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MALAYSIA
FOCUS
| December 2014
FOCUS
Many of these articles grossly ignored to discount
the effect of SST that would be abolished when GST
is introduced. Some critics who consider GST to be a
regressive tax do not study the expenditure pattern
of the various income groups.
Why Malaysian GST is Progressive?
The Royal Malaysian Customs and the Ministry of
Finance have done extensive research on the GST. A
recent study shows that Malaysia’s model is indeed
progressive.
Based on the data compiled from the tables shown
above, the tax burden as percentage to expenditure
for a household income of RM2,000 is only 2.59%
whereas for a household income of RM12,000 is
4.14%. The tax incidence at GST 6% on expenditure
subject to GST for a household income of RM2,000
per month is only RM39.16 but for a household
income of RM12,000 is RM345.06/month which
is almost nine (9) times greater. The tax incidence
would be much lower if we discount the sales tax
and service tax factor for which they are currently
already paying. A household income of RM2,000
spends about 32% of his total expenditure on zero-
rated item and 32.63% on items subject to GST
where else a household income of RM12,000 spends
EXPENDITURE
INCOME
RM2,000
TAX INCIDENCE
at GST 6%
Expenditure On Zero-
Rated Items
RM640.00
-
Expenditure On
Exempt Items
RM707.40
12.73
Expenditures Subject
To GST
RM652.60
39.16
Total
51.89
Total Expenditure
RM2,000.00
Tax Burden As %To
Expenditure
2.59%
EXPENDITURE
INCOME
RM12,000
TAX INCIDENCE
at GST 6%
Expenditure On Zero-
Rated Items
RM1,093.86
-
Expenditure On
Exempt Items
RM2,155.08
27.59
Expenditures Subject
To GST
RM5,751.06
345.06
Total
372.65
Total Expenditure
RM9,000.00
Tax Burden As %To
Expenditure
4.14%
TAX INCIDENCE
Analysis of Consumption based on Household Expenditure Survey 2009/2010
Glenn P. Jenkins, Hatice Jenkins and Chun-Yan Kuo, 2006, “Is the Value Added
Tax Naturally Progressive?”