Difference between GST and sales tax

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Forums › Finance and wealth management › Difference between GST and sales tax

Rikkitic

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#236092 17-May-2018 14:36

An item on Reuters reports that Malaysia is scrapping GST and replacing it with a sales and service tax. Can anyone explain what the difference actually is? I don't really see one and the brief article didn't explain it.

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#2017662 17-May-2018 14:39

i believe GST is constant and sale tax could vary from sale item to another.

like alco could be 20% sale tax, but milk only 5%

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Fred99

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#2017707 17-May-2018 15:17

kobiak:

i believe GST is constant and sale tax could vary from sale item to another.

like alco could be 20% sale tax, but milk only 5%

No.

GST is applied (to "value added") on every transaction in a supply chain, a sales tax is collected only at the final point of (retail) sale.

Fred99

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#2017713 17-May-2018 15:22

networkn:

It's just another way to Grab Snatch and Take. Problem with variable rates is it's harder and more expensive to police, and there are a lot of ways you can rort the system.

I agree - it's possible that as a sales tax would only apply to the final sale of an item, then that may make it simpler in some ways to have different rates for different products - so perhaps that's why they have done it.

For example if bread was tax free and cake was taxed, what rate of tax does the flour supplier charge the baker? (or how does the baker claim GST back).

Geektastic

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#2017819 17-May-2018 18:19

Fred99:
networkn:

It's just another way to Grab Snatch and Take. Problem with variable rates is it's harder and more expensive to police, and there are a lot of ways you can rort the system.

I agree - it's possible that as a sales tax would only apply to the final sale of an item, then that may make it simpler in some ways to have different rates for different products - so perhaps that's why they have done it.

For example if bread was tax free and cake was taxed, what rate of tax does the flour supplier charge the baker? (or how does the baker claim GST back).

Ask the UK version of the IRD. Food is exempt from VAT but luxury food isn't. I expect there is a list. And a number of Tax Tribunal cases!

tdgeek

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#2017863 17-May-2018 19:12

GST is regressive as is sales tax. GST is cheaper to manage than sales tax. A poor person pays the same tax on a pumpkin as a wealthy person.

The only fair way is to remove GST, replace it with Income Tax, and remove barriers, i.e. I am a trust not a real person, so that tax paid is relative to income earned. But if taxes go up, the world ends, even if it is fairer. Loopholes is a key issue.

Geektastic

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#2018446 18-May-2018 16:58

tdgeek:
GST is regressive as is sales tax. GST is cheaper to manage than sales tax. A poor person pays the same tax on a pumpkin as a wealthy person.

The only fair way is to remove GST, replace it with Income Tax, and remove barriers, i.e. I am a trust not a real person, so that tax paid is relative to income earned. But if taxes go up, the world ends, even if it is fairer. Loopholes is a key issue.

It’s only fairer if the tax rate is flat. There is no fairness in simply taking someone’s money at a higher rate just because they manage to get paid more.

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#2018501 18-May-2018 18:08

Geektastic:
tdgeek:

GST is regressive as is sales tax. GST is cheaper to manage than sales tax. A poor person pays the same tax on a pumpkin as a wealthy person.

The only fair way is to remove GST, replace it with Income Tax, and remove barriers, i.e. I am a trust not a real person, so that tax paid is relative to income earned. But if taxes go up, the world ends, even if it is fairer. Loopholes is a key issue.

It’s only fairer if the tax rate is flat. There is no fairness in simply taking someone’s money at a higher rate just because they manage to get paid more.

It's because they can afford it.

I use to think lower taxes was good and hated the idea of a death duty (which I now support) but as I get older (and hopefully wiser) my views have changed.

As long as the tiers are at the appropriate level - I don't think $70k is anywhere near high enough for a top tier - it should be $200k+

Someone once asked me, would I rather pay higher taxes which are used to improve society and everyone's standard of living, or have more money but live in a high security house and no feel safe whenever I leave my home? The actual example they used was South Africa.

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tdgeek

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#2018560 18-May-2018 19:46

Geektastic:
tdgeek:

GST is regressive as is sales tax. GST is cheaper to manage than sales tax. A poor person pays the same tax on a pumpkin as a wealthy person.

The only fair way is to remove GST, replace it with Income Tax, and remove barriers, i.e. I am a trust not a real person, so that tax paid is relative to income earned. But if taxes go up, the world ends, even if it is fairer. Loopholes is a key issue.

It’s only fairer if the tax rate is flat. There is no fairness in simply taking someone’s money at a higher rate just because they manage to get paid more.

Fair. The issue is PDI. If you are on 40k, you have no PDI. if you are on 240k you have plenty of PDI. So, the simple argument of flat doesnt work. You could though set a wage, as tax free, then have flat over that threshold. Then you have poor people paying no tax and comfortable people paying all the tax. Not a lot different than now is it?

nunz

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#2018584 18-May-2018 20:23

Geektastic:
Fred99:

networkn:

It's just another way to Grab Snatch and Take. Problem with variable rates is it's harder and more expensive to police, and there are a lot of ways you can rort the system.

I agree - it's possible that as a sales tax would only apply to the final sale of an item, then that may make it simpler in some ways to have different rates for different products - so perhaps that's why they have done it.

For example if bread was tax free and cake was taxed, what rate of tax does the flour supplier charge the baker? (or how does the baker claim GST back).

Ask the UK version of the IRD. Food is exempt from VAT but luxury food isn't. I expect there is a list. And a number of Tax Tribunal cases!

australia tried or still tries this with GST. Plain loaf of bread - no GST. Loaf of bread with cheese on it - GST. It was the processed goods they looked to tax from memory. It was a disaster to implement.

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#2018682 18-May-2018 22:56

nunz:

Geektastic:
Fred99:

networkn:

It's just another way to Grab Snatch and Take. Problem with variable rates is it's harder and more expensive to police, and there are a lot of ways you can rort the system.

I agree - it's possible that as a sales tax would only apply to the final sale of an item, then that may make it simpler in some ways to have different rates for different products - so perhaps that's why they have done it.

For example if bread was tax free and cake was taxed, what rate of tax does the flour supplier charge the baker? (or how does the baker claim GST back).

Ask the UK version of the IRD. Food is exempt from VAT but luxury food isn't. I expect there is a list. And a number of Tax Tribunal cases!

australia tried or still tries this with GST. Plain loaf of bread - no GST. Loaf of bread with cheese on it - GST. It was the processed goods they looked to tax from memory. It was a disaster to implement.

They do the same thing in the UK. Go to a supermarket and buy a heated scotch egg and it's got VAT compared to a cold one - because a heated one is takeaway food.

Last time I checked the UK is still a functioning society so managing variable rates isn't too hard.

Most of the posters in this thread are just like chimpanzees on MDMA, full of feelings of bonhomie, joy, and optimism. Fred99 8/4/21

JimmyH

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#2019166 19-May-2018 20:47

Geektastic:
Fred99:

networkn:

It's just another way to Grab Snatch and Take. Problem with variable rates is it's harder and more expensive to police, and there are a lot of ways you can rort the system.

I agree - it's possible that as a sales tax would only apply to the final sale of an item, then that may make it simpler in some ways to have different rates for different products - so perhaps that's why they have done it.

For example if bread was tax free and cake was taxed, what rate of tax does the flour supplier charge the baker? (or how does the baker claim GST back).

Ask the UK version of the IRD. Food is exempt from VAT but luxury food isn't. I expect there is a list. And a number of Tax Tribunal cases!

There are. Google VAT on cornish pasties or McVities Jaffa Cakes if you want to read up on some of them. This article for instance:

Jaffa cake - is it a cake or a biscuit? VAT's the difference

Which is a key reason why, if we have to have a GST, I am very much in favour of applying it to pretty much everything and having only one rate. It's simple, easy to understand, and much less difficult to police with scope for evasion than multiple rates and exemptions.

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#2019179 19-May-2018 22:15

JimmyH:

Which is a key reason why, if we have to have a GST, I am very much in favour of applying it to pretty much everything and having only one rate. It's simple, easy to understand, and much less difficult to police with scope for evasion than multiple rates and exemptions.

I agree. There was a great piece on the SpinOff about this last year as part of Eric Crampton's Outside the Asylum series which made me realise why the initially fair-enough sounding "let's not charge GST on healthy food/baby products/etc" is actually such a bad idea.

JimmyH

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#2019269 20-May-2018 10:10

That is a great article. I hadn't seen it before, and thanks for posting it. He puts the case far more eloquently than I am able to.

gzt

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#2019425 20-May-2018 17:55

I would think removing it from retail fresh fruit and vegetables would be easy enough. There would be minor odd cases like fresh truffles flown in from france, but not enough to care. Non-cured meats would be similar.

JimmyH

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#2019437 20-May-2018 18:51

gzt: I would think removing it from retail fresh fruit and vegetables would be easy enough.

Did you read the Eric Crampton article linked to above. Basically, no it wouldn't, and it's not a sensible idea.

Plus why only "fresh" fruit and Veg? What is the test you would apply to determine whether something is "fresh". Also, why not not frozen veg as well, nutritionally they are pretty much the same.

There would be minor odd cases like fresh truffles flown in from france, but not enough to care.

I wouldn't be so sure that there would only be odd cases.

Non-cured meats would be similar.

So roast beef in a sandwich would be tax exempt. Salami in a sandwich would be taxed. Pork in a sandwich would be tax exempt, but the same meat served as ham would be taxed. What is the logic of that?

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