GST - yes no yes no yes yes yes no!

16th June 2009 – The Second Finance Minister announced that govt has no plans to implement GST in the near future.

24th Nov 2009 – Prime Minister announced GST bill to be tabled in Parliament.

11th Mar 2010 – Second Finance Minister dismisses speculation that GST will be called off.

8th Apr 2010 – The same Second Finance Minister who dismisses the above speculation announced that the GST will be delayed beyond 2011.

The trend seems to be this… whenever they deny something, it always turn out to be true. Remember the no-election and bam… election was announced. It’s amazing how some people still trust them…

I guess it’s good news. But……. How the hell am I supposed to tell this to my big boss in London after being so convincing just a few weeks ago that it will be implemented? There goes my credibility… thanks to…


1 year ago… Consider this

2 years ago… When you think you’re thinking the right thing… A different kind of “doing dutch”

I never said GST is bad

I think there is a need to make this point clear. I have never said GST itself is bad. It is an efficient tax collection mechanism, one that ensures an equal spread of tax burden. Just like how some readers have highlighted, GST is currently functioning in many countries. It would appear that it has a proven track record and hence, we shouldn’t be complaining about GST.

The above are all true, I wouldn’t disagree with them. In fact, I would even say that GST is good.

However…

Just like a friend of mine said… GST is good in “chaotic and racist countries” like UK, Australia, Singapore, etc… but for a “beautiful” country like Malaysia, GST is no good.

Consider this… is democracy good? It certainly is… but is democracy in Malaysia good? I hope you get my drift.

For a start, it is claimed that only 15% of Malaysians are tax payers. The rest are either retired, which means they enjoy tax exemption, or their income are below the tax paying range. When GST comes into the party, everyone will have to pay tax. Is GST good in this situation? It is good because it spreads out the tax collection net and increase govt revenue, but it’s bad because a lot of people who don’t really need to pay tax will now have to pay tax.

Certainly; more tax revenue collection for the govt under a normal situation, is a good thing. It means the govt have more money for development of the country. But for a beautiful country like Malaysia… do you think they will use the money to develop the country and improve things… or will they use the money pay commission for buying submarines that can’t dive?

Right now, some of you might be thinking… GST, proposed at 4% is supposed to replace sales and service tax of 10% / 5%, surely such a reduction in rate will benefit us…!

I am not going to go into the detail mechanics on how GST, despite only at 4% will still result in us having to pay more tax. The bottom line is, govt is going to collect an additional RM1b from GST. Please note the keyword “additional”. I am not going to elaborate further.

Next, GST will result in additional cost for businesses. This happen in all GST/VAT countries. As to why companies will incur additional costs, I have already blogged extensively about it.

In other GST/VAT countries, there is strict enforcement to ensure that additional costs arising from GST will not be cascaded to consumers. If they find any companies cascading such costs to consumers, these companies will be in trouble.

Now, for a beautiful country like Malaysia with their very civic minded businessmen, do you think companies will refrain from cascading GST costs to consumers? And, do you think our super efficient law enforcers will ensure that consumers’ interest will be protected?

Last but not least, we are talking about a beautiful and efficient country like Malaysia trying to kick-start a very complicated and sophisticated tax regime. The last time something like this was done was the implementation of self-assessment for companies. It was a huge mess. Till today, there are still some grey areas that are not fully addressed. Will the implementation of GST be properly done? Only God knows.

There are many more things that I can write about. But I am sure you already know what I am trying to get at. Besides, I am tired of hitting the same nail again and again.

So just let me reiterate… GST is not a bad thing. It’s a good tax regime, designed with an effective and efficient tax model. But when mix GST with Malaysia, that’s when the equation takes a whole new dimension.


2 years ago… The conversation with the driver

3 years ago… A very misleading document

The reality of GST

In the past weeks, I have been trying to explain GST to a lot of people; ranging from acquaintances to friends to colleagues to business heads. I ended up with a common conclusion… it is very difficult to get these people to understand the technicality of GST.

I suppose I should be glad. If everyone can comprehend the topic easily, people like us will be out of job…

Anyway, I have tried to explain one very important component of GST, i.e. input tax. I even tried to sexitised the topic, but people only got the sex part, not the concept. Let me tell you, it is an element that will impact us all.

Right… let’s not get technical. The thing is, input tax recovery rate will impact costs composition of companies. It means, the profit of companies will be affected. But do you think companies will allow their profit to be impacted?

All the best tax brains in the country have been hired by big companies to ensure that these companies will not incur additional cost due to non-recovery of input tax. They are screaming to the relevant government agencies, that they want full recovery rate. And behind the scene, they are plotting, that if there is no full recovery, any additional cost will be passed on to consumers.

It simply means… prices will increase…

In consultations with the govt authorities, agencies or discussions in industry associations, I have heard how these people refer to companies as “we” / “I”, saying things like… “I don’t want to incur out of pocket costs”… “We will be suffering if we don’t get this through”… and the ultimate…

“If we don’t get it, we will just pass the cost to customers. We have no choice”

Isn’t it amazing (and sad), that humans can be so focus when they have been “paid” and forget that they too, are part of the community. They, their families, their friends… are the “customers” they are referring too. But they can’t see that far, they only see the salary and fees that the companies pay them.


1 year ago… How tasty are your nasi lemaks?… Behind the economic scene

2 years ago… London cooking adventure

GST – time is of the essence

GST is known to be a political suicide. In Hong Kong, the resistance from the people was so strong, the HK govt actually abolished their plan to implement GST. But as I have said, there is a compelling reason as to why GST has to be implemented.

Political suicide vs. a compelling reason… what’s the remedy? Timing…

March 2013 is the due date for the next GE. Hence, GST will have to go live latest by September 2011, by hook or by crook. Why?

We Malaysians are just whiners. We will just complain and complain and at the end of the day, we will just pay. Just look at toll charges. And is anyone complaining about the RM50 on credit cards anymore?

Therefore, Malaysians will be given a period to complain. 1.5 year should be sufficient, don’t you think? And so, by March 2013 when the next GE is due, all Malaysians will be happily stuffing our face with nasi-lemak, char-kuey-teow and bak-kut-teh like nothing has happened.

Don’t you agree?


2 years ago… Experiencing Hillsong in London… The weekend gem… A very safe “X”

3 years ago… A very close encounter with the rempit kind

GST - Explaining input-tax with sex, blowjobs and handjobs

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GST – knowing the 3 basics

I have really been getting quite a number of mails asking me about GST. Let me reiterate, I am not a GST expert. In fact, no one in this country can be considered an expert since it has never been done in this country before. Even the top tax consultants in the big consultancy firms have to import expertise from Singapore and Australia to assist them in providing consultancy services.

Hence, what I am sharing is just what I know and what I think you should know in preparation for the imminent.

A mail from GanKC asked me “Zewt, what is the difference between exempt and zero-rated? Isn’t that the same thing?”

Good question!

Like I said, to talk entirely about GST is going to take ages. So let’s just start with the basics. In understanding GST, one has to know that GST is segregated into 3 supplies.

Taxable supplies --- as the name suggests, this comprises of goods and services which will be taxed at the prevailing GST rate.

Exempt supplies --- again, as the name suggests, this comprises of goods and services which will not be subject to GST. This should include essential goods such as nasi-lemak, char-kuey-teow rice, sugar and salt.

Zero-rated supplies --- now, this is the tricky one. This actually comprises of goods and services which are taxable, i.e. subject to GST… but… the rate of GST is 0%…

Isn’t exempt and zero rated the same as what GanKC asked? The answer is of course… yes and no.

Yes to the consumer as he/she will not be paying GST.

No to the trader/vendor due to this important element in GST… known as “Input Tax Credit”.

What is Input Tax Credit? Well, the title of this post is “knowing the 3 basics”. Input Tax Credit is no basic. It’s rather complicated. No worries, I will tell you more about it and how it will affect you later.

For now, I hope you that you learned the 3 basic points of GST as mentioned above.

GST – the compelling reason

If I were to tell you that Malaysia desperately needs GST, what would be your reaction? Would you think that it’s because our country needs the money? Perhaps… but there is a more compelling reason…

In order to dwell into this notion, we need to digress a little… to this thing called “credit rating”.

Do you know that each of us have our very own credit rating? When we apply for loans, mortgages or credit cards, the banks will approve or reject our application based on our credit rating. It basically measures whether one is worthy to be give a loan or otherwise.

Besides individuals like you and me, companies also have their own credit rating. When companies apply for loan, their credit rating will be assessed, just like individuals.

Now, do you know that a country also has a credit rating? It is known as the “Sovereign Rating”. Essentially, it determines whether a country will be able to borrow from others. The poorer a country’s Sovereign Rating, the more difficult a country will be able to borrow from others.

Do you still remember when I blogged about the 2010 National Budget where I mentioned that if Malaysia is a company, it will be a company which has been running on losses for quite a number of years running due to continuous budget deficit situation? That is to say, this company called Malaysia has been borrowing in order to keep going. And to continue to borrow when you have been borrowing for a long time, a country needs a strong Sovereign Rating.

Here lies the problem. With the country continues to run on a high budget deficit situation (i.e. loss), the world governing authorities have “heavily hinted” (actually, I would prefer to use the word “threaten”) to downgrade our country’s Sovereign Rating.

My friends… this is no laughing matter. I can't even think of words to describe the magnitude of this, if it happens. I am sure all of you, in your own intellectual ways, will piece together the consequences, if it happens.

And so, in order for a country to enhance (in our case --- to preserve) one’s Sovereign Rating, a broad-based consumption tax mechanism has to be put in place. I have to be honest here, I am actually not sure if this is a prescribed rule or a directive from the world governing authorities. One thing for sure, this is where GST comes in.

Trust me, if you are a Malaysian, you do not want our country’s Sovereign Rating to be downgraded. Don’t get me wrong, I am not supporting GST. Definitely not, particularly when we all know the level of efficiency on how the money collected will be spent.

I am just saying that we are where we are today because we are in a very screwed-up situation. And why are we in this screwed-up situation? Well… sam jiu lah…


1 year ago… The reality of reality shows

2 years ago… The fear evolution… Do you believe in miracle?… Marriage brownies points

Answer to GST snippet and how it affects you

In the snippet, I asked this question…

“Apart from the govt, there is a group of people who is smiling in the sleep and quietly celebrating because GST is to be implemented. Who do you think this group of people is?”

Thank you for all your answers and kudos to ThomasChan for getting it right. The group of people that I am referring to is the elite bunch of people, the professional tax consultants from the professional firms. I know some of them, and they are really smiling in their sleep.

90% or more of companies in Malaysia; be it big, medium or small will need their service in the next few months. They will be rendering their professional advice in terms of initiation, preparation, implementation and setting up of processes to manage the compliance requirement and payment.

Another group of people who will benefit from the introduction of GST is the IT industry. There will be a lot of system enhancements, translates to a lot of business. But I think this group of people is not quite aware of it yet.

These people are going to make 10s or even 100s of millions in consultancy fees. Trust me when I say they are now smiling in their sleep. Of course, only the top partners will make the big bucks. Those slaves doing the ground work at the bottom will just earn knowledge and lots of sleepless nights.

But anyway, why did I say in the title and it will affect you? Do you think it will affect you?

When 10s or 100s of millions are going to be earned by these consultants, it also means that 10s and 100s of millions will be spent by companies in Malaysia. What does that tell you? Get the drift yet?

10s and 100s of millions being spent means there is additional cost to businesses in Malaysia. Huge additional cost! Now, what usually happens when companies or even small time traders incur additional cost? Think increase-in-price-of-petrol.

Yes… these 10s and 100s of millions of additional costs are going to be passed down to consumers, i.e. you, me, your uncle, your boyfriend, your girlfriend’s one night stand partner, your girlfriend’s one night stand partner’s dog’s mating partner’s owner, etc.

Some of you mentioned that retailers are going to benefit from GST. That is not true is GST is effectively implemented. They can merely pass the cost to the consumers without raking in more revenue and remit the collected GST to the govt due to enticing need to claim input tax recovery (I shall talk more about this later).

Anyway… prices are going to increase. And this is why I said that if you are only worrying about that additional % of GST that you need to pay, you are wrong. And let me assure you, these 10s and 100s millions of additional cost is not the end of it. There are more complicated issues in the GST that will affect you, me, your boyfriend; your girlfriend’s one night… well, I am sure you know what I mean…


1 year ago… A new criterion

2 years ago… Will this point hit you?

GST snippet

It is a very complicated taxation mechanism. To explain it would take numerous write-ups, and I might just end up confusing you even more. I received a few e-mails asking me about it and I will try my best to explain it in the simplest form possible. But I have to let you know that I am no GST expert.

Since weekend is on the way, let’s leave GST talk for next week. However, let me leave you with a teaser…

Apart from the govt, there is a group of people who is smiling in the sleep and quietly celebrating because GST is to be implemented. Who do you think this group of people is?

On a related note, I was in a consultation group with a top govt agency this morning regarding GST where a lot of P&C information was disclosed and discussed. Sorry that I can’t share with you, it’s P&C. Anti-Zewt claimed that I was only boasting when I claimed I have access to such information and he/she knew such information too. Perhaps anti-Zewt can share what’s in that consultation… can he/she?



2 years ago… Light Monday read… My very own encounter… Why the fortune teller failed to tell my fortune