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De minimis on the GST:

First, there must be a commensurate reduction in personal income tax. I still maintain that the ultimate target should be an 18% top tax rate. This will help to put Malaysia back on the competitive map.

The main purpose of the GST is as a new, efficient source of revenue for an increasingly-cash strapped, debt-laden government. In other words, the whole point of the GST is to be a new tax and a new additional source of revenue.

I hope there is true sincerity and genuine understanding on the part of the government regarding the true effect of the GST because all consumption taxes have a regressive effect i.e. where the lower income groups pay more as a percentage of their income than the higher income groups.

This contradicts a call for a “commensurate reduction in personal income tax”. The regressive nature of the GST essentially flattens the tax base – as the income tax is highly progressive (extremely so – only 15% or so file for income taxes for this reason). Reducing the income tax – especially on the higher end, only serves to further flatten the tax base – shifting more of the tax burden to the lower and middle classes.


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