Describing Umno’s argument as “illogical”, Lim said the party was comparing apples with oranges.
“According to them, my announcement that reverting to the old system of sales tax at 10% and services tax at 6% means that the tax rate would be at 16%; higher than the 6% GST. This is untrue, because we cannot simply add up the sales tax and services tax, which would be equating apples with oranges,” he said in a statement.
Lim said the collection from the SST was estimated at only RM21 billion for a full year, while the GST had been expected to collect RM44 billion in 2018, according to the previous government’s projection.
“Hence, compared to the GST, the new Pakatan Harapan government has ‘returned’ RM23 billion to the rakyat. Umno should not try to deceive the rakyat that they will be worse off with SST when the same SST system adopted by Umno before April 1, 2015, did not cause hardship to the ordinary rakyat like the GST had done,” he said.
Lim went on to explain that the sales tax at a rate of 5% and 10% applies to selected manufactured and imported products, and not all products, unlike the GST.
Secondly, he said, the 6% service tax applies to selected services and not all services, unlike the GST.
“The sales tax is imposed on manufacturers’ and importers’ price, while the GST is imposed on the final consumer price. Hence it is wrong to claim that a ‘10% sales tax is higher than a 6% GST.
“For example, a manufacturer imposes a 10% sales tax (10 sen) on a can of soft drink manufactured for RM1. However, when the same can is sold to a consumer at the 7-Eleven for RM2, a 6% GST of 12 sen would have been imposed.
“In this case, it is clear that a 6% GST at 12 sen would be higher than a 10% SST,” Lim said.
He said the finance ministry had also undertaken a comprehensive SST review exercise with the assistance of accounting firm Pricewaterhouse Coopers (PwC) tax consultants to simplify the SST.
“PwC will help rationalise tax collection and reporting requirements to ensure that the SST will be even more efficient and less bureaucratic than the GST, or even the old SST system.
“PwC will ensure the SST imposed on Sept 1, 2018, will be simpler, less cumbersome, prevent leakages and loopholes,” he said.
Lim said unlike the GST, which burdened the poor proportionately more, the new SST would also be tweaked and designed to ensure that the impact on the lower income groups would be proportionately less.
The details of the improvements will be announced when the new SST Bill is tabled in Parliament during the current sitting, the statement added.