Gst: the Challenges Amd so on for Implementation of Gst
Business e-Bulletin Vol. 1, Issue 1, 55-64
GOODS AND SERVICES TAX, PROBLEMS AND EFFECTS OF IMPLEMENTATION
ABOOD MOHAMMAD SALMEEN ALEBEL
INTRODUCTION
In taxation, taxpayers are taxed in two forms: whether through direct taxes such as income tax and road tax or through indirect taxes such as the sales tax and the services tax. For direct taxes, taxpayers will definitely realize that they are facing the tax burden since taxpayers are required to declare their income and to pay tax accordingly to the government. However, for indirect taxes, taxpayers usually don’t realize that they are being taxed since the amount of tax is already accounted for with the selling price. Goods and services tax (GST) is one type of indirect taxes. GST is also known as value added tax (VAT) (Behan & Jenkins, 2005). Although GST and VAT have different names, they represent the same system where the cost of tax is actually borne by the end user. However, each step in the supply chain will collect the tax and will be remitted to the government. The supply chain can also claim back the GST included in the products they buy. According to Singh (2007), it is well documented that a GST can be an effective form of indirect tax. Currently, many countries such as the United Kingdom, New Zealand, Australia and Singapore have already implemented the GST. The VAT has been adopted as part of a package of trade liberalization, compensating for the revenue loss from the reduction of tariffs whilst preserving the gains in production efficiency from moving producer prices closer to world prices. At a more general level—and especially in developing countries—adoption of the VAT is often seen as the central element in a program of modernizing tax administration, developing the use of methods of self-assessment whose generalization is expected ultimately to ease administration and compliance in relation to other taxes too (Keen & Lockwood, 2007). However, there are many issues and questions raised on
GOODS AND SERVICES TAX, PROBLEMS AND EFFECTS OF IMPLEMENTATION
ABOOD MOHAMMAD SALMEEN ALEBEL
INTRODUCTION
In taxation, taxpayers are taxed in two forms: whether through direct taxes such as income tax and road tax or through indirect taxes such as the sales tax and the services tax. For direct taxes, taxpayers will definitely realize that they are facing the tax burden since taxpayers are required to declare their income and to pay tax accordingly to the government. However, for indirect taxes, taxpayers usually don’t realize that they are being taxed since the amount of tax is already accounted for with the selling price. Goods and services tax (GST) is one type of indirect taxes. GST is also known as value added tax (VAT) (Behan & Jenkins, 2005). Although GST and VAT have different names, they represent the same system where the cost of tax is actually borne by the end user. However, each step in the supply chain will collect the tax and will be remitted to the government. The supply chain can also claim back the GST included in the products they buy. According to Singh (2007), it is well documented that a GST can be an effective form of indirect tax. Currently, many countries such as the United Kingdom, New Zealand, Australia and Singapore have already implemented the GST. The VAT has been adopted as part of a package of trade liberalization, compensating for the revenue loss from the reduction of tariffs whilst preserving the gains in production efficiency from moving producer prices closer to world prices. At a more general level—and especially in developing countries—adoption of the VAT is often seen as the central element in a program of modernizing tax administration, developing the use of methods of self-assessment whose generalization is expected ultimately to ease administration and compliance in relation to other taxes too (Keen & Lockwood, 2007). However, there are many issues and questions raised on