What is the difference between GST and Income Tax?The main different is Income tax is a tax impose on your income whereas GST is tax when you spend.
Government will send you Form B for you to report your income to the government. Base on what you report, government will tax you on your income. How much you pay tax is generally determine by how much income you received in a particular period. Regardsless of whether you spend it or not. Often, it is better you spend it and if you able to prove that your spending is wholly and exclusively generating your income, you might able to deduct against your income.
On the other hand, GST would not tax you on your income. You would not be tax when you received your income. As long as you never spend it. You would be tax when you decide to buy something ...... Like, you want to buy cigarette, you would pay "sin" tax to government indirectly. If you decide to buy a car, you might have to pay 200% tax to government on amount you spend, indirectly, included in the purchase price.
Thus, GST is call indirect tax as you pay tax indirectly included in the purchase price. Income tax is call Direct Tax as you pay directly to the government.
Which one is fair?
As you can see above, income tax is a tax base on your income. How much tax you pay depend on how much your income is regardsless of how much you spend.
Under GST system, you would not pay government tax no matter how high your income is if you never spend it. You would be tax if you try to buy something.
Now, which one is fair? Especially to poor people.
They is no definite answer. In UK, some services like healthcare does not impose GST or they call VAT, thus, poor people can enjoy such service without paying tax. In Malaysia, if you buy luxury car, you have to pay as high as 200% on amount you spend. Thus ,is depend on execution.
Are we ready?
In order for us to start implement GST from year 2007. Everybody have to get use to it now. Government has reduce the 10% Service tax to RM150,000 per year few years ago. Divide by 12 month. Thus, a coffee shop with monthly sales RM12,500 is subject to Sales Tax. Thus, unlike previously, only you go to high class restaurant only you pay plus 10% Service tax (or fast food). Under current legislation. Even if you go to coffee shop is subject to Service tax.
If every coffee shop register to custom and obtain a Service tax license now. By 2007, majority of the coffee shop has register to custom and they might have a system to collect the service tax and pay the tax to custom.
However, now, majority of the coffee shop owner is yet to implement this system. With current inflation cause by high oil price. Government also face difficulty in control inflation if they want to force those coffee shop owner to register.
It look like by 2007, custom and tax department would have difficulties in implement it. Custom and tax department would unable to process large volume of registration and license application. Small business owner also do not have a system to monitor the money collected on behalf and summit to government every two months.
We see how Finance Minister solve this problem then?
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