Poor families have little to cheer about GST

KUALA LUMPUR: All the reasons trotted about the benefits of the goods and services tax (GST) for the nation makes no difference to the man on the street who doesn’t earn much.

The poorer households will feel the effects of GST because a higher proportion of their income will be spent on GST.

Those in the high-income bracket would pay more on taxable items but they will hardly feel the pinch while middle-income earners would be able to cope, reported The Malaysian Insider.

These findings emerged from a survey of 12 families in the Klang Valley to gauge the impact of GST.

The 6% GST comes into effect on April 1 and the only good news for all is that, almost all common fresh foods will be exempt, such as fish, poultry, mutton, beef, vegetables, fruits, herbs and seafood.

Some processed foods such as bread, rice, sugar, salt, belacan, tea, coffee, fresh noodles, infant milk formula and white flour will also not be taxed.

But almost all household items and toiletries, such as soap, shampoo, detergent, floor cleaner, dish washing liquid and insecticide sprays will be taxed.

Most over-the-counter medicines and all kinds of clothes will be taxed as well as shoes, bags, make-up and other beauty accessories,

It is estimated that only 1.7 million Malaysians pay income tax out of a workforce of 12 million, and according to the government, the GST is fairer and more transparent because those who consume more, pay more.

To cushion the effects of the GST, the government is expected to slash personal income taxes by between 1% to 3% for all income brackets.

But this is hardly good news for low-income families.

The three families surveyed who made RM5,000 or less were quite worried about the GST’s impact on their ability to make ends meet, despite the fact that they would not pay that much GST if they bought the same things.

However accountant Aziz Mustapa, 63, would likely have more taxable items in his shopping basket if his spending pattern remained unchanged yet he was relatively unworried because his household income was between RM10,000 and RM15,000 a month.

Most of the five families in the middle-income range of between RM5,000 and RM12,000 a month were somewhat worried but confident they would be able to get by.

The most pronounced consumption trend was that high-income households tended to buy more processed foods, which would be taxed such as chocolates, biscuits, chicken nuggets, potato chips and fruit juices.

The receipts of the four high-income families showed that out of the total number of items they bought, 55% to 89% would be taxed. They had fresh food, but the proportion of fresh food to processed foods was slightly higher, compared with low-income families.

For the high-income families in the survey, processed food made up 40% to 48% of all food they bought while for low-income families, processed food comprised 35% to 45% of all food.

Low-income earners still bought processed foods, such as jam, butter, peanut butter, instant noodles, coffee, creamer, soy sauce and biscuits, which would be taxed.