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What are the shortcomings?

As a result of the implementation of the GST, it is not going to be a smooth ride. There will be problems from it and below are four consumer-related problems that can results from GST. Increase in disparity because GST will apply to everybody irrelevant of their income level and hence also nown as the proportional ta! system. So how is the GST going to affect the poor more? To illustrate, we have two individuals, A with an annual income of "#$%,%%% and & with an annual income of "#'%,%%%. (n a )rogressive Ta! system A is paying a *+ ta! or "#,,-*% for his "#-*,%%% income and & is paying -%+ ta! or "#,.,%%% for his "#'%,%%% income. (n this respect the poor man pays only "#,,-*% for his ta!es while his richer counterpart pays "#,.,%%% for his ta!es. (n a )roportional Ta! system everyone pays the same rate or ,*+ ta! in this case. A with an annual income of "#-*,%%% will be paying "#$,/*% while & with an annual income of "#'%,%%% will be paying "#,-,%%%. So, obviously the poor man is going to have less 0"#-,,-*%1 after the ta! deduction whereas the wealthier man still has much left 0"#.',%%%1. Similarly, with the implementation of the proportional GST of .+, who is going to pay more in monetary terms? 2ence, will the low and middle income or the high income group suffer more? Increase in prices. (n understanding how ta!es affect the prices of goods and services we must understand the two concepts of ta!es. 3irstly, we must now that ta!es impacts the prices of goods and services in two ways namely ta! incidence and ta! impact. Ta! impact refers to the initial point of the ta! or the impact on a company or consumer. Ta! incidence refers to the final resting place or the burden of the ta! where it ended. As for GST the first impression is that it will be levied fairly to everybody since it is proportional. Thus it also gives the impression that the initial impact will be on the companies. 2owever companies are able to shift the ta! burden bac wards to the suppliers or forward to the consumers. (n economics this is called the shifting thesis. 2ow do they do it? To reduce the impact of GST, companies can shift the tax burden backwards by pressuring suppliers to reduce their prices by a couple of percentage. With the current slowing economic conditions, ( am sure most suppliers are willing to oblige. Thus the initial impact of the GST has already been ta en cared because of price reduction from suppliers. Another method to shift the ta! burden is to cut wages. Since buying more machineries will have some ta! advantage and hiring more people doesn4t give any ta! advantage, employers can then threaten employees to accept lower wages or ris being fired. This is because the company can now afford to hire less wor ers by automating their production processes.

5ow to shift the tax burden forward to the consumers by increasing the price by .+ or they can reduce the portion 0as in 36&1. 2ence, in the end the companies will be better off in two ways, first by paying .+ GST on the bac end but receive price reduction from suppliers and second from reduced wages and hence more profit. 7n the front end consumers will be charged higher prices 0.+ GST1 but a smaller portion may be served 0as in 36&1. The poor consumers will be hit by full brunt of the price increase because they cannot shift their ta! burden either forward or bac ward.

Risk of Recession or slowing down of the economy. This will be caused by the Crowding Out effect on the money supply. When our Government raise funds through non-moneti8e deficit financing activities such as cutting subsidies or broadening the ta! receipts through GST, it will have the effect of 9rowding 7ut or displace the consumer and private business credit. This is because our Government is soa ing up the money from the economy, money that would otherwise be used by the consumer to spend and the business to invest. At the end of the day this could reduce both private consumer and business spending and thus will lead to lower economic activity and worsen the recession. 7ur Government should also now that by soa ing up money from the e!isting money supply will lead to lower economic growth and hence might cause a recession. A recession means lower future ta! revenue from both the private consumers and businesses. What is our Government going to do ne!t when ta! revenues collapse? (ncrease the GST from .+ to ,%+ and further rationalising of subsidies? 7r further moneti8e its debts by increasing its borrowings by raising the :ebt ceiling?

A rise in corruption. Since every company is sub;ected to the authority4s scrutiny hence is obliged to eep an orderly and tedious account. They have to report all their incomes, e!penditures and the amount of ta! to the authorities. As empirical evidence emerged from <uropean countries with e!perience with =AT, companies tend to over-inflate their e!penditures and hence reduce their value added. :iscrepancies are bound to happen and this will give an opportunity for the powers to be to abuse their power and hence corruption. (n the end it helped flourishes a brand new industry and that is fa ing invoices.

GS !R"#"$ S %O&'(" A)A IO$ They also pointed out the SST could lead to double ta!ation, that can prove to be a demerit to consumers. >Going bac to the carbonated drin e!ample. When buying the carbonated drin at a hotel, not only does the consumer pays an additional "#,.%' in ta! under the current system, the hotel4s profit carries a . percent service ta! on the sales ta! already charged by the drin manufacturer,? both of them e!plained further in their article.

2owever, they pointed out the problem of double ta!ation is addressed in GST as the ta! paid by the hotelier is recoverable as input ta! credit and does not form part of the cost to the hotel. Therefore under the current system, the drin costs the consumer "#,@.*'. Ander GST, the drin will cost the consumer "#,$.-*, that is B percent 0or "#,.$$1 less. So did the carbonated drin become . percent more e!pensive? :efinitely not. Therefore, consumers should not forget that they still stand to benefit under GST.

Why we need GST in Malaysian Budget 2014


October 26, 2013 by sabrie

Malaysians, when they see MLM, property or gold flourish, they flock to it like theres no to orrow! Lesson #1: Because, we, as a people are driven by emotions and sentiment. Malaysians, when the MLM, property or gold arket crash, they run away like cra"y!

Lesson #2: Because, we, as a people fail to see the actual / reality of something. # sure we ha$e seen our friends who flirted with beautiful girl and yet when they got arried they fall into di$orce %so e not all& 'hy so( )ecause the an is dri$en by ade the * arket+

senti ent, and when he understood the actual attitude of his wife, he crash % etaphor for di$orce&! 'hat do this ha$e to do with the Malaysian budget( ,$erything! 1! 2! 3! .!

'e Malaysians are dri$en by e otions, we want that subsidies but yet we dont want to pay for it! 'e Malaysians want large welfare progra we blabber on wasted spending! 'e Malaysians want higher inco e yet we do not work to ad$ance our skills - education through lifelong learning! 'e Malaysian /M,s co plain of costs and increase profits! ini u wage yet we do not focus on producti$ity to cut es, which lead to such a big go$ern ent, yet

'e dont care, yet we want it! 0eriod! 'ho cares if the go$ern ent couldnt pay, # the rakyat! # should get it!

#f the rakyat continues to ha$e this attitude, its perfectly fine for capitalists! 'hen a country is strong e otionally but weak in its structure, our econo y can go into a recession!

1ow so( #ll su

it up in econo ic ter s2 3/ recession, 4,, capital inflow, 4, tapering,

capital outlflow, 5inggit weakens, #nterest rate increase, 60L increase, tightening of credit, Malaysian recession! #n lay an ter s2 ru ah kita tak cukup si en tapi kite nak duduk tingkat 3 sbb ade bilik paling cantik dala ru ah! )ile ru ah retak, se ua lari dari tingkat 3! 7alo nak se ua

duduk tingkat 3 kene kuatkan si en, etc! /a e with our belo$ed Malaysia! Our in$estors will pull out their kurangkan print oney when they are left with no oney %because 3/ tingkat 3!

oney& and they see so ething retak, they run away fro

'hen that happens we are left with an econo ic recession! Our econo y is always positi$e because of the go$ern ent control of edia! 8ctually it is

fueled with debts! 8ll this businesses flourish because consu ers use debts %credit card, personal loan, refinancing, easy credit for business, etc&! 6ot to say we are still anufacturing low $alue things, sa e to 20 years back! 9/: is ;ust in eant to reassure our in$estors not to lari fro tingkat 3! :hat we are putting

ore si en so dont worry!

#ts ;ust reassurance %senti ent&! 8nd 9/: is only a short ter easure to a$oid collapse!

'e Malaysians need to work hard on i ple entation, transparency in spending, being accountable for e$ery 1 cent spent and understand the *real+ picture is what atters the

ost! Our hu an capital as well needs dire attention! # know the new blueprint is good in ter s of perfor ance based culture! )ut # worry of the i ple entation! 'e are known for great policies but i ple entation < fail! =or e>a ple2 tabung usahawan siswa"ah for graduates take 6 onths ? 1 year for

disburse ent! # agine the reality, business cannot afford to waste ti e because they will fail! # worry 9/: is good, but when they that ti e, 0akatan 5akyat doing 9/: now! # su 1! it up in 2 things2 /enti ent2 people are herds! they are dri$en by senti ent! :his is short ter ! ethod i ple ented is bad, there goes e$erything! 8t not

ay ha$e been right about this, but # dont agree on the

2!

/tructural2 people are by nature forgetful, they >bersyukur! :his is long ter ! inions at Mc@,

'hen you do so ething like in$est, do business, choose to do MLM, buy classify it! #s it no! 1 or no! 2(

#f it is no! 1, it will likely fall soon! #f it is no! 2, it will stand for a long ti e! Like Lu>or MLM and 8 way MLM! 8 way has structural, while Lu>or ha$e senti ent! :hats why y business focus so uch on the structural % anage ent syste s, people

planning, product enhance ent&, etc! )urger )akar as a trend itself, should ha$e been dead 1 year back! :hats the for ula why we are still profiting e$ery single /ingapore ha$e both no! 1 and no! 2! Malaysia unfortunately, ;udging fro /ad! 'arren )uffet can su this up with his Auote2 our rakyat and our go$ern ent, ha$e ore of no! 1! onth now!

Be Fearful When Others Are Greedy and Greedy When Others Are Fearful
.., An end to cascading effects This will be the ma;or contribution of GST for the business and commerce. At present, there are different state level and center level indirect ta! levies that are compulsory one after another on the supply chain till the time of its utili8ation. ..- Growth of "evenue in States and Anion (t is e!pected that the introduction of GST will increase the ta! base but lowers down the ta! rates and also removes the multiple point This, will lead to higher amount of revenue to both the states and the union. <liminate the multiplicity ta!ation 7ne of the great advantages that a ta!payer can e!pect from GST is elimination of multiplicity of ta!ation. The reduction in the number of ta!ation applicable in a chain of transaction will help to clean up the current mess that is brought by e!isting indirect ta! laws. "educes the corruption (t is one of the ma;or problems that (ndia is overwhelmed with. We cannot e!pect anything substantial unless there e!ists political will to root it out.

"educes average ta! burdens

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