KUALA LUMPUR - The new Goods and Services Tax (GST) is scheduled to be introduced in Malaysia next year but it will not happen without another fight as activists are already pushing back against it through roadshows and a mass street rally.
A demonstration is being planned for May 1, which is Workers' Day, to demand that the GST be scrapped, and that more measures be taken to control inflation.
Parliament last week passed the Bill that created the GST to lay the legal framework for the new tax to be implemented from April next year. It provides for fines for tax evaders, among others.
The government has also launched a major publicity campaign using billboards and the mainstream media, and a dedicated GST website and hotlines to convince the public that the new tax will not hit their pockets too hard.
It will soon launch a GST roadshow for all 222 parliamentary constituencies after Deputy Finance Minister Ahmad Maslan said on Sunday that public understanding was still below 50 per cent.
The tax rate has yet to be announced but it is likely to be around 6 per cent.
The GST is a crucial part of the government's plans to migrate to a broader-based tax system. At present, fewer than 15 per cent of Malaysia's 12 million workers pay income tax.
The opposition Pakatan Rakyat (PR) and some pressure groups have, however, taken up arms against the GST, saying that the new tax will be oppressive to the poor.
The high cost of living is one of the major platforms of the PR which blames the Barisan Nasional government for causing high inflation by rolling back food and fuel subsidies, which it said would be made even worse with the introduction of a GST.
The May 1 rally is the annual Workers' Day gathering but this year, it will focus on the GST, said Mr S. Arutchelvan, secretary-general of the opposition Parti Sosialis Malaysia (PSM).
The PR parties will be mobilising their supporters, along with other groups championing a variety of causes such as migrant workers' rights and environmental causes.
"It's a very important rally, meant to combine all causes close to the public. But the GST is the main issue," said Selangor legislator Rafizi Ramli, strategic director of Parti Keadilan Rakyat.
He said that while the GST is an efficient tax collection mechanism, its impact on society would be detrimental.
"Implementing it in Malaysia in the current situation would mean shifting the tax burden from the rich to the poor. Inflation will shoot up," he said. "Malaysia is not ready for it."
He said the deficit was caused more by excessive spending than a lack of revenue. "GST will never resolve the deficit problem if wastage isn't tackled," he added.
Mr Arutchelvan said the PSM regarded the GST as an unfair tax that is intended to make up the shortfall from a corporate tax which is gradually being lowered.
"It's a systematic shift towards taxing the poor," he said. "The income disparity in Malaysia is already among the highest in South-east Asia, and this will only increase inequality."
Think-tank Penang Institute's chief executive, Dr Lim Kim Hwa, said its study showed that GST would result in low- and middle-income households bearing a higher tax burden as a percentage of their income, compared to wealthier households.
But this has been disputed by the Royal Malaysian Customs Department, which conducted its own study that showed higher-income households would pay more taxes.
Its director-general, Datuk Seri Khazali Ahmad, wrote in a local newspaper recently that as essential goods such as basic food, piped water and electricity would be exempted from GST, the impact on the poor will be minimal.
He said its study showed that the tax burden on a low-income household would be about half that on a wealthy household.
The Malaysian government had introduced several measures to cushion the impact, he said, including cash handouts for the poor and reducing income tax.
While the impending GST remains unpopular, the government's publicity campaign has reached people like Mr James Ramendran, 33, an executive.
He said he was not too worried as he did not splurge on luxuries.
"But the government needs to ensure that the list of GST-exempted goods is a comprehensive and constructive one," he said.
This article was published on April 22 in The Straits Times.Get a copy of The Straits Times or go to straitstimes.com for more stories.