The current tax system is unfair to the middle class and lower income groups.

We agree with the current tax system is unfair to the middle class and lower income groups. The principle issues worried about the execution of GST is the expenses of the products will increment which will load the general population in the nation. Despite the fact that the administration guarantee that the execution of GST won't hurt the organizations and individuals as the assessment paid on the inputs at the past stage is claimable or deductible, by and large the expense of products will at present increment as the makers pass the full esteem added to the end shoppers at the last stage. Therefore, there might have expansion impact subsequent to the GST is connected to the costs of all merchandise, at each stages which bring about swelling as the general items costs may go up and the hyperinflation may happen from the persistently of swelling.

There might have constantly impact from the items costs go up. The interest of the business sector may significantly diminish because of the constrained acquiring force of family units. Numerous individuals contend against the GST is that the general population would not be able to pay for it as the high average cost for basic items cannot be met by their present salary needs and GST would unduly load the low wage working gathering. Because of the expanded items costs and high average cost for basic items, individuals may but rather ready to spend their constrained acquiring power and the business sector interest will generously influenced.

In spite of the fact that the administration guarantee that the GST would not hurt organizations because of GST claimable practice, truth be told it will hurt the organizations as well. This is a result of the low request in the business sector because of the high cost of item go to the end shoppers, the organizations need to diminish the supply to meet the present state of lower interest, hence the organizations need to chop down the costs, for example, work cost because of the lower yield required and in the long run there might happen high rate of unemployment. In addition, the organizations is not creating in the productive conditions as they are not augmenting the use of the machines, rental and so on and all these will lead them to scale back their organizations and in the long run lead to the retreats in a nation.

What's more, GST is another type of wide based assessment that will affect the lion's share of Malaysians who are not the citizens now. In spite of the fact that the administration asserts that the execution of GST would not load the general population in light of the fact that the wage charge rate is not expanding, indeed the GST is expanding the weight of Malaysians who are not the citizens now. This is on the grounds that some individuals is not qualified to pay for money charge where their salary is under sure sums, so the wide based expense framework GST will effect on those low wage specialists who are not the citizens now as they will need to pay for GST when they expend and make buys.

Numerous individuals is stressing the rate of GST may potentially increment later on with a specific end goal to increment for the administration income. This is on the grounds that numerous nations have expanded the rate of GST after its initiation. Individual’s desire and estimation on the expanding rate of GST later on will bring down the general population utilizations as they are unwilling to spend more on the merchandise and rather they are making all the more sparing. The beginning rate of GST is lower than the deals and administration charge, however individuals is stressing the GST rate may considerably higher than the present deals and administrations charge later on.

 

 

In addition, some individuals is contending that the GST ought not be actualized as the acquaintance of GST may lead with higher obligation level of the nation as different nations happens, for example, Greece and Italy. Subsequently, GST has not helped in the improvement of the nation and its would not help in lessening the nation's obligation level. In addition, the proposed usage GST is to upgrade the productivity and adequacy of the current expense framework, however its strength difficult to conform to it’s as it including complex bookkeeping framework and required appropriate review frameworks as well. Ultimately, individuals is stressing that the redistribution of expanded expense income won't not be accomplished or unjustifiably. Maybe executing GST will constrain purchasers to spend less and more cautious in the retail decisions as individuals are trepidation of the startling expansion and outcomes result from the usage of GST.

        In other words, the tax will impose a smaller burden (relative to resources) on those who are wealthier. It is expected that the lower income earners will pay more GST(GST) payable as percentage of income) than the higher income earner. The authors also found that it is not possible to make GST a progressive tax and reduce the GST burden on the low and middle-income groups if it is necessary to raise the same amount of tax revenue. Therefore, the low- income households will bear the higher GST tax burden. On the other hand, is only collected from those who have surplus wealth and nothing is taken from those who have no surplus wealth

        The execution of GST could raise obstructions to upward social versatility for the lower salary family units (Zhou et al., 2013) . Low - salary families spend more on essential things, for example, sustenance and utilities. A charge on nourishment utilization in addition to other things, will promote limit the ability to put something aside for some of the lower salary family units. Without adequate reserve funds, the poor could confront colossal challenges in collecting resources or have better access to data innovation and instruction . Resultantly, GST is broadening the separation between those who are well off and have notes. On the other hand, the motivation behind is to redistribute riches from those who are well off to the have notes.

        

       Besides, wage bolster gave to the low-wage family units would bring about upward move sought after for products and administrations, particularly essential necessities of life, for example, nourishment and attire. The news about this issue as below:

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.

As a conclusion, GST is a regressive tax and imposes a burden on end-user consumers of products. GST seems to have a negative impact as lower income earners pay more tax than higher income earners. It promotes inflation which reduces the purchasing power of consumers, and raises barriers to upward social mobility for the lower income households. In the long run, inflation may trigger higher interest rates and dampen private investment as well as overall economic growth.

References:

Palil, M. and Ibrahim, M. (2016). The Impacts Of Goods And Services Tax (GST) On Middle Income Earners In Malaysia. [online] ResearchGate. Available at: https://www.researchgate.net/publication/266036213_The_Impacts_Of_Goods_And_Services_Tax_GST_On_Middle_Income_Earners_In_Malaysia [Accessed 3 May 2016].

prezi.com. (2016). GST & HOW IT EFFECTS LOW INCOME EARNERS. [online] Available at: https://prezi.com/newk83frd7hf/gst-how-it-effects-low-income-earners/ [Accessed 3 May 2016].

Earners, I. (2015). Financial Market Analytics: Implications of GST on the Malaysian Low and Middle Income Earners. [online] Samcheekong.blogspot.my. Available at: http://samcheekong.blogspot.my/2015/03/implications-of-gst-on-malaysian-low.html [Accessed 3 May 2016].