The UN Report that Malaysia’s poorest households are worst hit by GST is proof that Malaysia’s GST model is still regressive despite Malaysia having the longest list of zero rated goods in the world.

Malaysia’s Millennium Development Goals Report 2015 which was jointly released by the United Nation and Economic Planning Unit of the Prime Minister’s Department yesterday said that Malaysia’s household on the bottom 40 percent (B40) of the income spectrum are worst hit by the GST implementation. The B40 household income balance reduce from RM522 to RM400.
The Millenium Development Goals Report 2015 is proof that Malaysia’s GST model is still regressive despite Malaysia having the longest list of zero rated goods in the world making it the most complicated and cumbersome GST implementation.
Putrajaya has long argued that Malaysia’s GST model is not regressive due to the long list of zero rated goods. Despite the long list of zero rated goods, it is almost impossible for the B40 households to merely depend on zero rated list products and goods to survive.
For example, although bread is in the zero rated list, only white bread and whole meal bread are zero rated, bread with kaya filling, peanut filling and butter filling are tax at 6%. Although chicken is in the zero rated list, marinated chicken is taxed at 6%. Although cooking oil from oil palm, coconut and groundnuts are zero rated, cooking oil from sunflower, corn, safflower, soybean and olive are taxed at 6%.
Basic necessity food items such as milo, instant noodles, biscuits, canned food and bottled condiments are all taxed at 6%. How can the government expect Malaysia’s poorest household to solely feed on goods and products on the zero rated list?
Despite the government chest thumping and assurance, the fact remains that Malaysia’s poorest households are worst hit by GST and Malaysia’s GST model is still regressive.
Najib has revealed last month that the GST collection to date is RM51 Billion. The RM51 billion amounted to GST collected for 9 months since 1 April 2015. This figure if pro-rated will amount to an annual GST collection of RM68 Billion.
During the tabling of budget 2016 last year, the government expected to collect a RM39 Billion of GST revenue in 2016. The RM68 Billion of GST revenue is almost twice the amount Putrajaya expect to collect and almost 4 times of RM18 Billion of SST collected in 2014.
The GST revenue collection has exceeded the expected collection figure by twice the amount which means the 6% GST rate was set at an unreasonably high rate. It would only be fair to Malaysians that the government reduce the GST rate from 6% to 3%. This would also ease the B40 households from the GST burden.
Media Statement by Chong Zhemin, DAP Perak Economic Development Bureau Chief and Political Secretary to Taiping MP on 24 February 2016

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