After much debates, the Malaysia government finally decided to implement GST on most goods starting 1/4/2015. The new GST will be imposed on most goods and services within the countries, except on basic necessities such as food and household items. So, will the new GST lead to higher cost of living for the average Malaysian?
Many argue that it will lead to higher cost of living as firms will pass on the tax burden to consumer and may in fact take th opportunity to increase prices to cover other rising cost of production. However, we must recognise the facts that the new GST will replace the original 10% sales tax which is higher than the 6% GST! Given that most household items are exempted from the GST, the impacts on the lower income Malaysian might not be as great as it seems. Thus to be fair to the Malaysian government, the new tax might act as a redistribution policy to transfer the wealth from the richer to the poorer.
The other interesting aspect would be how Singaporean will be reacting to the GST hike? Will Singaporean stop going to Malaysia for their shopping? Most Singaporean interviewed said that they would still go to Malaysia as the prices after GST will still be cheaper as compared to Singapore. The stronger Singapore dollars against the Malaysia Ringgit also contributed to the increasing demand for Singaporean in Malaysia.
So be prepared to pay more in Malaysia during your next trip!
Many argue that it will lead to higher cost of living as firms will pass on the tax burden to consumer and may in fact take th opportunity to increase prices to cover other rising cost of production. However, we must recognise the facts that the new GST will replace the original 10% sales tax which is higher than the 6% GST! Given that most household items are exempted from the GST, the impacts on the lower income Malaysian might not be as great as it seems. Thus to be fair to the Malaysian government, the new tax might act as a redistribution policy to transfer the wealth from the richer to the poorer.
The other interesting aspect would be how Singaporean will be reacting to the GST hike? Will Singaporean stop going to Malaysia for their shopping? Most Singaporean interviewed said that they would still go to Malaysia as the prices after GST will still be cheaper as compared to Singapore. The stronger Singapore dollars against the Malaysia Ringgit also contributed to the increasing demand for Singaporean in Malaysia.
So be prepared to pay more in Malaysia during your next trip!
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