Squeezing a piece of dry cloth drier !

Malaysia faces the prospect of dwindling income from petroleum, since petroleum is a depleting resource and will not be there forever. After suffering the curse of oil, which has resulted in massive misuse of petrol money and wasteful expenditures like massive buildings and bailouts, we are now staring at a future without oil money.

To cover for the loss of income from oil, GST is to be implemented in a year or 2.

In theory , GST is a good tax, and it will be good for the country if income is growing and people’s earning is expanding.

GST taxes on goods consumed and so is a form of consumption tax. It expands the revenue base of the government, and as a form of consumption tax, it discourages wastage and encourage wiser spending by individuals and hence maybe considered a form of ‘green’ tax.

It is a fair and equal tax in principle since everyone is subjected to this tax as long as you buy things or get services. But in reality, it hits the poor more than the rich .

A 4% increase in goods will be nothing to a high income earner and would do little to discourage his spending habits. But a 4 % increase in goods and services consumed to a middle-income person will be felt quite badly, and he or she  has to budget and reduce spending in order to save the same amount of money for a rainy day.

But to a low-income earner already struggling to survive especially in Urban and semi urban areas, a 4 % increase in goods and services will really burden him, and when income is insufficient to cover expenses in order to survive , he has only 2 ways to resort to: either turn to the loan sharks, in which case his life will be even more miserable    OR he may turn to crime..

A GST tax is good when the income level of everyone is rising and when the country is prospering. That way, the pinch felt would still be tolerable.

But in the words of a deputy minister, ‘ Malaysia’s economy has been stagnant for the past decade”, a situation all of us know. So a GST tax at this stage when the economy is not growing will only push a big segment of population below poverty line.

IN fact, Malaysia’s economy has been stagnant since 1997, more than a decade.

A fresh university graduate earns about 1500 a month then. A fresh university graduate  earns about the same amount now, even though the money is much smaller now than 12 years ago, taking inflation into consideration. A cup of coffee costs more . A plate of chicken rice costs more. Income remains stagnant.

On top of that, his expenses has gone up. In 1997, he did not have to worry about handphone bills. Now he has to foot handphone bills since handphone has become a necessity. In 1997, he did not have to pay much for internet services, but now, he has to dig out money for broadband, which is also considered a necessity to a university graduate if he wants to keep up with knowledge. The lifestyle now necessitates certain expenses which were not there 12 years ago, but is considered a necessity now.

Urban dwellers are now like a piece of moist cloth being squeeze for water. The moist cloth is fast becoming dry and still, there is relentless effort to squeeze it drier; any drier, however, the cloth will be full of irreparable holes.

I hope the implementation of GST can be delayed until the country’s economy start really moving again. In the mean time, the government can easily find the 1 billion revenue (which GST is supposed to raise) by more careful and prudent spending and tackle corruption at the top levels.

(This is the 1000th post of this blog — nothing to shout about but there is definitely some satisfaction in my inner self for being able to sustain and persevere in spite of all the shortcomings , busy schedules and pressures).