A pleasant surprise ...

I have not been keeping track of BNM's forex reserve for a long time and was pleasantly surprised that it has reached RM 402,647,348,388 as at 15 of June 2011. In USD terms, it is USD 133.1624 billion. The highest that it ever reached was a few years back, then went down for some time and went up again to today. I hope it will attain some USD 200 billion in a few years time.

China remains as the country with more than USD 3 trillion in forex followed by Japan with USD 1.1 trillion. Singapore has just about twice that of Malaysia and its per capita reserve is disproportionately high.

How I feel about GST ...

The Government of Malaysia has been putting off the implementation of the GST which was supposed to be in mid 2011, which is June or July 2011. Instead, it raised the Sales Tax by 1 %. The rational for the postponement was because the ruling party feared backlash in the impending election. The GST was to start at 4%. GST or Goods and Services Tax (countries in Europe used the VAT or value-added-tax - which is the same conceptually).

The GST or VAT is an indirect tax. That is, you pay the tax only when you buy the item or service. If you don't buy the item, you don't pay. Income tax, however, is a direct tax. It's a tax on your income i.e. as long as you have an income. If you don't have an income, you, of course, don't pay income tax. This is a simple illustration on the difference between indirect and direct tax.

The government says that once GST is introduced, the Sales tax shall be abolished at once. It also claims that GST is broadbased, that is to say, at all stages from raw materials to at the point of sales of the products, during the production and supply, when the raw materials gradually increase in value, GST shall apply. Let's take for example a very common product called rice. [By using this example, it's not to imply that the product is subject to GST].

(1) A paddy farmer, say, produces and sells a 100,000 kg (100 tonne) of his paddy to the mill at, say, RM 1.00 per kg. Since he has to pay the 4% GST, his price to the mill becomes RM 1.04 per kg. Upon delivery, the farmer receives RM 104,000 from the miller. The farmer then pays the government the RM 4,000 as a GST.

(2) After milling, the miller produces 95,000 kg of rice. The difference of 5,000 kg is husk, which is a waste. The miller then bags the rice in 5 kg bags, label the bags, and then deliver all the 95,000 kgs (19,000 bags) to the distributor at, say, RM 7.28 per bag, including the 4 % GST to the government. His total invoice to the distributor is RM 138,320.00. The miller then is liable to pay the government GST of RM 5,320.00 and pockets RM 133,000 to cover his costs and profit. But the miller need not pay all the RM 5,320 to the government, because there is such a thing in GST system called the Input Tax Credit. The miller actually pays RM 1,320 (5,320-4,000).

(3) The distributor then sells all the 19,000 bags to all his dealers at, say, RM 13.52 per bag including also the 4% GST. He therefore receives RM 256,880.00. The distributor then is liable to pay GST RM 9,880.00. Similarly, the distributor is allowed to claim Input Tax Credit which, in this case, amounts to RM 5,320. He actually pays RM RM 4,560 (9,880-5,320).

(4) The dealers then sell all the 19,000 bags to all his retailers at, say, RM 16.64 per bag inclusive of the 4% GST. They, therefore, receive RM 316,160.00. The retailers are liable to pay GST of RM 12,160.00. Likewise, the retailers can claim Input Tax Credit of RM 9,880.00 and actually pay RM 2,280 (12,160-9,880).

(5) And finally, the retailers managed to sell all the 19,000 bags of rice to the end users, i.e. the consumers, at, say RM 20.80 per bag, including the 4% GST. The retailers obtained RM 395,200.00. The retailers GST liabilities are RM 15,200.00. As with the above, the retailers can claim the Input Tax Credit of RM 12,160, and in fact only pay the government a sum of RM 3,040 (15,200-12,160).

(6) Adding all these, the nett GST to the government amounts to RM 15,200. If under the existing system when sales tax of 5% is applied on the selling price of RM 20.00 per kg, (not at each stage of the supply chain) the sales tax received by the government is RM 20.00 x 0.05 x 19,000 or RM 19,000.

Why, you may ask, the government forgoes RM 3,800 (19,000-15,200) in favour of the GST ?

The GST system has these benefits:-

- tax is collected from the beginning i.e. from raw materials stage to the stage when they become sold as final products. The treasury collects money along the way since it doesn't have to wait until the products are finally sold. In this example, the treasury has already collected some 85% of the tax at the retail stage, even before the products are sold. The treasury's cashflow is therefore greatly improved.

- improved control in tax collection since it involved more than 2 stages where the parties involved are interlinked through the system of input and output tax credits, unlike the current method where tax is collected at the retail stage and there is no way to check on the veracity of prior transactions.

- the more stages there are between raw materials and final products, the more tax can be collected by the treasuries. In the above, certainly transport services, stevedoring, financial services (though not mentioned) are involved, and hence are subject to GST. Hence, the broad based nature of this tax system.

- the government, can, at anytime after introducing the GST, increase the GST rate when it falls short on revenue collection. Britain started the GST at 7% in the '70s and now its GST rate is 20%. The highest GST rate in the world is in Sweden where it's at 26%. To date, some 143 countries impose some form of GST.

Coming back to Malaysia's potential GST of 4%, ever wonder why the proposed rate is 4%, and not 5% or higher or 2% or lower. Somehow 5% doesn't seem to do since it's the same as the sales tax rate. Making the rate higher would be disastrous. Making it lower than 4% seems to be too little. So, arbitrarily, it shall start at 4 %, because the government reckons that once the populace gets used to the GST, it can later, with impunity, raise the rate gradually over the years. Ever wonder why the government thought about introducing GST rather than stick to the present practice of sales and service tax at 5 and 10 percent respectively. Its because the government was unable to reduce its fiscal deficits. Year in year out, the government has to put up with a deficit budget. There seemed to be not enough revenue for the country's yearly expenditure. For years, Malaysia had to borrow internally or externally, in spite of the fact that Malaysia was an oil producer. Encouraged by Singapore's GST that somehow enabled the country to more than finance its expenditure despite shortfall in tourism revenues, Malaysia seemed to be eager to introduce GST to its people. The World Bank and the IMF are, of course, ever ready to encourage saying that, look, when is Malaysia going to introduce GST when some 140 odd countries in the world had done so.

It seems to me that GST is a country's way to get out of trouble.

According to the government, out of the 27 million or so of Malaysia's population, only about 1.0 million pay income tax. By having the GST, the government believes that the tax base is much wider. Somehow, the 27 million will pay tax, one way or another, directly or indirectly, a little or a lot. It implies that, even those not of working age, from the teens in schools to the babies just out from the wombs, are required somehow to pay taxes.

Why no "ganyang Arabs" ...

The other day, Saudi Arabia beheaded an Indonesian maid. She was accused of murdering her Arab employer. The news of the beheading spread far and wide. While, the beheading was criticised upon by a lot of countries, strangely, not a whimper of comments, let alone protests, came out from the usually vociferous Indonesian media and the Indonesian people themselves. What happens to their usual "ganyang" (crush) this and "ganyang" that. If that punishment had been committed by Malaysia, the Indonesians were quick to react against us, by clamouring for deaths to Malaysians found in Djakarta, or by demonstrating in the streets urging Indonesia to crush (ganyang) Malaysia.

The truth is that the Indonesians are scared stiff when dealing with the Arabs. To them, the Arabs don't do anything wrong when the death sentence was passed on the poor maid. She was not even legally represented by a lawyer. We have to accept that it's true that the maid stabbed her female employer several times.

But why did she do it ?

I can only surmise that the female employer treated her maid as though she was a slave. This is typical of Arabs, who adopt the feudalistic attitude that they can do anything they like on their employees. The cruelty and punishment perpetrated by the woman on the maid were so harsh that the maid couldn't bear them any longer - to the extent that she would rather kill her employer than run away from the house.

They are just no damn good .....

Recently, we read in the news that Malaysians are encouraged to invest in Africa. There's even a convention going on now in Putrajaya (called the Langkawi International Dialogue) about Malaysia-Africa bilateral relations and in support, the Bank Negara governor, said that Malaysians should look to Africa for new investments. The potentials in land and resources were many in Africa and Malaysians could do well there. Well, in fact, conglomerate Sime Darby, was involved in Liberia, buying land here and there, in order to set up oil palm plantations.

Well, to me, the Europeans had realised these long, long ago and that was why they colonised the African continent for its gold, diamonds, ivory, and minerals. They didn't go to Africa to help the natives. They went there with a gun in one hand and a bible in the other. If they could not kill the bastards, the least they could do was to convert them to Christianity. Once converted, it would then be easier for the Europeans to exploit the people and their lands.

Thus, Africa had seen the British, the Dutch, the French, the Belgians, the Portuguese, and even the Americans, the Germans, and the Italians. There's no one country in Africa that had not been exploited by the Europeans. North, East, South, West and Central Africa had, at one time or another, been colonised and exploited by the Europeans since the 16th century to the present. Out of Africa, came the precious minerals in huge quantities, ivories by the shiploads, and slaves in the hundreds of thousands for the American plantations.

Fortunately for them and us too, the war in Europe impoverished the European colonialists to the extent that they could not hold on to their colonies any longer. Thus one by one they had to relinquish the colonies voluntarily or by force. The British gave up Ghana, Nigeria, Sierra Leone, East African countries; the Belgians, the Congo by giving the Africans their "independence" while some Europeans (French and Italians) attempted in vain to hold on to the North African countries until they were literally kicked out in real wars of independence. They were also Europeans like those in the south and the east of Africa who set up their own European governments like those in South Africa and Rhodesia, but they were eventually forced to relinquish power to the natives.

The Africans in Sub-Saharan Africa (i.e. African countries south of the great desert of Sahara) however were incapable of managing their countries. Thus we saw internecine wars among the African peoples and "leaders" like Kwame Nkrumah of Ghana and Milton Obote and Idi Amin of Uganda were forcibly replaced by other leaders who were no good either. The things we read about the cruelty and the killings in the hundreds of thousands in Nigeria, Sierra Leone, Liberia, Congo, Rwanda, and many, many others match those that we read about what had happened in the European war.

While we sympathised with the Africans for being mistreated as sub-humans by the Europeans and the Americans, we just could not understand why they were equally mistreated by their own "leaders" ... which leaves me to the conclusion that Africans are just no damn good. It's in their nature that they are born with streaks of cruelty to exploit other people just they themselves have been cruelly mistreated by the Europeans. It leaves me to another conclusion that we Malaysians should not be friendly with them. We can however be polite but that's as far as it goes. We should not trust them when doing business with them. Nor should we welcome them to our countries, for look at what has been going on in the last 5 years when African "tourists" visited Malaysia. Instead of sight-seeing, they came here with ulterior motives. We have, for instance, those Nigerians that commit crimes in drug-trafficking, in perpetrating financial scams, or simply in indulging in crimes of illegal entry besides being a nuisance in areas where they reside.

By inviting them to be more involved in "bilateral relations" with us is an invitation for hordes of Africans to come to Malaysia, making the country unsafe to live. Let the Africans stay in their countries and, if we have to do business with them, let us do it at arms length. Not for me to be pally-pally with them. When Africans first started coming to the country, they were surprised to find that, generally, Malaysians are a friendly and hospitable lot, hence bullyable. They saw it as an opportunity to exploit the gentle Malaysians. Europe and America had their fair share of the peoples from Africa, but the Europeans know how to handle them - simply by looking down upon them, usually with insults thrown in. But we Malaysians don't do that. Talking about Africans reminds me of a joke I used to hear about how to handle and control Africans. The Africans themselves cannot control them nor the Europeans nor any other nationals for that matter. Only Tarzan the Apeman has demonstrated that he alone can control the Africans. Edgar Rice Burroughs would certainly testify to this.

To continue ...