Market resistance to GST will kill consumer economy

by Special Writer


COMMENT: India is one of the few countries in the world which doesn’t need personal income tax.
It has such a huge population that a tiny GST is enough. Besides it has a super rich middle class of 100 million people. They are big consumers.

M’sia is different.

The population, at 30 million, is small. If it wants to maintain the consumer component of its economy at the present 60 per cent of GDP, and grow it to 70 per cent like in the US, it should rethink the GST.

Real wages in M’sia have remained stagnant for years. GST further reduces incomes. The gov’t and companies don’t share the cake with workers, shareholders, consumers and the community.

The market has dropped by 30 per cent, GST collection has dropped by 30 per cent and inflation grew by a tiny 1.5 per cent.

This means the 2019 National Budget won’t have a development component. Federal Government revenue would be enough just to pay salaries. Any development has to be undertaken by state governments.

There’s something wrong with how the 6 per cent GST is levied. It seems to be 6 per cent at every stage of the supply chain, and not 6 per cent only at the final stage. That means we are paying 30 per cent GST, not 6 per cent GST. Just check prices before and now.

The Customs Dept should check on how GST is levied. One restaurant told me that it pays the GST on behalf of its customers. It disagrees with the GST.

If inflation drops to 0 per cent, it’s like being in a Japanese-style deflation, but without its developed nation status.

Many restaurants report fewer patrons these days and they close much earlier.

The mamak shop is a barometer in M’sia. Let’s call it the mamak shop Index like the Big Mc Index in the US and elsewhere.

If mamak shops don’t do well, it shows the consumer economy is not growing. Next, check housing starts and car sales.

One mamak shop I patronise — actually kaka (Malayalee Muslim) shop — seems to be doing okay. Still the usual crowd. The prices have not changed for years. The prices remained the same even after GST.

I also go there so that I have someone to speak to in Malayalam.

I notice that more of the office crowd are packing lunch from home. So, there has been a big drop in the lunchtime crowd at restaurants.

Fruit sales are down.

Also, petrol prices at the pump should be fixed, and sugar and cooking oil prices kept at minimum prices. This is not the place for the gov’t to make money.

The gov’t should not regulate ride-sharing. It’s a service the people badly need. Taxis don’t really serve the market.

Elsewhere, the gov’t should not fix minimum prices for property purchases by foreigners. The net effect will be an increase in property prices for locals. Besides that, they have to put up with shoddy workmanship. The developers cannot be trusted.

The gov’t forcing teachers to provide tuition after after hours at school, has killed the public tuition centres.

Of course, private tuition has always been around.

The gov’t should convert PTPTN loans into half loan/half scholarship at zero interest with longer repayment periods capped at 5 per cent of salaries.

The bottomline: the health of the consumer economy depends on doing away with GST. If market resistance continues, it will kill the consumer economy.

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