Is the Malaysian goods and services tax regressive?

Deputy Finance Minister Datuk Ahmad Maslan explaining the GST in Penang earlier this year. The GST or better known as VAT (value-added tax) has been introduced in more than 160 countries in the world.

A broad-based tax, such as goods and services tax, is generally considered to be a regressive tax. Before we go further, let us look at what regressive actually means.

In simple terms, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich — there is an inverse relationship between the tax rate and the taxpayer’s ability to pay as measured by assets, consumption or income.