Reconsider service tax hike, govt urged


PETALING JAYA: Essential services such as electricity should not be subjected to the increase in the service tax, says Ayer Hitam MP Datuk Seri Dr Wee Ka Siong.

He said electricity has already seen several hikes, such as the one in July 1 last year in which high-consuming domestic users who used above 1,500kWH (kilowatt-hours) or at least RM708 a month saw an increase of at least 25% in their bills.

Dr Wee also said there was another hike in January this year, where 1.2 million consumers using between 600kWH and 1,500kWH were no longer eligible for a rebate of between RM12 and RM32.

“Water and electricity are essential services that people cannot live without. It would be perfect if a 6% service tax rate is implemented across the board with no hike,” he said when contacted.

He was commenting on a Finance Ministry announcement that the 8% service tax would apply for domestic users using above 600kWH of electricity monthly.

Consumer groups, when contacted, suggested the implementation of the new tax be postponed.

Federation of Malaysian Consumers Association (Fomca) chief executive officer Saravanan Thambirajah said tax hikes would inevitably increase the cost of living and reduce the people’s purchasing power.

This, he said, was on the back of stagnating wages, inflation and rising food prices.

“Again, any increase of tax will definitely be a burden to consumers,” he added.

On the 8% tax on electricity usage above 600kWH, Saravanan said only those whose electricity bills are above RM600 should be taxed.

“If your bill is more than RM600, then of course you are a heavy user,” he said, adding that with a 6% service tax, 600kWH usage would cost RM219.80.

Saravanan said there must also be stringent enforcement as businesses may take advantage of the situation by hiking up prices exorbitantly.

The Finance Ministry said in a statement yesterday that close to 85% of electricity users would not be affected by the two-point increase in service tax for electricity. The service tax will also not be imposed on treated water supply.

Consumers Association of Subang and Shah Alam, Selangor president Datuk Seri Dr Jacob George said there should have been more engagements with consumer groups prior to the implementation of the tax hike.

“I would encourage the government to push back the date of implementation.

“Will there be a U-turn when there’s a public backlash, which has always been the case?” he added.

Jacob said the government should also spend more prudently instead of resorting to tax hikes to increase its coffers.

SME Association president Ding Hong Sing said the supply chain would be affected with the tax imposed on the logistics sector, adding that the cost would be passed down to consumers.

“Product prices too will increase,” he said, adding that higher electricity bills was another added cost component.

“I hope the government will understand that (this will affect) the supply chain. The economy is bad and our margins are low. The ringgit is also weak,” he added.

Pertubuhan Mesra Pengguna Malaysia deputy president Azlin Othman said the association wanted the implementation of the tax hike to be postponed.

“The hike in tax at this time will further burden the people, especially with the cost of living already a burden,” she said.

Azlin said the measure can be revisited later once the cost of living issue is addressed.

“Tax hikes should be considered based on current developments and if there needs to be a hike, it has to be at the most minimum rate,” she said.

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