‘Don't let traders play the expanded SST card'

The Star

20 hours ago

PETALING JAYA: The expanded Sales and Service tax (SST) may have a limited short-term effect on inflation, and to prevent dishonest traders from profiteering, economists say Malaysians play a crucial role in curbing unnecessary price hikes.
They advise consumers to be vigilant when shopping and avoid buying products from dishonest traders.
Economist Geoffrey Williams said consumers must be tough on companies that exploit the implementation of the expanded SST and raise prices unnecessarily.
He said they can report such companies for profiteering to the authorities or even name the company on social media.
'Naming and shaming profiteers online is very effective, as well as boycotting the worst offenders.
'But, this requires group action where NGOs and consumer groups can play a role,' said Williams.
He also said companies could play a role by being transparent with prices and having comparisons with their competitors.
'Those that treat customers well will keep and gain customers and those with bad attitudes will lose business,' said Williams.
He added that consumers should be aware of which products are affected under the expanded SST when they go shopping.
'If they see prices rising on products that had the same tax rate, they can report it to the authorities for profiteering.
'The effect on inflation will be limited and temporary because this is a one-off effect on only a small sample of goods and services. Most of the consumer price index constituents are unaffected,' added Williams.
He was commenting on the SST expansion which began on July 1 which saw zero rate taxes remaining for essential goods, while a rate of 5% to 10% was imposed on non-essential items.
An 8% service tax will be imposed on rental or leasing services, with no tax imposed on residential housing, reading material, monetary leasing and tangible assets outside Malaysia.
A 6% service tax will be levied on construction work services related to infrastructure, commercial and industrial buildings.
Socio-Economic Research Centre executive director Lee Heng Guie said consumer activism played a crucial role in addressing unnecessary price hikes and Malaysians themselves should be vigilant and report any unjustified price hikes to the authorities.
'To manage price pressures, the government can improve price monitoring, providing clear communication to the public, and strict enforcement of tax compliance to prevent price gouging,' said Lee.
He also said the government could implement awareness campaigns and maintain clear guidelines as well as strict enforcement of tax compliance to prevent excessive profiteering.
The inflationary effects from the implementation of the expanded SST, he said, was not expected to have a lasting impact on the country.
'While price adjustments are anticipated, particularly on non-essential items and services estimated between 0.5 and 1 percentage points in the short-term, this will likely taper off over time,' added Lee.
He said low- and middle-­income earners were likely to be affected by the expanded SST implementation despite exemptions on essential items and cash handouts such as Sumbangan Tunai Rahmah by the government.
'The increase in SST on a broader range of goods and services can lead to price hikes across the supply chain, ultimately impacting consumers, especially those in the lower and middle income brackets.
'While direct consumer impact is limited, some businesses, particularly those relying on rented premises in sectors like logistics, manufacturing, and retail, may experience increased costs due to the service tax on leasing and rental services.
'This could potentially be passed on to consumers,' added Lee.
Carmelo Ferlito, economist and chief executive at the Centre for Market Education think tank, argued that the prices of some goods may increase, but stressed that the government should not intervene.
'There are already too many price distortions in the Malaysian economic system,' he said.
Inflation was a generalised and persistent increase in the level of price due to the quantity of money increasing, outpacing the growth of the economy's output of goods and services, he said.
'Taxes do not create inflation, government spending does.
'There will instead be inflation if the government expands the money supply to counter the effects of SST,' added Ferlito.