei, and the countries under the Gulf Cooperation Council (GCC). Everybody else either has it, or are implementing it.
  2. Malaysia currently levies two forms of consumption tax – sales tax and service tax (henceforth SST).
  3. Sales tax is levied on all goods sold or produced in Malaysia, with the exception of petroleum and exports.The current standard rate is 10%, but a lower rate of 5% is applicable to fruits, certain foodstuffs, timber, building materials, cigarettes and tobacco, and liquor and alcohol.
  4. Service tax is applicable to restaurants, hotels, parking lots, golf courses, clubs, discoes, insurance agents, phone companies, professional services like accountants, lawyers and consultants, and many more at a rate of 6%. Some of these services require a minimum corporate income threshold before the tax is levied. Credit cards are also subject to a service tax, but in this case it’s a flat fee levied on principal and supplementary cards.
  5. GST is going to replace both these two taxes (with the possible exception of credit cards), and from which certain essential goods will continue to be excluded i.e. zero-rated (exports, petrol and basic foods for instance).
So, let’s assume that a 7% rate will be implemented:
  1. For food, the tax on basic staples will go from 5% to 0%.
  2. For other foods, the tax rate will go from 10% to 7%.
  3. For the “sin” goods, the tax rate will increase marginally from 5% to 7%.
  4. For everything else, the tax rate falls from 10% to 7%.
  5. Certain other goods, like books and petrol, will continue to attract no tax.
  6. For services, the rate will increase from 6% to 7%.
When the basic tax rates on most goods at point of sale are set to fall, how on earth can this be inflationary?
Both in theory and in practice, the implementation of a VAT or an increase in the VAT rate is almost always accompanied by a one time increase in the price level (cost of living), but not the rate of price increases (inflation). There are umpteenth examples of this over the last couple of decades.
In Malaysia’s case however, GST will be replacing a pre-existing tax and at a rate that is lower than the prevailing rate. Under those circumstances, the impact should be a one-time decrease in the price level, not an increase.
The regressive nature of GST is completely irrelevant in this discussion, because we’re replacing one regressive tax with another, and moreover one that is proven to be more efficient in raising tax revenues.
Almost all the gains in revenue collection from the switch to GST from SST will come from enforcing tax collection across the chain of production and distribution of goods and services, and not an increase in the overall tax burden to consumers.
Again, how can replacing SST with GST be inflationary?


Satu contoh pelaksanaan yang diberikan oleh Wikipedia mengenai perbezaan peringkat percukaian VAT/GST dan Cukai Jualan adalah seperti di bawah:-

Consider the manufacture and sale of any item, which in this case we will call a widget. In what follows, the term "gross margin" is used rather than "profit". Profit is only what is left after paying other costs, such as rent and personnel.

Without any tax 

A widget manufacturer spends $1.00 on raw materials and uses them to make a widget.

  • The widget is sold wholesale to a widget retailer for $1.20, making a gross margin of $0.20
  • The widget retailer then sells the widget to a widget consumer for $1.50, making a gross margin of $0.30

With a sales tax 

With a 10% sales tax:

  • The manufacturer spends $1.00 for the raw materials, certifying it is not a final consumer.
  • The manufacturer charges the retailer $1.20, checking that the retailer is not a consumer, leaving the same gross margin of $0.20.
  • The retailer charges the consumer $1.50 + ($1.50 x 10%) = $1.65 and pays the government $0.15, leaving the gross margin of $0.30.
So the consumer has paid 10% ($0.15) extra, compared to the no taxation scheme, and the government has collected this amount in taxation. The retailers have not paid any tax directly (it is the consumer who has paid the tax), but the retailer has to do the paperwork in order to correctly pass on to the government the sales tax it has collected. Suppliers and manufacturers only have the administrative burden of supplying correct certifications, and checking that their customers (retailers) aren't consumers.
A large exception to this state of affairs is online sales. Typically if the online retail firm has no "presence" in the state where the merchandise will be delivered, no obligation is imposed upon the retailer to collect sales taxes from "out-of-state" purchasers. Generally, state law requires that the purchaser report such purchases to the state taxing authority and pay the sales tax. It is fair to say that many citizens are unaware of this obligation and that states make little effort to raise that awareness or provide a reasonably easy way of complying with the obligation.

With a value added tax 

With a 10% VAT:
  • The manufacturer spends $1.10 ($1 + ($1 × 10%)) for the raw materials, and the seller of the raw materials pays the government $0.10.
  • The manufacturer charges the retailer $1.32 ($1.20 + ($1.20 × 10%)) and pays the government $0.02 ($0.12 minus $0.10), leaving the same gross margin of $0.20. ($1.32 – $0.02 – $1.10 = $0.20)
  • The retailer charges the consumer $1.65 ($1.50 + ($1.50 × 10%)) and pays the government $0.03 ($0.15 minus $0.12), leaving the same gross margin of $0.30 ($1.65 – $0.03 – $1.32 = $0.30).
  • The manufacturer and retailer realize less gross margin from a percentage perspective.
  • Note that the taxes paid by both the manufacturer and the retailer to the government are 10% of the values added by their respective business practices (e.g. the value added by the manufacturer is $1.20 minus $1.00, thus the tax payable by the manufacturer is ($1.20 – $1.00) × 10% = $0.02).

With VAT, the consumer has paid, and the government received, the same dollar amount as with a sales tax. The businesses have not incurred any tax themselves. Their obligation is limited to assuming the necessary paperwork in order to pass on to the government the difference between what they collect in VAT (output tax, an 11th of their sales) and what they spend in VAT (input VAT, an 11th of their expenditure on goods and services subject to VAT). However they are freed from any obligation to request certifications from purchasers who are not end users, and of providing such certifications to their suppliers.

On the other hand, they incur increased accounting costs for collecting the tax, which are not reimbursed by the taxing authority. For example, wholesale companies now have to hire staff and accountants to handle the VAT paperwork, which would not be required if they were collecting sales tax instead. If you calculate the added overhead required to collect VAT, businesses collecting VAT have less profits overall than businesses collecting sales tax.

The advantage of the VAT system over the sales tax system is that under sales tax, the seller has no incentive to disbelieve a purchaser who says it is not a final user. That is to say the payer of the tax has no incentive to collect the tax. Under VAT, all sellers collect tax and pay it to the government. A purchaser has an incentive to deduct input VAT, but must prove it has the right to do so, which is usually achieved by holding an invoice quoting the VAT paid on the purchase, and indicating the VAT registration number of the supplier.

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