GST (1)

There is so much to say about GST. And a lot more to be said about what more needs to be done. So far only the framework has been tabled. The framework is not important because it only sets out the mechanism of how GST typically works. Most GST countries apply the same framework.

What is important is the schedules, the flesh of the legislation. That is what the people need to study and consider. But we have no glimpse of that yet. Not even a draft. Why is it important to study the schedules? The schedules will determine whether Malaysia has applied the GST progressively or regressively.

The GST is a tricky tax. In a developed country with a high income society, the presumption is that it is progressive. It is progressive in the sense that it is capable of achieving the objective of taxing consumption as a means of targetting luxurious consumption. So when a country such as Singapore implements GST, we say, it's a good tax. It's an efficient means of collecting tax.

But how does Malaysia in the income arena. Are we not low income society? With a low income society, GST can do the cruel turn into becoming a regressive tax. How does it do that? At the qualitative level, a low income society has no choice but to consume only what it can afford. It does not achieve the deterrent objective of consuming luxurious consumption. At the quantitative level, RM50 of a low disposal income of RM1,000 is 5%. But RM50 of a high disposal income of RM10,000 is only 0.5%. That is the regressive end result.

Why is it important to ensure that GST is progressive? At the jurisprudential level, GST is an ideal tax based on the idealistic notion that it is supposed to be efficient and progressive. If it cannot achieve that, then there is really no basis for imposing GST. Remember, taxpayers are already subjected to other taxes such as income tax, real property gains tax. It would amount to over taxation. And there is an economic downside to over taxation. Simply put, over taxation removes the income from the pool required to drive the multiplier for growth.

At the implementation level, a progressive GST would tax the richer more and the poorer less. That is the litmus test of when to implement GST. Not whether it will win or lose elections I would think. If it is not possible to come up with a GST scheme that does just that, it means the time is not right. The income level of the people is not at the right level. So it is best to wait. Of course we look at the inflationary level, etc, but that is a secondary consideration.

And that GST scheme requires a lot of consideration. First look at the groups of people. Pretty much like how we deal with deciding who to put on the lifeboat where the vessel is sinking. Put in the children and the old first. So are we ensuring that all children's needs do not carry any GST? Remember we are taxing consumption. The parents may be paying but the consumption is made by the children. So ideally we cannot tax the children for its consumption. And we don't want to accidentally tax milk powder and we find that the kampung folks cannot afford to buy milk powder because they are a few cents short. That would be an inhumane society. So we go along that drift. Apply the same principle to all consumption by children such as medicine, books, toys. And we build up the same consideration for the old, the pensioners.

We hope to see meaningful discussion on the affected groups of people and from there build up a list of essential goods for this stage of the consideration. This list would form the zero rated goods.

Weapons of mass destruction

What has weapons of mass destruction to do with Malaysia? Unimaginable. But regulations have arrived ashore under the guise of Strategic Trade. The title gives me the impression that it is about making trade strategic, about facilitating trade. But no, it's not about enhancing trade but it is about regulating against any export, transhipment or transit of weapons of mass destruction or any item which has the capability of being used as an ingredient for weapons of mass destruction. Is it unusual? No, actually. Singapore uses the same title. Yet I wonder why. Why not call it what it is. Why not Weapons of Mass Destruction Act? Why is the title important? Well I guess every word in the legislation counts when one deals with a piece of legislation that contains death penalty as an offence with pecuniary penalty sums of Thirty Million Ringgit. If there is ever any ambiguity in the application of the legislation, at least one can look to the title to gauge the pith and substance of the legislation.

Is it a necessary legislation? Anything that fosters greater peace for humanity must be good, I think.

Well I would like to say more but I can't. The schedule on the list of items covered by the legislation has not been tabled. So we'll have to wait and see. Maybe we can look at the more developed jurisdictions which already have this legislation and study their list. Yes, we can do that. In fact it is very helpful to do that.

What would be more helpful is if we have a draft list and every industry can study it and highlight their industry difficulties. If we were to apply the EU or UN list all at once, the industries concerned are far and wide. Do we have the system in place to cope with it? Will it hinder trade? Can we afford to have it hinder trade. Should we stagger the implementation such that we begin with the most prevalent industries so that we have a narrower list and one where we can have a more confident implementation on. After all if the objective of the legislation is a good one, everyone should have a common objective. And that common objective would be to see to the success of the functioning of the machinery behind the legislation as well as the industries involved. Whilst resources is being committed by the government to build its capability, how much additional cost does it take, if the private sector is also brought up to speed with the same capability at the same time. As much as the government is required to build its capability, so should the private sector and this would be a good example of 1Malaysia with the public and private sectors working as one and building capability together to make the implementation of the legislation a successful one.

If this piece of legislation is a glimpse of the future in Malaysia being part of the complex machinery of international trade and relations, where legislations such as this are fundamentally modelled and driven by international organisations, Malaysia will clearly be dragged, whether one likes it or not, to the international level of compliance. Does this mean Malaysia has to take a quantum leap without the benefit of taking baby steps to play catch up? Does Malaysia have the luxury of taking the approach that the public sector builds capability first and that capability is then filtered down to the private sector? Is there time to do that? Filtered and watered down? With the information age we are now in, would it not be better that the public and private sector strive together to tackle and meet the international requirements of compliance. If Malaysia already suffers brain drain, do we have enough brains even when we put all the brains together? There is no time to split hairs. We only have each other to race to meet the global challenge of staying competitive...(or is it, to remain solvent?).

Astro beyond means...

If we get a hospital bill, we should send it to astro. It's been frustration all the way since we signed up for astro beyond. We now call it astro beyond means beyond the control of the voice that we are speaking to, whether it is the technician that installed the setop box or the technical assistance we call.

Here's what happened... astro sends a very young team of technician to install the setop box. That was 2 days ago. They also adjusted the existing satellite dish. Whilst the technician is here, the viewing is interrupted constantly with the message...'invalid smart card..' every few minutes. My son tells them it's the setop box and the smartcard. They are faulty and need to be replaced. The technician insists it will normalise automatically. He says leave it on and it will normalise. An he left. With our old setop box for regular astro. 48 hours later the problem is still there. In the meantime we call the technician, he says it is beyond his control, call astro.

So we call astro, wait for a long long time. That was last night. No one picks up the phone. Then we call astro again, wait for a long time again. We got to speak to technical assistance. The technician says they'll do a diagnostics from their side this morning. Then they find it can't be resolved. They'll send someone to pick up the setop box within the next 48 hours to take it for diagnostics. But. They can't give us a replacement setop box. So it must mean we won't be able to watch astro at all. The voice says it is beyond his control...

I guess in our kind of big is better and where there is no competition, this is what we have to put up with. We become sitting ducks for bad service. As if it is a free service. The system has no sense.

If you sign up for beyond and you get a faulty box, bad luck. You are stuck with that box until that box gets fixed, even if it was faulty from day one. That we think is the most ridiculous system. I guess with a low income society like Malaysia coupled with monopoly, any bad system no matter how ridiculous, still sells. What is a few disgruntled customers amongst millions, right?

We are talking about an enhanced service from normal satellite tv to high definition tv and yet the service level is pretty much third world. And the way customers are treated clearly needs to be taken up a notch higher. We may be a low income society but that does not mean that the country is filled with senseless non thinking idiots. Give the customers some sense of dignity.