Part 10 Gearing GST towards public acceptance. Distributional effect of GST The author investigated the distributive effects of a comprehensive GST on prices of a broad group of commodities and services in Malaysia. Base data was compiled from the Household Expenditure Survey (HES), which collates information on levels and trends of consumption expenditure by households on a comprehensive range of goods and services. The 11-monthly expenditure classes (categories) vary from below RM500 (Class 1) to above RM5,000 (Class 11). A simulation model was developed to determine the effects of the GST on households. Four GST rates, namely 3, 5, 7 and 10 percentile points were considered in the simulation exercise. The findings of this study suggest that the GST is not necessarily a regressive tax and it is even found to be fairly progressive. The distributional effect of GST in Malaysia should not be examined in isolation but viewed within the context of a fiscal system comprising tax and government expenditure programmes. A tax is seen as regressive when it would impose a proportionately higher tax burden on lower income earners than higher income earners. The mild regressive aspects of the indirect tax could be overcome with financial assistance programmes, imposing graduated excise duties on non-essentials and prudent use of a GST coupon system to support the lower income groups. Source : The Star
Posted on: Mon, 21 Oct 2013 23:51:13 +0000
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