An encouragement to become savvy consumers

THE increase in the Sales and Service Tax (SST) to 8%, up from the previous 6%, took effect on Friday, and will undoubtedly impact consumers and businesses in various ways.

Prices for an array of services and goods are anticipated to adjust, leading to higher costs for some leisure activities as well as professional services.

The figures seem intimidating at first glance – it is, after all, an increase of two percentage points, which isn’t a tiny increase.

However, it was reassuring to hear the Finance Ministry’s explanation that the new tax rate focuses on discretionary activities and business-to-business services in an attempt to avoid imposing a higher consumption tax for essential services such as food and beverage, telecommunications, and parking.

The government does seem to mean it, as that most essential-to-life service, the supply of potable water, will remain untaxed as it has been all this while.

As for the supply of electricity, almost 85% of users won’t pay a service tax at all, similar to water bills. Only domestic users who consume more than 600 kilowatt-hour (kWH) a month will pay the 8% tax rate. (This doesn’t apply to commercial and industrial electricity consumers.)

This is not a popular opinion but hear us out: If we really want to do something about climate change, we must use less dirty energy, and this effectively encourages people to reduce energy use.

The new SST rate will also affect logistics services, which will have a ripple effect through the manufacturing sector and, ultimately, touch the end consumer. While some businesses may initially absorb the higher SST cost to stay competitive, it isn’t something they can sustain in the long term, so price hikes are inevitable eventually.

But this does seem to be medicine we need to swallow if we’re to get Malaysia back on a firm economic footing following the Covid-19 pandemic and mega financial scandals over the years that have sent billions of the rakyat’s ringgit outside the country.

Treasury secretary-general Datuk Johan Mahmood Merican pointed out recently the country’s fiscal deficit stood at 5% of GDP last year, and that has to be reduced.

But we can be clever about how we swallow this pill. For a start, we can become savvier consumers by shifting towards more economical choices and doing things like comparing prices and seeking the best deals on necessary services and goods.

Technology can help (telco services aren’t subject to the higher tax rate, remember), as there are websites and apps aplenty that can be used to compare prices, track promotions and discounts, and find cashback programmes, not to mention virtual discount vouchers offered by most businesses nowadays.

Exploring alternatives, such as supporting smaller, local businesses for non-essential services, can also offer more competitive pricing. Even something as simple as working out a proper budget for monthly expenses – something basic that not a lot of Malaysians do, studies have found – can help avoid expensive impulse buys of “wants” rather than “needs”.

Monitoring service-related expenses can help identify potential savings, with budgeting apps playing a helpful role in tracking spending.

By adopting these and other money-savvy strategies, consumers can lessen the impact of the SST increase and make more informed decisions about their service-related expenditures.