The Hideous SST: "Consumers will pay 2 taxes at one go"

Cost of goods will go up with 10pc sales tax and 6pc service tax, says expert

THE Sales and Services Tax (SST) has two very different taxation elements, which could see consumers pay two taxes at one go.

As such, before the implementation of SST, two bills need to be tabled in the Dewan Rakyat.

Malaysian Association of Tax Accountants president Datuk Abd Aziz Abu Bakar said the two elements in SST were the sales tax applied to manufacturers and importers at a 10 per cent rate and the service tax of six per cent applied at the retail level.

He said he was made to understand that for SST to be enforced, both bills needed to be approved in Parliament as the tax would be applied at two different levels.

“In SST, the sales tax exists as an element where every level in the sales chain has a margin of cost for each item.

“Then, when it arrives at the retail level, the service tax will be added on.

“With both these elements, the consumer will pay twice, meaning the cost of goods will increase,” he told the New Straits Times Press.

Finance Minister Lim Guan Eng had said that SST, set to begin on Sept 1, would be set at between five and 10 per cent for sales and six per cent for services.

He said unlike the Goods and Services Tax, the sales tax would only be for certain products.

He also said the service tax would apply only to certain sectors.

Aziz said GST had been introduced as the previous SST had failed to overcome the problem of leakage of taxes stemming from the failure of manufacturers and importers to pass on collection to the government.

GST, he said, had prevented errant manufacturers and importers from “running away” from passing on collection of taxes to the government.

“For SST, even though only manufacturers and importers are taxed, they can pass on the cost to consumers by raising the prices of goods at every level, from factory to retail.”

He said because GST was an efficient mechanism, errant business which had “run away” from passing on SST collections to the government found that they could not under-declare income taxes.

“GST collection was at RM44 billion per annum because a large portion was being paid by those who had escaped during the previous SST era, and the ‘hidden economy’ also had to come out in the open, allowing the government to collect taxes.

“What this means is that not all the RM44 billion was from the people, but from these errant manufacturers and importers.”

By Rohaniza Idris, KL
New Straits Times, 19 Jul 2018