THE debacle over the goods and services tax was reignited after Prime Minister Dr Mahathir Mohamad said GST may be reintroduced should Malaysians want it.

Even though it is cynical, the argument over whether GST is a good tax is never-ending.

To me, GST is regressive and against Islamic principles. Regressive in the sense that it taxes based on consumption instead of income and profit. It is against Islamic principles because it does not conform to the zakat (alms-giving) concept, whereby zakat is an obligation for Muslims once they enter a certain income bracket.

I am of the view that the tax system must be fair. It is only considered fair when it derives from a person’s profit or income. It is unfair to tax based on consumption because there is no profit or income made from it. How is it fair for a “makcik” who buys groceries for daily use to be taxed? No reasonable person would accept this as fair.

There is the argument that developed countries have implemented GST, so why not Malaysia?

I think this argument is flawed because Malaysia is still a developing country. The household income in developed countries is much higher. For example, the household income in Finland was US$24,000 (RM100,450) in 2016, compared with Malaysia’s RM5,226. There is a huge gap. Hence, developed countries may have extra income to be taxed by their governments.

There is also the question of what tax regime is appropriate for Malaysia. To me, as a developing country, Malaysia should produce more. For this to happen, the government should encourage producers by imposing minimal tax. This will encourage the industry to flourish, and as a result, more producers can pay tax.

The tax rate does not reflect the tax revenue. There are differences between these two concepts. It is a misconception that by raising the tax rate, the tax revenue will increase. In fact, raising the tax rate will cause producers to shy away, killing the industry. As a result, the government’s revenue will be greatly reduced.

Going forward, the government should find alternative ways to fill its coffers. I suggest that it focuses attention on the super rich, who make billions from capital gains. A capital gains tax can be an alternative to GST. Such a tax is only for those who make excessive profits. Any reasonable individual would reckon this tax is fair.

By having a clear philosophy and fundamentals, we can reach a solution. – October 6, 2019.

* Mohd Jamizal Zainol reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.