Current Tax System is unfair to the middle and lower income groups. Do you agree?

The current tax system is unfair to the middle class and lower income groups do you agree?

           We agree that the tax system is unfair for the middle and the lower income groups. In Malaysia  currently impose new taxation law which is the new Goods and Services Tax (GST). Although in other countries such as Australia have already impose these tax to their country which is Value Added Tax (VAT) which is similar to our GST, but the current economic status in our country is not very stable and it causes in increasing the burden for the middle income and lower income groups.

            Malaysian population been seperated into three income groups that is high, middle, low, then with the recent oil price hike it is believed that the middle-income group is the worst hits, because some people at middle class they just only can cover their income only. First of all , high income group which is the richest group of people in our society is always inflation- proof. The lower income group is generally taking public transportation of which the fares are still being protected by the government.

            When our tax system increase but our government does not rise up the minimum salary and come out with a more effective housing scheme for the lower income group as most people spend at least one third of their salary paying housing loans or house rentals. It is reported that the Inland Revenue Board (IRB) collected about RM 10 billion in personal income tax which is contributing 7% of the government’s total inland revenue of RM 147 billion. This is paid by approximately 1.1 million working class people out of total eleven million strong work force. In other words, only one out of 26 people in this country pay a single sen of person income tax due to the present unfair tax system.

            For the personal income tax, we also disagree for that system. The middle and the lower income groups their salary only can cover the family, for the middle who are have RM3000 above salary in Malaysia Act they need to pay the income tax, these income tax will made them trouble compare with the people who are rich or high income they will pay higher tax but for their income the tax their pay is only 10% for their profit only, so hopefully our government can come out a new tax system to made it fair for every classes.

(by Foo Chi Hong)

             The GST in Malaysia our government set it 6% that means that when the consumer buy a cup of coffee in Starbucks the price of the coffee is RM10 they charge the GST 6% the consumer need to pay RM10.60 adding more RM0.60. The high, middle, low groups also need to pay this GST 6%, compare with the high income person RM0.60 is not be affect, but for the low income person RM0.60 for them, they can buy 2 eggs for breakfast, is heavy burden for them. We agree that is unfair for the lower or middle income person they need to have more allowance and benefit from the government.

·                     Critics have argued that the GST is a regressive tax, which has a more pronounced effect on lower income earners, meaning that the tax consumes a higher proportion of their income, compared to those earning large incomes. A study commissioned by the Curtin University of Technology, Perth in 2000 argued that the introduction of the GST would negatively impact the real estate market as it would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent. India has opted for a dual-GST model. Critics claim that CGST, SGST and IGST are nothing but new names for Central Excise/Service Tax, VAT and CST and hence GST brings nothing new to the table. The concept of value-add has never been utilised in the levy of service as the Delhi High Court is attempting to prove in the case of Home Solution Retail while under Central Excise the focus is on defining and refining the definition of manufacture instead of focusing on value additions. The Revenue can be very stubborn when it comes to refunds as the Maharashtra Government proves and software entities that applied for refunds on excess service tax paid on inputs discovered.

            First of all, GST is an important source of revenue for government, especially for countries such as Singapore and Hong Kong, where the personal tax and corporate tax are low. With  huge amount of GST collected, government can manage the country more effectively, which is obviously beneficial to both individual and the society as a whole. For example, the government can use the GST collected to build infrastructures such as hospitals and schools so that people get access to quality healthcare and education.

(by Lee Chia Ching)

GST can also be a tool for government to curb the overconsumption of undesirable goods. Government can set high GST for cigarette, alcoholic products and prostitution (if the government perceive sex industry as undesirable). Supply curve shifts up, quantity demanded drops (i.e. price increases, consumption decreases). In economics term, tax is varied across different goods and services so as to reduce the society's welfare deadweight loss due to overconsumption of demerit goods or goods that imposes negative externality. 

Moreover, GST can be used to implement fiscal policy. As a tax that is imposed economy-wide, GST can be raised or lowered to effectively manage the economy. For example, during economic downturn, GST should be reduced so that the equilibrium output of the society as well as the employment opportunities increase. Conversely, the government should raise tax level during booming period. It curbs the aggregate demand in the long run, hence cools down the economy (i.e. lowers the inflation). It is interesting that, by increasing tax, the general price level will eventually fall. The explanation is that in the short run, tax increase causes mild inflation, however, in the long run, consumers and companies have less money to spend and invest. Aggregate demand as well as price level fall in the long run.

However, GST is not flawless. The blunt tax penalises everyone in the society equally, inclusive of both the rich and the poor. Unlike the income tax or corporate tax, GST is hardly progressive. It makes necessities such as food, transport, houses, clothing and medical treatment more expensive to the exact same extent to both the rich and the poor, adversely affecting the equity of the society. Fortunately, GST can be progressive if the government taxes more on luxuries and less on necessities. Moreover, government can construct strong transfer or welfare system to assist those financially needy citizens. 

Overall, GST brings more benefits than harms to society. That's precisely why most of the countries, if not all, collect GST.

(by Lai Jordan)

            The research find out the reason why the middle class they feel unfair. The taxes on wealth, such as capital gains, are often subject to a lower tax rate than wages and salaries, which the vast majority of every day Oregonians rely on for most of their income. A fair tax system would narrow the disparity between tax rates on income from wealth and income from work. The small family businesses according to the National Small Business Association, 40% of small businesses reported spending more than 80 hours a year dealing with federal taxes in 2014. Businesses in Oregon and across the country should be using this time to grow their business.

            Another ways is they pay the tax without the basic standards, too many unaffiliated tax-return preparers are incompetent or even unethical, giving taxpayers incorrect advice and potentially depriving them of their refund something that many Oregon families depend on. Senators Wyden and Cardin are fighting to set basic standards that tax preparers must meet. The middle and low income people in Americans who cannot afford expensive accountants that rely on the IRS for tax help. The customer service has declined in recent years due to budget cuts, so much that calling the IRS is like shouting into a void. Only 40% in US taxpayers calling into the IRS for help can get through to a real person. IRS budget cuts have led to inadequate service meaning billions in taxpayer dollars go uncollected every year. Many well-off taxpayers know this and have little fear of getting audited.

         We agree the current tax system is unfair for the middle class and lower income groups, because have some reason and example to approve that. Even that is unfair the middle and lower class also must adapt hope the government will come out a new allowance and benefit for them. Something we can’t say that is unfair, maybe from another side they is a way to made the middle and lower income person more motivate to gain more income.

(by Khor Yeow Ping)

Reference

M.malaysiakini.com. (2008). Why personal income tax should be abolished. [online] Available at: https://m.malaysiakini.com/letters/88685 [Accessed 3 May 2016].

Quora.com. (2016). [online] Available at: https://www.quora.com/What-are-the-good-sides-and-the-bad-sides-of-GST-goods-and-services-tax [Accessed 3 May 2016].

The Huffington Post. (2012). Buffett Rule Goes Down. [online] Available at: http://www.huffingtonpost.com/2012/04/16/buffett-rule-vote-fails-senate_n_1429657.html [Accessed 3 May 2016].

Wyden.senate.gov. (2015). 10 Ways the Tax System is Unfair to Middle-Class Americans | Senator Ron Wyden. [online] Available at: https://www.wyden.senate.gov/news/blog/post/10-ways-the-tax-system-is-unfair-to-middle-class-americans [Accessed 3 May 2016].