Monday, March 29, 2010

goods and service taxes??..

Recently, we all get hectic with the new-will-establish taxes by the government, the goods and service taxes...people all get mad and blame the government without any valid reasons for that things,.the most argue from the people is the taxes will burden them all..but, please think twice before you say something..First, let me just state that I am a huge supporter of GST.

Of course, any tax burdens the consumer. You can argue that zakat burdens you too. GST does not burden consumers greater than any other kinds of taxation. 

The government plans to implement GST to replace sales tax and services tax currently being used. The sales and services taxes are at between 5 and 10 percent, whereas GST is proposed at a lower 4%. Small companies are not subject to GST, and essential goods like food are usually exempt as well. Therefore, there is no justification to say that the poor or low income will suffer from GST.

The main motivation for the government to introduce GST is of course to increase government revenue. The higher tax revenue expected from GST, however, does not come from a higher tax rate, but higher compliance (more people paying it). Now, many businesses are not even registered, so they do not pay taxes, losing the government billions in revenue. The way GST is structured encourages businesses to register and report their activities.

A major problem to the government now is that it relies too much on income from petroleum (Petronas) as a source of revenue. We know that we will run out of petroleum soon. On the other hand, people are demanding more and more from the government everyday in the form of subsidies, scholarships etc.

According to experts, implementation of GDP will only lead to a small one time increase in price as we adjust to the new system. That is about the only negative effect. The positive effect is that it gives the government an efficient way of collecting tax. GST taxes consumption, so it does not 'punish' hard work like income taxes. Typically, when GST is introduced, income tax is lowered. 

No comments: