Review of GST

Malaysia has decided to defer the implementation of GST (goods and services tax or value added tax) for the forseeable future. They cited the burden and difficulty to low and middle income earners. A similar move by Hong Kong a few years ago was shelved for the same reason.

Why is GST, which is a part of the taxation landscape in the western countries, not acceptable to these Asian countries? I guess the key reason is the lack of a minimum wage and the wide disparity of income in the Asian countries. In this economic environment, GST will be a burden to the low income earners.

I have another strong objection to GST. It is a wasteful tax. It adds to the cost of doing business. The actual cost to business (and ultimately paid by consumers) is much higher than the revenue collected by the state. This situation applies to Singapore as well.

I suggest that GST in Singapore should be replaced by a flat rate tax of 4 percent on salaries and profits. A special approach will have to be taken for investment income (to be discussed separately). The employer can be allowed to recover the flat rate tax of 4% on salaries earned above $1,000 per month and will absorb this cost for employees earning below this salary.

Tan Kin Lian