Although fewer items would be taxed under the SST regime, the burden felt by the people would only be less if prices do not go up, said Barjoyai Bardai, a professor at Universiti Tun Abdul Razak.
He said prices had not come down when the goods and services tax (GST) was zero-rated, and feared that prices would also go up when SST is implemented from Sept 1.
The government has said it expects to raise RM21 billion from SST compared with RM44 billion from GST, which is to be abolished.
Finance Minister Lim Guan Eng has said the difference in revenue collected by the two taxes was being “returned” to the people, making SST less of a burden on the people.
However, Barjoyai contended that a lower burden would only be true if the price of goods did not go up.
He said the lower revenue came from a narrower tax base — “on paper, people are taxed for a much smaller number of items because the SST-exempt list is also very extensive, which is a good thing”.
However, he feared that businessmen would take advantage of SST to raise prices, as they had done with GST.
”The government implemented the GST with the idea that businesses will be ethical enough to pass on the savings to the consumers.
“The basic calculation was that prices would go up for a while, and then come down, because the 6% rate was lower than the old SST rate of 10%.”
He noted that GST taxed all businesses along the supply chain, from the manufacturer to the retailer, with the tax only borne by the final customer because others higher up the chain could claim a refund of the tax from the government.
“In the Philippines, Indonesia and Thailand, when they introduced the GST or VAT, prices went up for several months but subsequently dropped lower than before. But this didn’t happen in Malaysia,” he said.
Barjoyai said he feared that once the SST is implemented, prices will go up again, with businesses seeking to maintain the same profit margins as before, even if their costs did not go up by as much.
“People need to understand that changing the tax system isn’t the right way to reduce the cost of living,” he said.
“Regulations and enforcement are ineffective in trying to ensure traders don’t profiteer, as it will strain resources and traders will cite the ‘free market’ as reasons for them to set whatever prices they want.”
Barjoyai said consumers should “wake up” and realise that they were being dictated to by the market because they were too passive.
Instead, consumers should band together, shop wisely and compare prices, monitor price trends and boycott those businesses which are unfairly raising prices or setting high prices.
“The best way to hurt greedy businesses is through their pockets,” he said.