The Goods Service Tax In Malaysia

The Goods Service Tax In Malaysia IS THE INTRODUCTION OF THE GOODS SERVICE TAX (GST) IN MALAYSIA GOOD OR BAD? Chapter 1 1.0 INTRODUCTION. In the new global economy, more companies are operating cross border, and as such are faced with the need to deal effectively with many different taxes, often in many different countries, each with different rates, ruling and application. Coupled with this, the regulatory environment is increasingly challenging. The IMF has been trying to push for all countries to adopt the Goods Service Tax (GST), or also known in certain countries as Value Added Tax (VAT), so as to create a more level playing field amongst trading nations. Direct taxes have in the past been used to camouflage à ¢Ã¢â€š ¬Ã‹Å"protectionism policy of certain countries. High tariff on certain product like motorcar has prevented healthy competition amongst trading nations. The general populations of that country are left without a choice but to consume the local products, as imported products have become more expensive with the high tariff. Often, because of this, the local products tend to be inferior in quality as the re is no real incentive to compete. In the 2005 Budget, the Government of Malaysia announced that GST will be implemented on Jan 1 2007 to replace the current sales and service tax (SST). Following public outcry, on 22 February 2006 it announced a deferment to allow lead time to businesses for potential changes in processes, development of software and personnel training. The first reading of the GST Bill was tabled in December 2009 and the second and third reading is expected in April 2010. The Prime Minister recently announced that the increase in revenue expected from the introduction of GST will be used mainly to finance the hike in Civil Servants salary and to finance other infrastructure works for the benefit of the nation at large. Problem Statement Is GST really needed for Malaysia? If so, how does it affect the general public and the country as a whole? The aim of this paper is to discuss and bring to attention the problems which we might face with the implementation of the GST, or if we are to remain status quo with the SST. Chapter 2 Literature review The Ministry of Finance presented the following information to highlight on GST. It stated that it would be part of the overall tax reform to overcome the inherent weaknesses in the SST and to reduce the reliance on revenue from direct taxes and petroleum. GST is a more efficient and effective tax system as it is self policing and has an in-build cross checking features. It enhances tax compliance and deals with less bureaucracy. It is also a more stable source of revenue compared to income tax and less susceptible to economic downturn due to the consumption nature of the tax. The main types of taxes are direct and indirect taxes. Direct taxes are: Corporate Tax, Personal Income Tax, Real Property Gains Tax and Stamp duty whilst indirect taxes are Tariff (or Customs Duty), Excise Tax, SST (currently practiced in Malaysia) and GST. Contribution from petroleum revenue to total revenue increased from 29.1% (1990) to 40.1% (2008). The current high petroleum revenue is not sustainable as it is a depleting resource therefore and alternative source have to be sought. With the present average birth rate of 2.2, it is expected that by 2030, 12% of the population will be above 60 years old which almost double the current number. The working population paying taxes will therefore reduce, putting a greater burden on a smaller group of people. GST is a broad-based tax that distributes the burden of taxation among a larger section of the population based on consumption. GST preserve the incentive to work and encourages enterprise as it is not a progressive income tax. The tax rate does not increase according to income level; it is flat at the determined rate. It is levied at the production and distribution stages, thereby incorporating a self-policing mechanism that facilitates administration and makes it more difficult to avoid or evade. This further reduces the possibility of revenue loss through understatement of tax evasion. The GST model implemented in Malaysia is not expected to have cascading, or pyramiding, effect as the tax on a particular good depends upon its final value, and not the number of production and distribution channel it passes through. Furthermore, the output tax to be paid will be offset against the input tax, and there is no GST levied over GST. GST is expected to provide a more stable source of revenue as consumption is less affected by economic cycles compared to income tax. It can be an effective tax on the à ¢Ã¢â€š ¬Ã‹Å"shadow economy, as those involved would consume, and thus pay indirect taxes through GST. It is likely that those involved in such activities would buy luxury goods, which would be subjected to GST. The government is cutting its operating expenditure for 2010 by 13%. This shows it is aware of the growing deficit that has widened due to the stimulus package. Recently, Fitch rating agency has cut the rating of the ringgit, which may cause imported inflation if it depreciates, and the International Monetary Fund commented that the GST needs to be implemented urgently. Malaysias budget 2010 reports on GST; is that, it is currently at the final stage of completing the study on the implementation, where analysts are measuring the social impact of its presence in Malaysia. The Malaysian government said that it could be possible for them to implement this in the near future. Looking at Malaysia in a broader scale, GST will not only affect big businesses, but small and medium enterprises (SME) as well. Although there were nimble of past information saying that a food outlet can only charge GST if its annual turnover is above RM3 million (3,000,000 Ringgit Malaysia), the GST compliance requirements and thresholds has not been officially announced. If we were to take into account GSTs implementation into goods and services, we have to assume that it will happen to all stages of the supply chain; which means from the purchase of raw materials or start-up goods all the way to end-user (consumer ready) products available for sale. Ultimately in a product, GSTs charged to every level are passed on to the next person and ultimately, the consumer. A Tax Review Panel was formed in middle of 2005, and it has come out with a Discussion Paper intended for businesses to understand the basic administrative requirements and procedures when GST is implemented so that they know the impact of GST. Secondly, the Tax Review Panel invites the business community and other relevant organizations and associations to review the proposal in that paper. Thirdly, by having a public consultation, it provides an appropriate forum for both the public and private institutions to exchange views with members of the Tax Review Panel so as to understand the rationale behind the proposals initiated. The GST was supposed to be implemented in Malaysia in the year 2007; however the government has to defer the move due to critical reviews by certain quarters. After losing four States to the opposition, it has to tread on a careful path in order not to lose more public support. It cannot afford to make any more major mistake in the wake of its dismal performance in the last General Election. GST is generally known as a tax system which results in regressivity (i.e. people with less pay a greater share of their resources than those with more), in contrast with the ideal aim of progressivity which is generally sought when implementing a tax. It is sometimes argued that a GST system does not work in a poor region such as Africa, where most countries have heavy external debt burdens, malnutrition, civil wars and lack of food and medicines which often result in inhuman living conditions. Nevertheless, with the support of the IMF, VAT/GST systems were designed in many African countries to combat or at least alleviate the adverse effect of VAT/GST regressivity by having a list of exemptions and zero-ratings which apply (generally speaking) to basic foodstuffs and other basic necessities. GST is not always simple to administer, contrary to what the advocates of GST would want countries to believe during the transformation stage. Unless a proper GST administration, supported by modern technology and electronic communication systems can be implemented, GST administration will inevitably be costly for both the Revenue Authorities and the business sector. The output/input mechanism of the GST system, coupled with GST refunds, may provide the ideal opportunity for fraud where corrupt officials and unscrupulous businesses exploit weaknesses in the system. This again results in a defensive attitude from the Revenue Authorities, resulting in bad communication, cash flow and other GST cost. In 1992, a Free Trade Agreement (FTA) was signed which reduced import tariffs between ASEAN member countries. In the first three years of the FTA, exports amongst the ASEAN countries grew from US$43 billion to US$80 billion. In 1997, the leaders of ASEAN adopted the vision to build a stable, prosperous and highly competitive economic region, in which there is a free flow of goods, services and investments, a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities. The plan is to remove all tariffs for the six more developed countries by 2010 and for all countries by 2015. The summit also progressed the efforts to integrate ASEAN with the much larger economies of Asia- Pacific, specifically China, Japan, South Korea, India, Australia, and New Zealand. China signed a pact to introduce the worlds largest free trade zone by 2010, covering almost two billion people. Japan signed a similar agreement to take effect by 2012. India agreed to join in by 2011. Australia and New Zealand have agreed to talks starting next year to free up trade within a decade. The master plan is to have a free trade zone that can compete with the US and EU. In South East Asia, Malaysia remains one of the few countries yet to adopt the GST system, which would indirectly be in the way, if we want to be part of this master plan. In Malaysia, it was announced that essential goods and services will not be subjected to GST, but fears that GST will spark a chain reaction that will increase the prices of most non-controlled items should not be dismissed. We have seen numerous examples of when there is an increase in a certain commodity; it sparks a price rise in most goods and services. For example, when the petrol price increased to RM2.70, prices of most goods, foods and services were hiked. But after the petrol price dropped, there has not been a substantial correction in the prices of goods, food and services. The relevant ministries are powerless to mitigate the situation and curb the necessary inflation. A recent example is on the removal of the subsidy on white bread resulting in price increase of one loaf of bread by 20 to 30 cents. The Deputy Domestic Trade, Cooperative Consumer Affairs Minister can only comment that the price adjustment was not necessary, urge traders to practice corporate social responsibility and call on the consumers to execute their power in hand. All these statements will not effectively curb excessive profiteering and traders taking opportunity to increase the price of goods and service. The public would want to know how the government intends to avoid the similar predicament What is GST and how does it work? GST is a consumption tax charged on a wide range of domestic international products, goods and services. Its a broad-based tax imposed on every level of a product, from raw materials all the way to finished goods. The proposed implementation of GST will replace the current Malaysian service tax and sales tax. Broadly, GST works by offsetting GST paid on purchases (input tax) against GST due on sales or supplies made (output tax). This is referred to as the credit offset mechanism. The multi tier stages of tax helps to ensure that GST paid by businesses for purchases does not end up being a permanent cost. However, the consumer ultimately bears the burden of the tax. Conceptually, GST is imposed on the value added to goods or services by each separate processor in the production and distribution chain. This can be seen in the simple illustration below. GST to Government RM 4 + RM2 = RM6 (i.e. 4% x RM 100) i.e.4% x RM 150 = RM6 Output tax i.e. 4%x150 Less RM4 Input tax RM2 Net 4% is the assumed standard rate of GST. It is assumed that the entire output is taxable and all input taxes are creditable. FINAL CONSUMER Cost to consumer = RM 156 SUPPLIER Selling price = RM100 GST(4%) = RM 4 Total = RM 104 MANUFACTURER Cost = RM 100 Value added = RM 50 Total = RM 150 GST (4%) = RM 6 Total = RM 156 2.1 SOME CONCERN ABOUT THE INTRODUCTION OF GST. There were some concerns that Malaysians could suffer even more with the introduction of the Goods and Services Tax (GST). GST-driven inflation would be a calamity that the struggling lower-income group could do without. The GST Bill was tabled in Parliament at the end of the Budget sitting that ended on 17 December 2009. At its first reading, the bill was just mentioned, but there was no explanation of the bill or any debate. The second reading is when the bill is open for debate and proposed amendments. This may come as early as March 2010 for the GST Bill. Once approved, the new tax can be implemented as early as 2011. The table below lists the governments tax revenue for 2008 which contributed RM112.9 billion or 70 per cent of total government revenue. Government Tax Revenue in 2008 Personal Income Tax  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM 15.0 bil Company Tax  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM 37.7 bil Petroleum Tax  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM 24.2 bil Export and import duties  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM  Ãƒâ€šÃ‚   5.4 bil Excise duties  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM 10.7 bil Sales and Services Tax  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM 11.7 bil As shown in the table, the biggest source of tax revenue is company tax, which at 26 per cent of declared profits, currently brings in RM37.7 billion into government coffers. Petroleum tax makes up the second biggest tax item while the tax levied on the 1.5 million individuals who are now currently paying personal income taxes in Malaysia makes up the third biggest. All these taxes are deemed progressive for they tax the richest individuals and the companies that are making profits. Progressive taxes do not burden the poorer sectors of society. Progressive taxes tend to equal out income differences between the rich and the poor in society. It was argued that regressive tax regimes, on the other hand, burden the poor. Sales taxes are generally regressive as they tax consumption and not income. But sales tax in Malaysia has different rates for different types of goods and the government can make them less regressive by levying sales taxes exclusively on good that are consumed by the richer sectors of society such as expensive cars, big houses, overseas travel, expensive restaurants and other luxury items. The Goods and Services Tax, however, is perceived to be even more regressive for it is levied at a flat rate on a very wide range of products including many items that the poorer people need to buy. It might lead to a rise in prices and would definitely hit the poorest the hardest.   As in most countries with the GST in place, a reduction of corporate tax and personal tax will follow suit. This then, is seen as the real reason that the GST is being brought in à ¢Ã¢â€š ¬Ã¢â‚¬Å" to make Malaysia more business friendlyà ¢Ã¢â€š ¬? by cutting corporate tax (which has already been reduced markedly from the 40 per cent level in 1988 to its current 26 per cent). 2.2 LACK OF INFORMATION AND CONFUSION ON GST. The piecemeal release of information is creating great concern among the people and in the business sector. For example; Will the authorities furnish an extensive list of item that will be charged GST, and what will be exempted? If a product, like rice or chicken is exempted, does the exemption apply across the board regardless of the form of the product? For example, is cooked rice or cut, frozen or marinated chicken also exempted? What is the difference between exempt and zero-rated GST? Will there be any reduction in personal and corporate tax? What changes will be made to the sales and service tax? There is a perception that as GST is a multistage tax, it would result in higher effective tax rate than 4%. As GST is very technical, most people are unaware how it will impact them. When will the GST rate be reviewed? Recent media statement on its impact did not improve opinion on the introduction of GST. It is reported that under the sales and services tax system, the burden on the poor is 2.38%, but under the GST it will be 2.17%. For the higher income group, the tax burden will be reduced from 13% to 2.74%, according to the Finance Ministry. The overall savings for households will be between RM14.52 and RM346.92 yearly. This clearly contradicts other statement from politicians, and the public perception, that the GST will be inflationary. But as no further details are provided on how the savings are arrived at, public sentiment remains negative on GST. CHAPTER 3 EXPECTED IMPACT OF GST 3.1 Impact on the people in the street. The public is generally concerned that the introduction of GST will hit their wallets directly. In an initial assessment, as the GST is expected to be lower than service tax, the bill for a restaurant meal will be 1% lower as the service tax rate is 5% and GST is 4%. For other services liable to service tax, a GST rate lower than service tax should result in a slight decrease in charges if the cost of the other components in providing the service remain the same. On goods that attract sales tax, the current rate seems higher than the proposed GST, hence there might be a reduction if there is no further adjustment. Current rates are as follows; à ¢Ã¢â€š ¬Ã‚ ¢ Fruits, certain foodstuff and building materials (5%) à ¢Ã¢â€š ¬Ã‚ ¢ General goods, including motor vehicle (10%) à ¢Ã¢â€š ¬Ã‚ ¢ Liquor and alcoholic drinks (20%) à ¢Ã¢â€š ¬Ã‚ ¢ Cigarette and cheroots (25%) For hawkers; even though they do not have a turnover of RM500,000 yearly, so are not required collect GST, the material procured, for example, noodles, fish balls, processed meat, chicken, equipments for the stall may be subjected to GST, resulting in price hike. But without detailed knowledge or mapping, or even information on the duties charged, the people are uncertain whether the prices of goods and services will remain stagnant, increase or decrease. 3.2 IMPACT ON BUSINESSES. The implementation of GST is expected to impact business in the following manner: Compliance costs are expected to be incurred as there is requirement to track the input tax and output tax to determine refund or tax to be submitted. Even though some Malaysian companies are already paying sales tax or service tax, there was no input tax to be monitored and accounted for to offset against output tax. Business process and procurement need to be mapped out, especially with respect to suppliers and promotional items. For example, a new car attract GST, but items provided for free during promotion like sports rims or a GPS system à ¢Ã¢â€š ¬Ã¢â‚¬Å" may not be eligible for an input tax claim. Likewise the corporate souvenirs and hampers given out by businesses may not be eligible. The procurement department should start detailing the sales tax or the existing tax paid for their items used a raw material. As the GST is expected to be lower than most current indirect tax, there should be some potential cost savings. This is also to avoid being overcharged by supplier that intends to add the GST over the existing price of its supplies after sales tax, there should be some potential cost saving. Human resource factor: New staff may need to be employed to ensure a business is compliant and conversant with the GST requirement. As most staff have not been exposed to GST, training needs to be conducted. Accounting system and account payable: The business would require an appropriate accounting system to keep track of the GST amounts. Most systems could be upgraded, and it is important to notify software vendors to test run the data to avoid any potential complication. Cash flow management: Businesses should be aware that output GST may have to be settled before settlement of sales invoices by customer. Meanwhile, payables on which input tax has been claimed but remains unpaid after six months have to be accounted as output tax and are to be reclaimed as input tax only after payment is made. Businesses are concerned about the timeliness of the refund process as delays would results in a higher working capital cost. In addition, businesses that have thin margins are worried about the speed of the refund for input tax, especially if the business is mainly exported-oriented and procure its raw material locally. 3.3 OTHER IMPACTS: The expected impact on corporate and income taxes are as published in the news recently. Deputy Finance Minister Chor Chee Heung quoted that Malaysia will see a gradual reduction in its corporate and income tax rates once the proposed Goods and Services Tax (GST) is in place by mid-2011. He does not think that there was a timeline for achieving this reduction in corporate and income taxes, as this is a long-term objective of the government. Once the GST come into play, it will be a broad based tax and the trend is, once GST is implemented, corporate and income taxes will gradually be reduced. Chor also disclosed that businesses related to services such as those in the food and transportation sectors, would be exempted from the proposed GST. He gave assurance that the cost of living and lifestyle of the people would not increase or be affected with the implementation of a GST. He also added that the implementation of GST would not cause inflation. Once the GST is in, the service tax and sales tax (now imposed) would be abolished. Both taxes are quite high at 10 per cent and five per cent respectively. The GST at four per cent is considered very low. Meanwhile, the Finance Ministrys Tax Review Panel Chairman, Ms. Kamariah Hussain, said there would be revenue gains of about 1.0 Billion Ringgit for the government with the GST implementation. She explained that the introduction of the GST was part of an overall tax reform in the country. With the GST, the government would have a better mix of revenue, and not be too dependent on income tax and petroleum income. Second Finance Minister, Ahmad Husni Hanadzlah had indicated that while the GST would replace the existing sales and services taxes, it would not put pressure on prices and to ease the burden of consumers, staple foods such as rice, sugar, cooking oil and flour would be exempted from it. 3.3.1 IMPACT OF GST ON SMALL MEDIUM ENTERPRISE (SME). SMEs form the backbone of the business activities of a nation. Other than encouraging the growth of new industries such as tourism and biotechnology-based industries, the Government (2004 Budget Proposals) too has singled out SMEs to spearhead domestic growth. However, there is a group of à ¢Ã¢â€š ¬Ã‹Å"unhappy people representing non-governmental organizations (NGOs) and the public who have expressed their non-approval for the introduction of the proposed GST. Their main argument is that GST favours the rich and burdens the poor at large. Their contention is that it will burden the people and contribute to the widening gap between the rich and the poor, not to mention the rise in the inflation rateà ¢Ã¢â€š ¬?. However, tax practitioner, Beh Tok Koay is of the opinion that perhaps this small group lacks an understanding of the whole system of GST. It is supposed to be broadbased and will replace the service and sales tax system, and this in turn will help to reduce income tax ratesà ¢Ã¢â€š ¬?. There could be two GST rates: a lower rate for SMEs and a higher rate for large enterprises. Imposing two GST rates is, however, difficult to administer as they provide ample room for tax avoidance and increase compliance cost. Lowering the compliance cost of GST would ease the burden of SMEs. If there is convincing data to show that the compliance cost of SMEs are lower if the accounts are computerized, then the Government could provide software packages to the licensees to enable them to correctly compute GST. Free training and seminars including visits should be extended to SMEs to enable them to have a better understanding of the compliance requirements. One other option is to exempt small busine sses from GST altogether but such a decision too has its drawbacks. The Government has to analyze the revenue gain as compared to the compliance cost before making a decision to determine the threshold limit. With the two-year window period before GST is in force, all of us have a role to play in contributing towards the development of a better broad-based consumption tax system which ultimately would help reduce the rates of income tax. No doubt, everyone especially the SMEs will eagerly await the final introduction of the GST system and the extent of the expected income tax rate cuts. The business community, NGO and charity organization are concerned about the ability of the authorities to implement GST smoothly. Australia, for example, had to bring in foreign experts to help in rollout of GST. It would undermine investor confidence if the GST is not implemented in a structured manner with minimal hiccup. Burdening the poor and those economically vulnerable: Some 32% of the household in Malaysia have an income under RM2,000 per month. The introduction of GST without the necessary revamp of subsidies will result in a heavier financial burden on poor and low-income families. Families with an income below RM2,000 a month do not have to pay personal income tax. With GST, things that are not basic necessities toys, processed food, can food, packet drinks, and so on, could increase existing inflationary pressures. The ongoing restructuring of the subsidy will also create the tension, discomfort and dissatisfaction as people eligible for subsidy could unintentionally be left out as the government establishes and tries to refine its method of distribution. CHAPTER 4 4.0 CONCLUSION GST is unavoidable. It will just be a matter of time when it will be implemented. It may not be a perfect system, but has worked well as a revenue base for other countries. Malaysias problem may lie more in public education, implementation and enforcement. To move forward, Malaysia has to conform to the free trade vision of ASEAN and cannot lag behind the other countries. As of today, apart from Malaysia, only Myanmar and Brunei has yet to implement the GST. GST modernises the tax system by addressing tax evasion committed by free riders who want every benefit but refuse to pay for it, or rather have others to pay for them. GST will certainly be a good platform to increase the Governments revenue. Concerns of it being regressive can be overcome by careful and prudent classifications of zero rated supplies and exempt supplies for essential items as against standard supplies for non essential and luxury items. One good point of starting late is the ability to learn from the mistakes of others. The government has to be fully transparent in the implementation of the proposed GST. In this borderless world, news and knowledge cannot be curbed. The masses are getting more intelligent and informed. It will not be prudent for the government of the day not to move forward towards a more modern tax system. Rather than blind opposition, critics should provide examples and lessons learnt from the weaknesses of other nations in the implementation of GST or VAT. However, based from past experience, the skeptism voiced is understandable. We have heard of past Auditor General Reports on the wastage and the leakage of public funds into the pockets of the well connected; of RM 25 screw drivers being bought through tender at a price of RM200; commissions running into millions of ringgit for the purchase of Sukhov jets and submarines; and billions swallowed in the PKFZ scandal. The sums involved are astronomical. Then we have newly built hospitals that cannot be used, court room complexes with leaked ceilings and stadium roofs that collapsed in the absence of even a small earthquake. So, whether the GST will finally proved to be good or bad for the country will remain a question mark until its actual implementation. The actual salary increase as promised by the government might not be the expected pot of gold at the end of the rainbow if the GST is not properly implemented. The Goods Service Tax In Malaysia The Goods Service Tax In Malaysia IS THE INTRODUCTION OF THE GOODS SERVICE TAX (GST) IN MALAYSIA GOOD OR BAD? Chapter 1 1.0 INTRODUCTION. In the new global economy, more companies are operating cross border, and as such are faced with the need to deal effectively with many different taxes, often in many different countries, each with different rates, ruling and application. Coupled with this, the regulatory environment is increasingly challenging. The IMF has been trying to push for all countries to adopt the Goods Service Tax (GST), or also known in certain countries as Value Added Tax (VAT), so as to create a more level playing field amongst trading nations. Direct taxes have in the past been used to camouflage à ¢Ã¢â€š ¬Ã‹Å"protectionism policy of certain countries. High tariff on certain product like motorcar has prevented healthy competition amongst trading nations. The general populations of that country are left without a choice but to consume the local products, as imported products have become more expensive with the high tariff. Often, because of this, the local products tend to be inferior in quality as the re is no real incentive to compete. In the 2005 Budget, the Government of Malaysia announced that GST will be implemented on Jan 1 2007 to replace the current sales and service tax (SST). Following public outcry, on 22 February 2006 it announced a deferment to allow lead time to businesses for potential changes in processes, development of software and personnel training. The first reading of the GST Bill was tabled in December 2009 and the second and third reading is expected in April 2010. The Prime Minister recently announced that the increase in revenue expected from the introduction of GST will be used mainly to finance the hike in Civil Servants salary and to finance other infrastructure works for the benefit of the nation at large. Problem Statement Is GST really needed for Malaysia? If so, how does it affect the general public and the country as a whole? The aim of this paper is to discuss and bring to attention the problems which we might face with the implementation of the GST, or if we are to remain status quo with the SST. Chapter 2 Literature review The Ministry of Finance presented the following information to highlight on GST. It stated that it would be part of the overall tax reform to overcome the inherent weaknesses in the SST and to reduce the reliance on revenue from direct taxes and petroleum. GST is a more efficient and effective tax system as it is self policing and has an in-build cross checking features. It enhances tax compliance and deals with less bureaucracy. It is also a more stable source of revenue compared to income tax and less susceptible to economic downturn due to the consumption nature of the tax. The main types of taxes are direct and indirect taxes. Direct taxes are: Corporate Tax, Personal Income Tax, Real Property Gains Tax and Stamp duty whilst indirect taxes are Tariff (or Customs Duty), Excise Tax, SST (currently practiced in Malaysia) and GST. Contribution from petroleum revenue to total revenue increased from 29.1% (1990) to 40.1% (2008). The current high petroleum revenue is not sustainable as it is a depleting resource therefore and alternative source have to be sought. With the present average birth rate of 2.2, it is expected that by 2030, 12% of the population will be above 60 years old which almost double the current number. The working population paying taxes will therefore reduce, putting a greater burden on a smaller group of people. GST is a broad-based tax that distributes the burden of taxation among a larger section of the population based on consumption. GST preserve the incentive to work and encourages enterprise as it is not a progressive income tax. The tax rate does not increase according to income level; it is flat at the determined rate. It is levied at the production and distribution stages, thereby incorporating a self-policing mechanism that facilitates administration and makes it more difficult to avoid or evade. This further reduces the possibility of revenue loss through understatement of tax evasion. The GST model implemented in Malaysia is not expected to have cascading, or pyramiding, effect as the tax on a particular good depends upon its final value, and not the number of production and distribution channel it passes through. Furthermore, the output tax to be paid will be offset against the input tax, and there is no GST levied over GST. GST is expected to provide a more stable source of revenue as consumption is less affected by economic cycles compared to income tax. It can be an effective tax on the à ¢Ã¢â€š ¬Ã‹Å"shadow economy, as those involved would consume, and thus pay indirect taxes through GST. It is likely that those involved in such activities would buy luxury goods, which would be subjected to GST. The government is cutting its operating expenditure for 2010 by 13%. This shows it is aware of the growing deficit that has widened due to the stimulus package. Recently, Fitch rating agency has cut the rating of the ringgit, which may cause imported inflation if it depreciates, and the International Monetary Fund commented that the GST needs to be implemented urgently. Malaysias budget 2010 reports on GST; is that, it is currently at the final stage of completing the study on the implementation, where analysts are measuring the social impact of its presence in Malaysia. The Malaysian government said that it could be possible for them to implement this in the near future. Looking at Malaysia in a broader scale, GST will not only affect big businesses, but small and medium enterprises (SME) as well. Although there were nimble of past information saying that a food outlet can only charge GST if its annual turnover is above RM3 million (3,000,000 Ringgit Malaysia), the GST compliance requirements and thresholds has not been officially announced. If we were to take into account GSTs implementation into goods and services, we have to assume that it will happen to all stages of the supply chain; which means from the purchase of raw materials or start-up goods all the way to end-user (consumer ready) products available for sale. Ultimately in a product, GSTs charged to every level are passed on to the next person and ultimately, the consumer. A Tax Review Panel was formed in middle of 2005, and it has come out with a Discussion Paper intended for businesses to understand the basic administrative requirements and procedures when GST is implemented so that they know the impact of GST. Secondly, the Tax Review Panel invites the business community and other relevant organizations and associations to review the proposal in that paper. Thirdly, by having a public consultation, it provides an appropriate forum for both the public and private institutions to exchange views with members of the Tax Review Panel so as to understand the rationale behind the proposals initiated. The GST was supposed to be implemented in Malaysia in the year 2007; however the government has to defer the move due to critical reviews by certain quarters. After losing four States to the opposition, it has to tread on a careful path in order not to lose more public support. It cannot afford to make any more major mistake in the wake of its dismal performance in the last General Election. GST is generally known as a tax system which results in regressivity (i.e. people with less pay a greater share of their resources than those with more), in contrast with the ideal aim of progressivity which is generally sought when implementing a tax. It is sometimes argued that a GST system does not work in a poor region such as Africa, where most countries have heavy external debt burdens, malnutrition, civil wars and lack of food and medicines which often result in inhuman living conditions. Nevertheless, with the support of the IMF, VAT/GST systems were designed in many African countries to combat or at least alleviate the adverse effect of VAT/GST regressivity by having a list of exemptions and zero-ratings which apply (generally speaking) to basic foodstuffs and other basic necessities. GST is not always simple to administer, contrary to what the advocates of GST would want countries to believe during the transformation stage. Unless a proper GST administration, supported by modern technology and electronic communication systems can be implemented, GST administration will inevitably be costly for both the Revenue Authorities and the business sector. The output/input mechanism of the GST system, coupled with GST refunds, may provide the ideal opportunity for fraud where corrupt officials and unscrupulous businesses exploit weaknesses in the system. This again results in a defensive attitude from the Revenue Authorities, resulting in bad communication, cash flow and other GST cost. In 1992, a Free Trade Agreement (FTA) was signed which reduced import tariffs between ASEAN member countries. In the first three years of the FTA, exports amongst the ASEAN countries grew from US$43 billion to US$80 billion. In 1997, the leaders of ASEAN adopted the vision to build a stable, prosperous and highly competitive economic region, in which there is a free flow of goods, services and investments, a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities. The plan is to remove all tariffs for the six more developed countries by 2010 and for all countries by 2015. The summit also progressed the efforts to integrate ASEAN with the much larger economies of Asia- Pacific, specifically China, Japan, South Korea, India, Australia, and New Zealand. China signed a pact to introduce the worlds largest free trade zone by 2010, covering almost two billion people. Japan signed a similar agreement to take effect by 2012. India agreed to join in by 2011. Australia and New Zealand have agreed to talks starting next year to free up trade within a decade. The master plan is to have a free trade zone that can compete with the US and EU. In South East Asia, Malaysia remains one of the few countries yet to adopt the GST system, which would indirectly be in the way, if we want to be part of this master plan. In Malaysia, it was announced that essential goods and services will not be subjected to GST, but fears that GST will spark a chain reaction that will increase the prices of most non-controlled items should not be dismissed. We have seen numerous examples of when there is an increase in a certain commodity; it sparks a price rise in most goods and services. For example, when the petrol price increased to RM2.70, prices of most goods, foods and services were hiked. But after the petrol price dropped, there has not been a substantial correction in the prices of goods, food and services. The relevant ministries are powerless to mitigate the situation and curb the necessary inflation. A recent example is on the removal of the subsidy on white bread resulting in price increase of one loaf of bread by 20 to 30 cents. The Deputy Domestic Trade, Cooperative Consumer Affairs Minister can only comment that the price adjustment was not necessary, urge traders to practice corporate social responsibility and call on the consumers to execute their power in hand. All these statements will not effectively curb excessive profiteering and traders taking opportunity to increase the price of goods and service. The public would want to know how the government intends to avoid the similar predicament What is GST and how does it work? GST is a consumption tax charged on a wide range of domestic international products, goods and services. Its a broad-based tax imposed on every level of a product, from raw materials all the way to finished goods. The proposed implementation of GST will replace the current Malaysian service tax and sales tax. Broadly, GST works by offsetting GST paid on purchases (input tax) against GST due on sales or supplies made (output tax). This is referred to as the credit offset mechanism. The multi tier stages of tax helps to ensure that GST paid by businesses for purchases does not end up being a permanent cost. However, the consumer ultimately bears the burden of the tax. Conceptually, GST is imposed on the value added to goods or services by each separate processor in the production and distribution chain. This can be seen in the simple illustration below. GST to Government RM 4 + RM2 = RM6 (i.e. 4% x RM 100) i.e.4% x RM 150 = RM6 Output tax i.e. 4%x150 Less RM4 Input tax RM2 Net 4% is the assumed standard rate of GST. It is assumed that the entire output is taxable and all input taxes are creditable. FINAL CONSUMER Cost to consumer = RM 156 SUPPLIER Selling price = RM100 GST(4%) = RM 4 Total = RM 104 MANUFACTURER Cost = RM 100 Value added = RM 50 Total = RM 150 GST (4%) = RM 6 Total = RM 156 2.1 SOME CONCERN ABOUT THE INTRODUCTION OF GST. There were some concerns that Malaysians could suffer even more with the introduction of the Goods and Services Tax (GST). GST-driven inflation would be a calamity that the struggling lower-income group could do without. The GST Bill was tabled in Parliament at the end of the Budget sitting that ended on 17 December 2009. At its first reading, the bill was just mentioned, but there was no explanation of the bill or any debate. The second reading is when the bill is open for debate and proposed amendments. This may come as early as March 2010 for the GST Bill. Once approved, the new tax can be implemented as early as 2011. The table below lists the governments tax revenue for 2008 which contributed RM112.9 billion or 70 per cent of total government revenue. Government Tax Revenue in 2008 Personal Income Tax  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM 15.0 bil Company Tax  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM 37.7 bil Petroleum Tax  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM 24.2 bil Export and import duties  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM  Ãƒâ€šÃ‚   5.4 bil Excise duties  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM 10.7 bil Sales and Services Tax  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   RM 11.7 bil As shown in the table, the biggest source of tax revenue is company tax, which at 26 per cent of declared profits, currently brings in RM37.7 billion into government coffers. Petroleum tax makes up the second biggest tax item while the tax levied on the 1.5 million individuals who are now currently paying personal income taxes in Malaysia makes up the third biggest. All these taxes are deemed progressive for they tax the richest individuals and the companies that are making profits. Progressive taxes do not burden the poorer sectors of society. Progressive taxes tend to equal out income differences between the rich and the poor in society. It was argued that regressive tax regimes, on the other hand, burden the poor. Sales taxes are generally regressive as they tax consumption and not income. But sales tax in Malaysia has different rates for different types of goods and the government can make them less regressive by levying sales taxes exclusively on good that are consumed by the richer sectors of society such as expensive cars, big houses, overseas travel, expensive restaurants and other luxury items. The Goods and Services Tax, however, is perceived to be even more regressive for it is levied at a flat rate on a very wide range of products including many items that the poorer people need to buy. It might lead to a rise in prices and would definitely hit the poorest the hardest.   As in most countries with the GST in place, a reduction of corporate tax and personal tax will follow suit. This then, is seen as the real reason that the GST is being brought in à ¢Ã¢â€š ¬Ã¢â‚¬Å" to make Malaysia more business friendlyà ¢Ã¢â€š ¬? by cutting corporate tax (which has already been reduced markedly from the 40 per cent level in 1988 to its current 26 per cent). 2.2 LACK OF INFORMATION AND CONFUSION ON GST. The piecemeal release of information is creating great concern among the people and in the business sector. For example; Will the authorities furnish an extensive list of item that will be charged GST, and what will be exempted? If a product, like rice or chicken is exempted, does the exemption apply across the board regardless of the form of the product? For example, is cooked rice or cut, frozen or marinated chicken also exempted? What is the difference between exempt and zero-rated GST? Will there be any reduction in personal and corporate tax? What changes will be made to the sales and service tax? There is a perception that as GST is a multistage tax, it would result in higher effective tax rate than 4%. As GST is very technical, most people are unaware how it will impact them. When will the GST rate be reviewed? Recent media statement on its impact did not improve opinion on the introduction of GST. It is reported that under the sales and services tax system, the burden on the poor is 2.38%, but under the GST it will be 2.17%. For the higher income group, the tax burden will be reduced from 13% to 2.74%, according to the Finance Ministry. The overall savings for households will be between RM14.52 and RM346.92 yearly. This clearly contradicts other statement from politicians, and the public perception, that the GST will be inflationary. But as no further details are provided on how the savings are arrived at, public sentiment remains negative on GST. CHAPTER 3 EXPECTED IMPACT OF GST 3.1 Impact on the people in the street. The public is generally concerned that the introduction of GST will hit their wallets directly. In an initial assessment, as the GST is expected to be lower than service tax, the bill for a restaurant meal will be 1% lower as the service tax rate is 5% and GST is 4%. For other services liable to service tax, a GST rate lower than service tax should result in a slight decrease in charges if the cost of the other components in providing the service remain the same. On goods that attract sales tax, the current rate seems higher than the proposed GST, hence there might be a reduction if there is no further adjustment. Current rates are as follows; à ¢Ã¢â€š ¬Ã‚ ¢ Fruits, certain foodstuff and building materials (5%) à ¢Ã¢â€š ¬Ã‚ ¢ General goods, including motor vehicle (10%) à ¢Ã¢â€š ¬Ã‚ ¢ Liquor and alcoholic drinks (20%) à ¢Ã¢â€š ¬Ã‚ ¢ Cigarette and cheroots (25%) For hawkers; even though they do not have a turnover of RM500,000 yearly, so are not required collect GST, the material procured, for example, noodles, fish balls, processed meat, chicken, equipments for the stall may be subjected to GST, resulting in price hike. But without detailed knowledge or mapping, or even information on the duties charged, the people are uncertain whether the prices of goods and services will remain stagnant, increase or decrease. 3.2 IMPACT ON BUSINESSES. The implementation of GST is expected to impact business in the following manner: Compliance costs are expected to be incurred as there is requirement to track the input tax and output tax to determine refund or tax to be submitted. Even though some Malaysian companies are already paying sales tax or service tax, there was no input tax to be monitored and accounted for to offset against output tax. Business process and procurement need to be mapped out, especially with respect to suppliers and promotional items. For example, a new car attract GST, but items provided for free during promotion like sports rims or a GPS system à ¢Ã¢â€š ¬Ã¢â‚¬Å" may not be eligible for an input tax claim. Likewise the corporate souvenirs and hampers given out by businesses may not be eligible. The procurement department should start detailing the sales tax or the existing tax paid for their items used a raw material. As the GST is expected to be lower than most current indirect tax, there should be some potential cost savings. This is also to avoid being overcharged by supplier that intends to add the GST over the existing price of its supplies after sales tax, there should be some potential cost saving. Human resource factor: New staff may need to be employed to ensure a business is compliant and conversant with the GST requirement. As most staff have not been exposed to GST, training needs to be conducted. Accounting system and account payable: The business would require an appropriate accounting system to keep track of the GST amounts. Most systems could be upgraded, and it is important to notify software vendors to test run the data to avoid any potential complication. Cash flow management: Businesses should be aware that output GST may have to be settled before settlement of sales invoices by customer. Meanwhile, payables on which input tax has been claimed but remains unpaid after six months have to be accounted as output tax and are to be reclaimed as input tax only after payment is made. Businesses are concerned about the timeliness of the refund process as delays would results in a higher working capital cost. In addition, businesses that have thin margins are worried about the speed of the refund for input tax, especially if the business is mainly exported-oriented and procure its raw material locally. 3.3 OTHER IMPACTS: The expected impact on corporate and income taxes are as published in the news recently. Deputy Finance Minister Chor Chee Heung quoted that Malaysia will see a gradual reduction in its corporate and income tax rates once the proposed Goods and Services Tax (GST) is in place by mid-2011. He does not think that there was a timeline for achieving this reduction in corporate and income taxes, as this is a long-term objective of the government. Once the GST come into play, it will be a broad based tax and the trend is, once GST is implemented, corporate and income taxes will gradually be reduced. Chor also disclosed that businesses related to services such as those in the food and transportation sectors, would be exempted from the proposed GST. He gave assurance that the cost of living and lifestyle of the people would not increase or be affected with the implementation of a GST. He also added that the implementation of GST would not cause inflation. Once the GST is in, the service tax and sales tax (now imposed) would be abolished. Both taxes are quite high at 10 per cent and five per cent respectively. The GST at four per cent is considered very low. Meanwhile, the Finance Ministrys Tax Review Panel Chairman, Ms. Kamariah Hussain, said there would be revenue gains of about 1.0 Billion Ringgit for the government with the GST implementation. She explained that the introduction of the GST was part of an overall tax reform in the country. With the GST, the government would have a better mix of revenue, and not be too dependent on income tax and petroleum income. Second Finance Minister, Ahmad Husni Hanadzlah had indicated that while the GST would replace the existing sales and services taxes, it would not put pressure on prices and to ease the burden of consumers, staple foods such as rice, sugar, cooking oil and flour would be exempted from it. 3.3.1 IMPACT OF GST ON SMALL MEDIUM ENTERPRISE (SME). SMEs form the backbone of the business activities of a nation. Other than encouraging the growth of new industries such as tourism and biotechnology-based industries, the Government (2004 Budget Proposals) too has singled out SMEs to spearhead domestic growth. However, there is a group of à ¢Ã¢â€š ¬Ã‹Å"unhappy people representing non-governmental organizations (NGOs) and the public who have expressed their non-approval for the introduction of the proposed GST. Their main argument is that GST favours the rich and burdens the poor at large. Their contention is that it will burden the people and contribute to the widening gap between the rich and the poor, not to mention the rise in the inflation rateà ¢Ã¢â€š ¬?. However, tax practitioner, Beh Tok Koay is of the opinion that perhaps this small group lacks an understanding of the whole system of GST. It is supposed to be broadbased and will replace the service and sales tax system, and this in turn will help to reduce income tax ratesà ¢Ã¢â€š ¬?. There could be two GST rates: a lower rate for SMEs and a higher rate for large enterprises. Imposing two GST rates is, however, difficult to administer as they provide ample room for tax avoidance and increase compliance cost. Lowering the compliance cost of GST would ease the burden of SMEs. If there is convincing data to show that the compliance cost of SMEs are lower if the accounts are computerized, then the Government could provide software packages to the licensees to enable them to correctly compute GST. Free training and seminars including visits should be extended to SMEs to enable them to have a better understanding of the compliance requirements. One other option is to exempt small busine sses from GST altogether but such a decision too has its drawbacks. The Government has to analyze the revenue gain as compared to the compliance cost before making a decision to determine the threshold limit. With the two-year window period before GST is in force, all of us have a role to play in contributing towards the development of a better broad-based consumption tax system which ultimately would help reduce the rates of income tax. No doubt, everyone especially the SMEs will eagerly await the final introduction of the GST system and the extent of the expected income tax rate cuts. The business community, NGO and charity organization are concerned about the ability of the authorities to implement GST smoothly. Australia, for example, had to bring in foreign experts to help in rollout of GST. It would undermine investor confidence if the GST is not implemented in a structured manner with minimal hiccup. Burdening the poor and those economically vulnerable: Some 32% of the household in Malaysia have an income under RM2,000 per month. The introduction of GST without the necessary revamp of subsidies will result in a heavier financial burden on poor and low-income families. Families with an income below RM2,000 a month do not have to pay personal income tax. With GST, things that are not basic necessities toys, processed food, can food, packet drinks, and so on, could increase existing inflationary pressures. The ongoing restructuring of the subsidy will also create the tension, discomfort and dissatisfaction as people eligible for subsidy could unintentionally be left out as the government establishes and tries to refine its method of distribution. CHAPTER 4 4.0 CONCLUSION GST is unavoidable. It will just be a matter of time when it will be implemented. It may not be a perfect system, but has worked well as a revenue base for other countries. Malaysias problem may lie more in public education, implementation and enforcement. To move forward, Malaysia has to conform to the free trade vision of ASEAN and cannot lag behind the other countries. As of today, apart from Malaysia, only Myanmar and Brunei has yet to implement the GST. GST modernises the tax system by addressing tax evasion committed by free riders who want every benefit but refuse to pay for it, or rather have others to pay for them. GST will certainly be a good platform to increase the Governments revenue. Concerns of it being regressive can be overcome by careful and prudent classifications of zero rated supplies and exempt supplies for essential items as against standard supplies for non essential and luxury items. One good point of starting late is the ability to learn from the mistakes of others. The government has to be fully transparent in the implementation of the proposed GST. In this borderless world, news and knowledge cannot be curbed. The masses are getting more intelligent and informed. It will not be prudent for the government of the day not to move forward towards a more modern tax system. Rather than blind opposition, critics should provide examples and lessons learnt from the weaknesses of other nations in the implementation of GST or VAT. However, based from past experience, the skeptism voiced is understandable. We have heard of past Auditor General Reports on the wastage and the leakage of public funds into the pockets of the well connected; of RM 25 screw drivers being bought through tender at a price of RM200; commissions running into millions of ringgit for the purchase of Sukhov jets and submarines; and billions swallowed in the PKFZ scandal. The sums involved are astronomical. Then we have newly built hospitals that cannot be used, court room complexes with leaked ceilings and stadium roofs that collapsed in the absence of even a small earthquake. So, whether the GST will finally proved to be good or bad for the country will remain a question mark until its actual implementation. The actual salary increase as promised by the government might not be the expected pot of gold at the end of the rainbow if the GST is not properly implemented.

Healthcare Reform in Vermont

Healthcare Reform in Vermont Vermont is one of the states of the United States and it is found in the region of New England. New England is on the Northeastern side on the United States. Vermont is the 2nd least populous state in the US, and the 6th least extensive. This is the only state in the New England region that does not have a border with the Atlantic Ocean. However, half of its Western border is found within Lake Champlain, and it shares this border with New York. On the south of Vermont lies Massachusetts, while on the east, there is the state of New Hampshire. On the north of Vermont lies the Canadian province of Quebec, while on its east, there is the state of New York. As of July 2013, the census Bureau of the US gives an estimation that the total population of this state of Vermont stood at 626, 630 people (Abrahamsen, 2012). This represented an increase of 0.14%, when compared to the census of 2010. The state of Vermont has an increase in the aging population, and on this basis, there is an increase in the provision of aging health care services within the economy of the state (Abrahamsen, 2012). The Allen Fletcher Health is considered as the biggest private health provider in the state of Vermont, with an employee base of around 7,100 people. As of the year 2010, the entire bill that patients in the hospital paid amounted to 3.76 billion dollars. Currently, 92,000 people have enrolled for the Medicare program. It is important to denote that as of 2011, Medicare was able to spend 740 million dollars on the health care of the state (Deary and sBrown, 2001). The financial capacity of the state is very stable, and it has been able to achieve a balanced budget, since the year 1991 (Deary and sBrown, 2001). The state has an enterprise fund, for purposes of sponsoring activities that would reduce social and economic problems like unemployment, drug abuse, etc. For purposes of understanding the economic strength of Vermont, the state has an individual’s per capita income of 38,306 dollars. On the other hand, the general size of the public sector is 24.3%, when compared to that of the private sector which amounts to 36.6% (Abrahamsen, 2012). Based on these grounds, the private sector is wider than the public sector. The tax system of this state is also favorable, and one of the unleast fair tax structure in the United States. This is because the tax structure gives income tax credit to low waged workers. This is for purposes of ensuring that there is an equitable distribution of resources. Prior Health Reform Policy: One of the health care reforms initiated by the state of Vermont is the Dynasaur programs. This is a program that is funded by the government of Vermont, and was formed in 1989. This program was aimed at providing universal cover to the children of Vermont, and when this was added up by the private insurance individuals that Vermont had, the state was able to ensure universal health coverage of all its children (Deary and Brown, 2001). Because of this policy, the state of Vermont was able to be regarded as having the best health care policies in the US. When this program began in 1989, the objective of the government was to provide health care services to children who were under the ages of six years, and to pregnant women who were unable to afford private health insurance programs. In 1992, the government of Vermont was able to increase the health care coverage of the Dr. Dynasur program. This was to cover children and teenagers who were under the ages of 17 years; this is up from t he previous six years covered by the 1989 Dr. Dynasur plan (Deary and Brown, 2001). The main aim of this policy was to ensure that children and pregnant women are able to access preventive care, and pre-natal health care services. Another important goal of this policy was to ensure that the state government is able to assist families in achieving self-sufficiency, by helping them carter for their medical needs (Abrahamsen, 2012). This was in line with the state’s welfare system that was assisting families that did not receive the welfare money. As discussed earlier, this policy was very efficient, and it resulted in the ranking of Vermont as a state with the best health care policy in the United States. In 2006, the government of Vermont introduced the Catamount Health care policy (Almgren and Lindhorst, 2012). This health care policy targeted people who were not insured by the Medicaid and Medicare policies. The main aim of this policy was to reduce the medical costs suffered by chronic patients. In 2011, the state government of Vermont introduced a new heal th care policy. This health care policy was to create a single health care payer system, under the Green Mountain Care program. The law that enabled the introduction of this policy is the H. 202 law. Under this policy, all citizens of Vermont are required to get a universal health care cover. This policy also helped to improve the technologies used to provide health care services to the citizens of Vermont (Almgren and Lindhorst, 2012). This policy is enacted to replace the system whereby only a segment of the society is able to access insurance health care policies. That is the pregnant women and children covered under Dr. Dynasur insurance plan, and chronic patients who were not covered by Medicaid and Medicare, under the Catamount policy. This policy hasn’t yet achieved efficiency due to a number of problems in its implementation. This is partly due to the passage of the affordable care act, and uncertainties on the methods of financing the program (Deary and Brown, 2001). Outcomes of past reforms: As of the year 2005, the Vermont Public Assets institute and the children’s forum released a report indicating that the minimum wage of Vermont’s public sector was unable to keep up with an increase in the cost of the basic needs of the people of Vermont (Almgren and Lindhorst, 2012). According to this report, the biggest factor that led to an increase in costs of living was the health insurance. This insurance cost doubled for the last five years, and this represented 25% of the house hold expenses (Maclean, 2007). This was during the period of 2003. It is important to denote that during this period, Vermont was implementing the Dr Dynasur insurance policy, which was very effective in catering for the needs of people eligible for the policy. It is very important to understand that the Dr. Dynasur policy was a very effective policy in reducing the health care costs of pregnant women, and children under the ages of 18 years old. For instance, since the introduction of the Dr. Dynasur policy, the Government was able to enroll 90,000 children who were under the federal poverty level (Maxwell, 2012). It is important to understand that the childhood population of Vermont at that time was 150,000 children. 90,000 represent more than half of the total population of Children in Vermont. Based on this ground, this program was able to achieve equity in terms of health insurance coverage (Deary and Brown, 2001). This is because the remaining 60,000 children could afford private insurance cover. However, this policy failed to reduce the insurance costs of all citizens of Vermont (Abrahamsen, 2012). This is because it was discriminatory in nature, because it did not cover the entire population of Vermont; hence an increase to health insurance costs. This is because the people left out in this policy resorted to acquiring private health insurance policies (Maxwell, 2012). On this basis, the Catamount health care policy was introduced in 2006 for purposes of catering for the needs of those people not covered by the Medicaid and Medicare insurance policies (Maclean, 2007). This policy was very effective in reducing the medical costs of people living with chronic diseases. This is because the government of Vermont catered for their needs, through this health care policy (Abrahamsen, 2012). On this basis, the Catamount Health Care policy was able to reduce the health care insurance costs for the citizens of Vermont. By reducing the health care costs of citizens of Vermont, the Catamount Health Care plan was able to fulfill the social welfare policy of Vermont, which is to make it possible for equitable distribution of health care programs (Maxwell, 2012). However, as of 2011, the government of Vermont decided to improve on its health care insurance programs, and hence the creation of the Mountain Care Program. This program is still under the implementation stage, to judge its outcome (Abrahamsen, 2012). This is because of the uncertainties over the funding of the program, and how to integrate the whole program, under the affordable care act. However, the intention of this program is to eliminate medical costs of all citizens of Vermont, irrespective of their social class. This is because it will make it possible for the entire citizens to enroll for an insurance program controlled and funded by the state (Maclean, 2007). Current Steps under ACA: In satisfying the provisions of the Affordable care act, Vermont has initiated a number of policies. One such policy is the introduction of the health insurance exchange. This is the market place for health insurance. Under this health insurance policy, an individual who purchases the policy before the 15th of January, then the person under consideration must enroll for the health care coverage that begins on the 1st of January, if the person purchases the policy on the 15th of February, and then the coverage of the person under consideration begins on the 1st of May (Alker, Brooks and Harbelein, 2014). What this refers is that the coverage normally begins 15 days, after the day of purchase. This policy further goes on to exempt people who have enrolled for the health care coverage before the 1st of May, from paying enrollment fees. By 31st of March 2014, the enrollment of people for this program came to an end, and those not enrolled would be barred from accessing the benefits of health insurance up to November 2014, when the next enrollment begins (Alker, Brooks and Harbelein, 2014). In bringing these services closer to people, the state has established a website referred to as the Vermont Health Connect. This website enables citizens of Vermont to make applications of the insurance policies, compare the prices and plans of various health care policies, etc. It is important to denote that the government of Vermont has shifted the responsibility of managing health insurance to Green Mountain Care Board, established by the 2011, H202 law. Previously, the responsibility of managing insurance health care was undertaken by the Banking, Securities, and Insurance Health Care Administration (Deary and Brown, 2001). The state has also initiated a number of policies in regard to Medicaid under the ACA. For instance in Vermont, any individual making below 139% Federal Poverty Level is eligible for Medicaid. This is under the expansion plan of Vermont in regard to implementing the provisions of the Obama care. It is important to denote that applications are only acceptable through the Health Insurance Exchange that is operated and managed by the Green Mountain Care organization. Under the Medicaid expansion program, there are a number of plans available, and these plans include the bronze, silver, gold, and platinum plans (Maxwell, 2012). The Bronze plan is a low cost plan Medicaid program offered by the government of Vermont. It has a very low actuarial value, and very low premiums. The actuarial value of this plan rests at 60%, and this means that 60% of all medical costs are catered for by insurance companies. The Silver plan on the other hand comes next, in terms of the costs that an insurer has to pay (Alker, Brooks and Harbelein, 2014). The silver plan gives an actuarial value of 70%. This is an indication that 70% of medical costs are catered for by insurance organizations, while 30% is catered for by the individual concerned. This plan is recommended for people who are reasonably healthy, and occasionally use medical services Alker, Brooks and Harbelein, 2014). The Gold plan on the other hand comprises an actuarial value of 80%, and on this basis, 80% of medical costs will be paid by insurance organizations. The beneficiary will therefore pay the remaining 20%. Finally, members holding the platinum plan contribute the highest premium, and it covers 90% of all medical costs incurred by the beneficiary. This plan is suitable to people who are sickly, and of poor health. It is important to denote that health insurers in Vermont are not obligated to offer all these plans, but they are required to offer at minimum, one silver, and one gold plan. Anticipated Effects: There are a number of anticipated outcomes for the enactment of the project under consideration. For example, in Vermont, the policies enacted will lead into an increase in the number of the insured people in the state. This is because the policies of Dr. Dynasur and Catamount policy did not adequately cover all the people in the State. For instance, statistics indicate that Vermont has a total number of 47,000 people who do not have any medical cover. This policy will ensure that these people are eligible for the cover, and hence reducing their medical costs. It is important to denote that this policy will have a lot of outcomes when it comes to Medicaid. For instance, initially, Medicaid had a variety of gaps, in the number of people eligible for enrollment (Alker, Brooks and Harbelein, 2014). This is because eligibility was only restricted to people with disability, low income individuals, children, and the elderly. However, with the expansion of Medicaid to involve other people, Vermont hopes that the policy will lead to an improvement in the medical conditions of its people. This is because there will be an increase in the number of people enrolled into the program. These are people, who were previously not eligible to access the services of Medicaid. Furthermore, with the implementation of this program, chances are high that the living conditions of people will improve (Burkhauser and Lyons, 2011). This is because they will have the capability to save their incomes, and use it for other purposes, other than worrying on how they will pay for their health needs. Chances are also high that there will be a series of innovations, aimed at effectively implementing these policies. Take for instance in Vermont, the state managed to create a website whereby people can apply for the services of Medicaid (Alker, Brooks and Harbelein, 2014). This website is interactive in nature, and it is referred to as Vermont Health Connect. On this basis, it is important to understand that a series of such kind of innovations will occur. This in turn will improve the efficiency of service delivery. Barriers to Reform and Changes: The Health insurance exchanges serve as the main health insurance market places. At a start, these insurance health exchanges will provide insurance cover to people, and business organizations that have an employee base of around 100 people. Federal subsidies will play a great role in minimizing the insurance premiums charged to the middle and lower income people, and insurers will have to meet a variety of conditions set forth by the Federal government (Holtz, 2008). However, there are a number of challenges that the implementation process of these policies will face. One challenge is governing the health insurance exchanges. It might be difficult to govern these health insurance exchanges, and this is because they are new concepts that emerged. However, in managing these health insurance exchanges, there is a need of the state establishing an independent body that is exempted from certain administrative laws, and governmental regulations. The people in charge of governing this agency should be government representatives and representatives of insurance stakeholders, and the consumers in general. Another challenge that comes into place is the issue of high risk customers. These are customers whose health is very bad, and hence insurance providers will always be unwilling to give them insurance cover. The state will have to develop a policy such as subsidizing the premiums paid by these customers, for purposes of helping them access insurance cover. Politics is another serious challenge to the implementation of these policies, and this is because of the differences between the Republicans and democrats on the enactment of the ACA. To address this problem, there is a need of constant communication by the governor of Vermont, highlighting the importance of these policies to its people. References: Abrahamsen, E. (2012). Health insurance issues, challenges and perspectives. Hauppauge, N.Y.: Nova Science Publishers. Alker, J., Brooks, T., Harbelein, M. (2014). The new state-level health insurance exchanges  that are to be established under the Affordable Care Act (ACA) New York: Kaiser Commission on Medicaid and the Uninsured . Almgren, G. R., Lindhorst, T. (2012). The safety-net health care system health care at the  margins. New York, NY: Springer Pub.. Burkhauser, R. V., Lyons, S. (2011). The importance of the meaning and measurement of  affordable in the Affordable Care Act. Cambridge, Mass.: National Bureau of Economic Research. Deary, T., Brown, M. (2001). The USA. London: Scholastic. Holtz, C. (2008). Global health care: issues and policies. Sudbury, Mass.: Jones and Bartlett Publishers. Maclean, N. (2007). Distributing health care principles, practices, and policies. Exeter: Imprint Academic. Maxwell, N. L. (2012). The health and wealth of a nation: employer-based health insurance and  the affordable care act. Kalamazoo, Mich.: W.E. Upjohn Institute for Employment Research.

Great Lakes Directional Drilling :: essays research papers

Around the mitten shaped state of Michigan, five gigantic lakes encompass the coast. Providing a spot for vacationers, fisherman, and much wildlife, the Great Lakes are the pride and joy of Michigan. The history of the lakes stretches back thousands of years, where glaciers carved the lakes out of bedrock. These lakes provided a surplus of food and access to easy travel for settlers hundreds of years ago. People around the Great Lakes area appreciate the diversity of wildlife, scenery, and rarity of such landmarks. When the question of whether to drill in these lakes for oil and natural gas came up, it ignited many debates. Is our wildlife more important than oil to us? Or does the presence of oil and natural gas mean we can corrupt our environment and endanger many different types of species, along with ourselves? We find ourselves in unique situation. A debate of whether it is right to dig up oil in the Great Lakes. The lakes are known to contain oil and natural gas, but what risk does that play to our environment? The two sides in this debate both have their valid points. It is right to preserve wildlife, but oil is also a highly valuable commodity in today’s market. People often stress that we must take care of our planet because it is the only one we have. Why then do we destroy thousands of square miles of rainforest for wood? Why is there so much emphasis on industrialization, and not enough on the preservation of our Earth? Why do we need to use so much, nevertheless waste so much? Our environment and world is declining at a rate at which we cannot afford. It will be sad to see our planet in another few hundred years. We need to start preserving our environment, and not drilling our Great Lakes for oil is a great place to start. If we drill for oil, we will lose much wildlife, de stroy habitats, have possible oil spills, and in fact endanger ourselves in the long run. To extract such oil from under the Great Lakes, we would need to use directional drilling. To do this, the well is first drilled vertically, and then it is angled under the lakes at about four thousand feet to in fact reach the oil. This is a complicated process that had improved due to technology over the past twenty years.

Comparing Daisy Buchanan of The Great Gatsby and Brett of The Sun Also

Daisy Buchanan of The Great Gatsby and Brett Ashley of The Sun Also Rises      Ã‚  Ã‚  Ã‚   Written right after the publication of Fitzgerald’s The Great Gatsby, Hemingway’s The Sun Also Rises is apparently influenced in many ways.   The most obvious of Fitzgerald's influence is manifested in Hemingway's portrayal of his heroine, Brett Ashley. Numerous critics have noted and discussed the similarities between Brett and Daisy Buchanan, and rightly so; but the two women also have fundamental differences. Compared to Daisy, Brett is a more rounded, complex character, and Hemingway has treated her with more sympathy than Fitzgerald has with Daisy. Some similarities between Brett Ashley and Daisy Buchanan include their physical beauty, their extravagant/ flamboyant lifestyle, and their unhappy marriages. However, their most important similarity is the destructive influence they have on their suitors.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Daisy attracts Jay Gatsby with her beauty--not only her physical appearance, but also the entire carefree, comfortable, luxurious lifestyle: Gatsby was overwhelmingly aware of the youth and mystery that wealth imprisons and preserves, of the freshness of many clothes and of Daisy, gleaming like silver, safe and proud above the hot struggles of the poor (157). To Gatsby the rich life is temptingly desirable because it was equaled to Daisy herself. Her life far detached from the sweaty hard struggling seems to hold as much enchanted beauty as she holds for Gatsby. He falls in love with that beauty, and Daisy has become his one and only goal and dream in life. With this, Fitzgerald is putting the blame for Gatsby's fall--his indulgence in the wrong dream, and his wrong choice of means to achieve his end--on Daisy. But t... ... S. "Brett and Her Lovers." Brett Ashley. Ed. Harold Bloom. New York: Chelsea House Publishers, 1991. 105-122. Martin, Wendy. "Brett Ashley as New Woman in The Sun Also Rises." New Essays on The Sun Also Rises. Ed. Linda Wagner-Martin. Cambridge: Cambridge University Press, 1987. 65-82. Works Consulted: Hemingway, Ernest. "The Unpublished Opening of The Sun Also Rises." (5-8). Fitzgerald, F. Scott. "Letter to Ernest Hemingway (June 1926)." (8). Whitlow, Roger. "Bitches and Other Simplistic Assumptions." (148-156). Cohen, Milton A. "Circe and Her Swine." (157-165). Bloom, Harold. Brett Ashley. New York: Chelsea House Publishers, 1991. McCay, Mary A. "Fitzgerald's Women: Beyond Winter Dreams." (311-324). Fleischmann, Fritz, ed. American Novelists Revisited: Essays in Feminist Criticism. Boston: G. K. Hall & Co., 1982.      

Marketing Strategy Essay

Discuss the type of product the company will offer and identify its primary characteristics The type of product the company will offer is a bracelet called Life Alert band. The characteristics of this device are size and the ease of use along with a lifetime guarantee. The Life Alert band is light and portable that no one will even know it’s on his or her wrist. It’s the size of a thick rubber band and comes in different wrist sizes. It has one easy to access button with an emergency icon that only needs to be pushed once to alert the Life Alert call center in the event of an emergency. The bracelet has several hidden sensors that monitor a person’s pulse and blood sugar and wirelessly sends this information to the Life Alert monitoring centers. If a change is detected in any of the monitors the bracelets sends a signal to the centers for immediate action. The Life Alert medical counselors immediately call the patient to see if they are ok. If no response is received they dispatch emergency responders right away. The bracelets uses flash memory to keep the device slim and flexible. It has a flexible band that can bend slightly. The material of the bracelet is a made of hard rubber that protects the electronics and its sensors. The bracelet requires a one-time setup much like a cell phone has to be programmed by Life Alert in order to ensure communication is occurring with their monitoring centers. The device has wifi built in for local communication. Users who have a wireless network can browse directly to the bracelet using a web browser. This gives them access to all the information the bracelet is recording. Discuss the product branding strategy Entrepreneur magazine states that a branding strategy is how, what, where, when and to whom you plan on communicating and delivering on your brand messages. Where you advertise is part of your brand strategy (Enterpreneur, 2011). In this case a brand is name that consumers associate with a device or service. Life Alert has many devices, all which bare its name on it. For example wireless companies such AT&T sell cell phones from different manufactures but all of them have the name AT&T on them and their logo. This goes for any large company that sells multiple products even if the products are manufactured by another company. Another good example is Apple. Apple has mp3 players, desktops, laptops, and other computer peripherals, all have the Apple logo on them. Therefore, the branding approach for the Life Alert bracelet will be the umbrella branding approach. The umbrella approach will help Life Alert in promoting their popular name even further. In a survey taken by ACNielsen International Research, 87% of Life Alert members said that Life Alert’s protection is a main or important factor in their decision to keep living at home rather than going to a retirement institution (lifealert911, 2011). Life Alert members on an average spend 6 more years living alone because of their services. The bracelet will not only enhance their product line but attract more customers. The introduction of this bracelet will increase their customer base and maybe appeal to those who have a serious illness. The bracelet will become the main entity of the product line with Life Alert’s name and logo. Discuss how the product fits within a product line and the depth and breadth of the line. Life Alert’s bracelet is a unique product that has carved a niche in the medical devices industry. It fits into health care products that offer emergency services for monitoring and addressing health related issues. It addresses a void in the industry and aims to support independence in aged adults by providing state of the art monitoring and emergency services. The distinctive aspect of the Life Alert bracelet is that it is both broadens and intensifies in scope in terms of its breadth and depth. It fits well into the product line Life Alert offers. It’s an extension of the current product offerings. Some of the functionality the bracelet offers cross’s over to other product categories. For example the bracelet now becomes competitive with blood glucose meters. Regardless, the bracelet extends the depth and breadth of the company. Explain how the product and target market strategies fit with the organizational strategy. The organizational strategy is based around a few key factors. The company’s business domain is clearly defined and is focused towards Mature 50+ adults who wish to live an independent lifestyle. The factors that are considered are mainly geographical location, age, retirement lifestyle and medical needs. The strategy is effective as it concentrates on a few key product and ervices. Life alert employs niche marketing to devise a product strategy aimed at that targets mature 50+ adults residing mostly in Florida, which is a popular retirement destination, who are currently living a retired lifestyle and desire a degree of independence and who may or may not have specific medical needs. The Life Alert bracelet fits into the organizational strategy for Life Alert. Introducing the bracelet will solidify the stance in the market. The organizational strategy for Life Alert is to be most innovative company in assisting the elderly. Life Alert can take advantage of its existing organizational strategy to support and market the bracelet. The company can further expand its diversified portfolio of services by using its existing infrastructure and the multifaceted use of its core resources. By including and expanding on existing product offerings the company can reduce cost and maximize return on resources. Life alert bracelet can utilize the infrastructure for Life Alert Necklace, security, monitoring and emergency response services with minor additions. All of these services employ the same core organizational set up, which is the monitoring center, which maximizes service offering with minimal investment. The marketing strategy includes Ads in local newspapers or niche publications, Opt-in web sites that make use of keywords to connect with potential customers, direct mail campaigns, as well publicity through Television developed for mature audiences. The bracelet can be incorporated under these existing marketing tools since it’s directed towards the same target audience. The ease of competitors’ entry into Life Alert’s market segment is minimal as the company employs a profitable business model where users pay an initial set-up charge for the systems and the company generates revenues each month through subscription-based monitoring costs. The company also distributes medical alert system to more than 300 resellers and is one of the largest wholesale medical alarm distributors in the nation, with over 200,000 medical alert devices in service. The bracelet can be an adjunct to the existing portfolio and use the same monitoring system and distribution strategies in use. The business strategy also supports innovation and product development and at present only a couple companies offer a medical alarm with two-way voice. With an additional service such as the bracelet the company will be a step ahead of its competitors and can utilize its R&D budget to support the new product. The company’s ability to customize services and marketing different price points for packages will allow customers to use the bracelet with other Life Alert products and services. The new product aligns well with the company’s organizational strategy and the same marketing strategy can be applied towards the Life Alert bracelet.

Actions to Reduce Fixed Costs Essay

   †¢Increase volume such that the fixed costs become a smaller proportion of the cost base. †¢Derive value from sweating the assets by working them as much as is safely and practically possible. For example, airlines plan their schedules to maximize night-time flying between 11pm and 6am when there are often legal restrictions on landings and take-offs. †¢Outsource on a unit cost basis, thus making the cost variable rather than fixed. For example, buying in a component at a cost per unit rather than paying for a machine and staff to make them yourself. †¢Use standard platforms (such as one type of asset), thus minimizing the amounts of spares that need to be held. For example, logistics companies generally have only one manufacturer of trucks, and airlines select either Boeing or Airbus. †¢Use temporary staff to manage peaks in demand and thus avoid carrying the cost of staff throughout the year when demand is lower. For example, hotels often call in temporary banqueting staff for large functions. †¢Use an element of profit-related pay rather than a fixed salary, thus aligning the employment cost to the performance of the business. Similarly, sales commission not only provides a sales incentive but also makes the cost variable. †¢Assess the full life-cycle cost of an asset. A cheaper asset may over its useful life involve higher maintenance and ultimately faster replacement than a more expensive version. For example, a cheap printer may do the job, but soon its quality deteriorates and within a short while a new one is required. †¢Develop products that can use the waste from manufacturing the primary product. For example, Marmite, a yeast extract spread, is made from the residue from brewing beer, thus making the brewing waste a revenue earner rather than a disposal cost. †¢Employ staff with accountable hour’s contracts rather than standard hours and overtime. The process is that the staff works the hours they are required, but only 1,600 hours in a year. Operationally, this requires one-twelfth of the staff to have their accountable hours year ending each month. This makes sure that all the staffs do not run out of hours at the same time. †¢Simplify the product or service. Cut out a stage in the process that reduces costs but does not result in customers perceiving any loss in quality. For example, Kit Kat, a chocolate bar, used to be wrapped in foil with a paper sleeve. The packaging now is just a single outer wrapper. Some organizations describe this action as â€Å"squeeze†, which is the process of reducing the unit cost of production with no discernible loss in quality.

Conceptualizing Addiction Paper Essay

Introduction For many years, individuals have battled substance abuse and addiction. My position comes from hearing about it, having seeing results from it, and reading about it, also developing my own thoughts about addiction. Weil and Rosen (1993) believe that a drug use (and addiction) results from humans longing for a sense of completeness and wholeness, and searching for satisfaction outside of themselves. McNeece and DiNitto (2012) says the reason why people continue to use drugs to the point of becoming a physically and/ or psychologically dependent on them are more complex, some have tried to explain this phenomenon as a deficit in moral values, a disease, conditioning or learned behavior, or as a genetic prosperity. Still some see it as a â€Å"rewiring† of the brain (Mc Neece & DiNitto, 2012). At this point, there is no one single theory that adequately explains addiction (McNeece & DiNitto, 2012). Addiction is not easily defined. For some, it involves the â€Å"continued, self-administered use of a substance despite substance- related problems, and it results in tolerance for the substance, withdrawal from the substance, and compulsive drug- taking behavior due to cravings† or drives to use the substance (Schuckit, 1992, p. 182). No single theory adequately describes the etiology of addiction or dependence (McNeece & DiNitto, 2012). Most models of addiction is an â€Å"addictive disease† (Washton, 1989, p.55). In this paper will compare and contrast the moral model and the disease model conceptualizing addiction. Describe the two on how they take competing views on addiction, and a summary on a theory that can be most useful in helping to intervene on addiction. The Moral Model One of earliest theories offered to explain the etiology of addiction is humankind’s sinful nature (McNeece & DiNitto, 2012). Since it is difficult  to show empirical evidence of a sinful nature, the moral model of addiction has been generally discredited by modern scholars. However, the legacy of treating alcoholism and drug addiction as sin or moral weakness continues to influence public policies regarding alcohol and drug abuse (McNeece & DiNitt o, 2012). Competing Views The model appeals to our common sense because it is consistent with liberal views. In a liberal society, free will and individual autonomy are highly emphasized and valued ideals (Wilbanks, 1989). Addicts are conceived as free willed individuals making rational choices and the reason they engage in drug use is because they have bad morals. However, individuals with â€Å"good† morals are just likely to use drugs such as alcohol or marijuana. If this is the case other factors are present. In the face of reality, the moral model is insufficient to capture the phenomenon of drug addiction (Wilbanks, 1989). The Disease Model The disease model of addiction rests on three primary assumptions predisposition to use a drug, loss of control over use, and progression (Krivanek, 1988, p.202). These physiological alterations cause an undeniable desire to take more drugs (McNeece & DiNitto, 2012). Addicts are viewed as individuals with an incurable disease with drug addiction as the symptom. The disease model argues users cannot be held accountable for their addictions (Kirvanek, 1988). Competing Views As the disease model argues that there is no cure for addiction, the only treatments available aims to reduce or suppress the urge to use drugs (McNeece & DiNitto, 2012). Firstly, addicts are encouraged to acknowledge that they have a sickness that cannot be dealt with alone and to seek help from professionals such as counselors and therapist (Schaler, 1991). For instance, Narcotics Anonymous uses twelve step program where addicts must first admit that they are â€Å"powerless† over their addictions and must appeal to a â€Å"power greater† that themselves to overcome addictions. Critics of the disease model believes that it takes responsibility away from the addicts and instead characterizes them as victims (Schaler, 1991, Wilbanks 1989). Compare and Contrast The moral model describes addiction as exclusively a matter of choice, where the disease model illustrates it as something that is beyond the control of the individual. With the disease model choice is a factor only insofar as a person actually chooses to treat their disease, not in actually feeding of having the addiction to begin with (McNeece & DiNitto, 2012). For instance, where the moral model conceptualizes addiction as a matter or weakness or sin, the public response within this framework is naturally one where the only appropriate action is a corrective or punitive one (McNeece & DiNitto, 2012). Theory most helpful to intervene on Addiction The two models are very different, with the moral model essentially discounting most of what hard sciences offers, and the disease model embracing it to a large degree (Miller & Gold, 1990). Morality concept in addiction offer the counselor, and client very little to build on in terms of congruence, because they also dismiss physiological, and neurobiological factors as a cause of addiction (McNeece & DiNitto, 2012). So with that been said the disease model would be most useful helping to intervene on addiction. Conversely the disease model allows the counselor to illustrate an individual’s addiction as something that can be explained in terms of hard science, as well as in terms of how an individual has certain obligations inside the healing process (Comer, 2004). Conclusion In conclusion writing this paper was very interesting, and informational learning about the different models they have to help with drug or alcohol addiction. Comparing and contrasting the moral model and the disease model was helpful in understanding the differences they both had to offer, and competing views. Also being able to choose one model to which would be helpful in intervention of addiction was pretty interesting doing research, and learning that the disease model would work well for intervention purposes. Lastly, McNeece & DiNitto (2012), says no single theory adequately describes the etiology of addiction or dependence. References McNeece, C. A., & DiNitto, D. M. (2012). Chemical dependency: A systems approach (4th ed.). Upper Saddle River, NJ: Pearson. Krivanek, J. (1988). Heroin: Myths and realities Sydney: Allen & Unwin. Schaler, J. A. (2000). Addiction is a choice. Chicago: Open court. Schuckit, M. A. (1992). Advances in understanding the vulnerability to alcoholism. In C.P. O’Brien & J. H. Jaffe (Eds.). Addiction states (pp.93-108). New York: Raven Press Wahshton, A. M. (1988). Cocaine addiction: Treatment, recovery, and relapse prevention. New York: W. W. Norton. Wilbanks, W. (1989). The danger in viewing addicts as victims: A critique of the disease model of addiction. Criminal Justice Policy. Comer, R. J. (2009). Fundamentals of abnormal psychology. New York: Worth Miller, N. S., Gold M. (1990).The disease and the adaptive models of addiction. A re-evaluation Journal of Drug Issues, 20(1), 29-30