CONSUMER activists have submitted to Putrajaya evidence that retailers and suppliers were exploiting the change in the tax systems last year by spiking their prices, which led to a significant rise in cost of living.

The evidence was compiled following several studies carried out by the Federation of Malaysian Consumers Associations (Fomca) and the Malay Economic Action Council (MTEM).

MTEM’s study showed that suppliers and retailers raised prices for 30 popular food items ahead of the June to September tax holiday last year – the period when the nation transitioned from the goods and services tax (GST) to the sales and service tax (SST).

MTEM chief executive officer Ahmad Yazid Othman said prices of the items were recorded in May before the GST was abolished and compared during the three-month tax break, as well as prices after the SST came into effect.

Prices started to rise in May soon after the new government announced the three-month tax holiday, before dropping between June and September but only to pre-May levels.

For instance, an item priced at RM100 in April went up to RM105 in May. In June, it came down to RM100, the same level in April.

“To consumers, it appeared that goods had gotten cheaper because prices dropped. But in reality, these prices did not drop, they just went back to their original levels,” Yazid told The Malaysian Insight.

MTEM shared its findings with the government, which also did its own study of the prices of 100 goods during that period.

“The government also noted this pattern during its study. So we’re now comparing notes to see whether this is something that can be acted on,” said Yazid.

Fomca, meanwhile, was working with the government to identify collusion among suppliers and retailers to set prices for certain goods.

“There must be intervention on the part of the government to act on collusion and monopolistic practices, where people sit around and fix prices,” said its secretary-general, Paul Selvaraj.

“For instance, the AP (approved permits) system must be reviewed so as to allow more competition between importers and to diversify the amount of goods into the market which can then bring down prices.”

Both groups are part of Putrajaya’s national cost of living action council (NACCOL), which is headed by Deputy Prime Minister Dr Wan Azizah Wan Ismail.

Assisting low-income groups

In their report, both groups also recommended several measures to assist those in the B40 group of low-income households.

Fomca suggests fixing a minimum standard of living threshold so that the poorest households have access to a basic set of services, including education, job opportunities, housing and food.

“Much of our measures to help the poor are piecemeal and scattered across different departments and ministries.

“There should be a way to tie them all together in one package so that people who fall through the cracks will get this basic set of services,” said Paul.

In the short term, the government is focused on studying the supply chains of the most popular foods of low-income Malaysians in order to include a few of them in the year-round controlled prices list, said MTEM’s Yazid.

Domestic Trade and Consumer Affairs Minister Saifuddin Nasution Ismail announced something along these lines last month as a way to ease inflation pressures.

“The idea is that the government will look at the whole supply chain in a certain food to see what are its raw material costs and the profit margins of everyone involved in producing, transporting and selling it,” he said.

“Then a fair price can be set so that everyone in the supply chain makes a reasonable profit and the consumer also benefits.”

In the long term, Yazid said, the cost of living council is looking at raising incomes of the B40 group.

“If you compare the prices of our goods, they are not that high compared with similarly developed countries. But our incomes are low. Most of the money that is generated by the economy goes to corporations.”

Out of every ringgit in the economy, 60% goes to corporate profits and the rest to workers, he said.

“In Singapore and parts of Europe, corporations make between 45% and 50%, so their workers get more income.”

The government has to rectify this by either taxing corporations more so as to transfer the money to the B40 in terms of subsidies or aid or to make them raise wages, Yazid said. – March 6, 2019.