The current tax system is unfair to middle and lower income group. Do you agree?

There are various types of taxes under the tax system in Malaysia such as corporate taxes, consumption taxes, individual taxes and others (Santander Trade Portal, no date). Example of consumption taxes like Goods and Services Tax (GST) is implemented by the government on the 1^st of April 2015. GST actually did affect and given huge impact towards our lives from every expenses throughout the day. While the personal income tax is divided into two groups which are residents and non-residents. In fact, these tax systems are unfair for those middle and lower income groups of residents in Malaysia. However, tax deductions in Malaysia are available in numerous cases, including medical expenses, education fees and others (Just Landed, no date).

A family that qualifies as low income is often eligible for social services offered through state and federal government agencies. Examples of services that families qualify for include cash assistance, food stamps, low-income housing and subsidized medical insurance. State programs establish and follow specific requirements based on family size and income, and have additional requirements regarding assets. Institute for Democracy and Economic Affairs chief executive officer Wan Saiful Wan Jan said the middle class should consist of the middle 40 per cent with monthly incomes of at least RM3,000 all the way up to the top 20 per cent of incomes, which has a median of about RM9,800 for 2012. Based on the household income data for 2012, less than 51.8 per cent of Malaysian households belong in that category.

The main issues concerning is that implementation of GST, the cost of good and service will increase which may burden the lower and middle income group people in the country. According to Malay mail online article, the households earning for example RM2, 500 per month will suffer the most as the GST will cost them 2.67 per cent of their total monthly income. As we know there have selective product have no GST but still have a lot daily need products have to pay GST. So, higher proportion of their income will be spent on GST. Thus, they may not will to spend much as their limited purchasing power and this situation will affect the market demand. However, The Malaysian Insider reported that the middle-income earners would be able to cope the GST.

GST is a tax that if you buy more, then you have to pay more. It is charged to every level of income group in Malaysia. After GST implement, most of the household items will be taxed, such as shampoo, dishwashing liquid, detergent and floor cleaner (MToday News Sdn. Bhd., 2015). As we know, every family also needs to use household items. This is our daily need. The price of the products will be increased after GST implement. We have less purchasing power to purchase the products. It will add a burden to Malaysian especially to the low income group. They need to think twice when consume due to their limited income.

In the conclusion, current tax systems of Malaysia are unfair to the middle and lower income groups of residents, especially the GST system. Besides that, we all think that GST should not exist, and some other tax system government should lower the rate of the tax, so there will be uniformity all income groups of residents in Malaysia.

Reference

1) Santander Trade Portal (no date), Malaysia: Tax System.

Available at: https://en.portal.santandertrade.com/establish-overseas/malaysia/tax-system

(Accessed: 31^st October 2016)

2) Just Landed (no date), Taxes in Malaysia.

Available at: https://www.justlanded.com/english/Malaysia/Malaysia-Guide/Money/Taxes-in-Malaysia

(Accessed: 31^st October 2016)

3) Melissa Chi, (2014), What does it mean to be middle class in Malaysia?

Available at: http://www.themalaymailonline.com/malaysia/article/what-does-it-mean-to-be-middle-class-in-malaysia

(Accessed: 2^nd Nov 2016)

4) Malay Mail Online (2013), Middle-income group will get short end of GST sticks, says think thank

Available at: http://www.themalaymailonline.com/malaysia/article/middle-income-group-will-get-short-end-of-gst-stick-says-think-tank