Tax evaders cannot escape from paying GST

I AGREE with the comments by Tan Sri Mohd Sheriff Mohd Kassim, “GST should be retained” ( The Star, July 11). The former secretary-general of the Finance Ministry has hit the spot on the advantages of the GST system.

The Inland Revenue Board of Malaysia also has a long history and is presently contributing to a large share of the national coffers.

What one has to admit is that, despite all its efforts, there will always be a significant segment of the population who would shirk their responsibilities to pay fully the income tax that is due.

This is a worldwide phenomenon and every tax authority’s nightmare.

GST comes in handy when combating non-compliance in paying income tax. It is human nature for those with money to satisfy their needs and wants. After all, how long can one hoard cash?

We can understand and accept needs-based consumption. These may merit a lower GST rate or even exempted. Those who avoid paying income tax but indulge in satisfying their wants, more so on big-ticket items and lifestyle purchases, be it goods or services, should not escape paying consumption tax.

What the government has to calibrate before considering the reimposition of GST is the range of goods and services that ought to be taxed and the rate.

It is true that making the poor and needy pay GST on any essential item is a sure trigger to social unrest. A wide range of items used for day-to-day living and essentials can be zero rated/exempted.

The government can configure GST rates and goods and services to capture lifestyle consumptions and big-ticket items purchased mainly by those who have income surpluses.

Even those in the shadow economy who are making big gains but not paying taxes will somehow, somewhere, sometimes have to use their money and therefore cannot escape from paying consumption tax.

GST can then be seen to complement income tax. This is not to say that those who have already paid their taxes and still pay GST on big-ticket items lose out to those who have avoided paying tax but only pay GST. As they say, only two things are certain in life – death and taxes. The long arm of the taxman will surely tap them on their shoulder one fine day. Expensive lifestyle purchases are a very likely wealth indicator that would call out the attention of the tax authorities.

GST and income tax rates, as fiscal policy tools, can be adjusted accordingly as we become a high income nation with narrowing income disparity. To be competitive globally, income tax rates have to eventually be lowered but GST should remain true to the maxim – the greater the spending power one has in satisfying wants, the bigger the consumption tax one pays.

THINKING ALOUD ALLOWED Kuala Lumpur