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Tuesday, April 14, 2015

Tampons, condoms and GST – Harold Kong

Image result for GST on sanitary pads

Recently, The Malaysian Insider reported that two ladies, S. Kasthuri and Kamelia Shamsuddin, had “started an online campaign to get the government to stop taxing Malaysian women for their periods”. The petition received more than 5,000 supporters in five days.
The ladies were moved to do so because “Bintulu MP Tiong King Sing had elicited laughter in Parliament for raising the issue of the goods and services tax (GST) being imposed on women's sanitary products”.
TMI reported that the ladies were “enraged at the callous manner in which the lawmakers had trifled a concern that affected half the world's population”.
At an emotional level, such arguments are compelling but they are logically problematical. They invite the question: “Should men’s shavers be exempt from GST or zero-rated instead of being subject to GST at 6%?” And if they are not exempt or zero-rated, can we make the case that there is discrimination against males? After all, to varying degrees, most men have facial hair that needs to be shaved if they decide that it has no decorative value. 
I hasten to assure women that I am fully sympathetic to their real complaint here, ie. that men should not turn women’s issues into jokes, particularly when they are in Parliament.  However, I would also suggest that GST should not be politicised as a gender issue either. 
Instead, a clear policy position should be adopted and publicised. The nature of GST is such that there are many instances where the answer to the question of whether a product or service should be exempt or zero-rated is unclear. However, it is possible to determine if the GST treatment across several products makes sense. Thus, we can demand a high degree of horizontal equity in the GST treatment of products that only women use and those that only men use. Otherwise, there would be gender discrimination.
More difficult would be how to ensure horizontal equity across women. Should a lady who prefers to eat chocolate cakes, something that women like (I am told), be subject to GST at 6% whereas her friend, who prefers to save up and buy the latest lipstick, enjoy exemption or zero-rating because it is a “woman’s product”? Sensibly, lipsticks are indeed taxed at 6%.
All things being equal, there seems to be no good reason why personal hygiene, feminine and sexual health products should be exempt if a fruit salad in the food court is taxed. We can sympathise with a single mother who lines up at the soup kitchen. How can she afford to pay for tampons, particularly with 6% GST added on? But should a lady earning a million ringgit a year as a partner in a major law firm not pay 6% GST for tampons?
But let’s move on to other goods that are relevant to reproductive health. 
A gentlemen by the name of Ng Shu Tsung wrote an article in Malaysiakini recently, arguing that condoms should not only be exempt from GST but should be subsidised too. The main argument was that condoms promote safe sex and the likely resultant savings in the cost of suffering and treatment of HIV on society would more than offset any loss of GST revenue by exempting condoms.
With due respect, his argument is not compelling and is logically problematical. For example, it invites the question:  “Should membership fees at private gymnasiums be exempt from GST or zero-rated instead of being subject to GST at 6%?”   After all, an improvement in the general health of the population would result in reduced health costs across society. 
But let’s think further.
Apart from condoms, what about contraceptive pills, lubricant gel and Viagra? They are essential for family planning and do facilitate happy adult relationships. Which ones of these are men’s products and which ones are women’s products? Or are they “we” products? The key to the answer is whose budget would be impacted by the imposition of a GST on these products, not whose body it is applied to or who ingests them.
Lubricant gel, often helpful in heterosexual sex, is essential for male homosexual bonding. Should we feed the homophobia in our society by calling for an “enhanced GST rate, say 9%” to somehow make it difficult for a sexual minority to seek pleasure and/or happiness? And how would that be implemented? 
Viagra is more likely to be used by older men. Should a society that respects the aged not give their warga mas a fiscal advantage to compensate for an increasingly inevitable physical disadvantage?  And if we are to do that, how about also giving a GST exemption for reading glasses? 
But where does it all end? Where we end depends on how we begin. 
We cannot formulate sensible tax policy if we (i) we do not frame arguments that make sense; and (ii) trivialise matters of high policy by angling them to trigger mirth and laughter in Parliament or take a “single issue” approach that distracts from serious discussion of the GST.
There has been a successful protest campaign in the UK against treating women's sanitary pads and tampons as "luxury" items rather than as a necessity. As a result, the VAT rate on such products was reduced from the then standard rate of 17.5% to the reduced rate of 5%. Two observations may be made here:
a) The initial labelling of such items as “non-essential and luxury” was technically wrong and of course, also politically incorrect.
b) The wiring in of a reduced rate into the design of the VAT system demonstrates UK policymakers’ recognition that the politicians will not be able to hold the line on the ideal of standard-rating across all products and services. The effect of the reduced rate has been to act as a “speed hump”, ie. to minimise the distortion to the VAT system overall if too many goods and services are exempted or zero-rated. 
Sectional pressure to reduce the VAT on women’s sanitary pads and tampons to zero or to exempt them from VAT has thus far been unsuccessful because the UK is legally signed up to EU tax harmonisation and co-ordination frameworks.  
There have been similar campaigns to exempt feminine products from GST in Canada and Australia and VAT in France. I have not checked on their outcomes. However, unless there are specific compelling reasons unique to those countries, exemption will more likely prove that there has been successful politicking, not sound policy-making.
This article does not evaluate the pros and cons of having a GST. That is a larger discussion, quite a different one altogether. But if we are to have a GST, as we have already had for more than two weeks now, let’s do it properly. Given that GST has been implemented, we must not easily cave in to superficial arguments that are almost always normative in nature. We should strive for a logical and consistent basis of taxation across similar products and services and fact patterns.
The list of zero-rated and exempted products and services are currently longer than they should be and yet, calls for additions to these lists seem unabated. Undoubtedly, some requests merit tax preference but we need to be clear on the criteria.  
Populist and moralist dealing with the GST regime will distort and emasculate it. Both the people and the politicians must resist such impulses. There is no point in having a GST that is all paper work and full of permitted leakage.
* Harold Kong reads The Malaysian Insider.

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