Business Ethics And Governance Of A Capitalist Corporation

Business, Ethics and Governance MGT2204 – Assignment 3 Word limit: 2000 words Prepared for Gerard Betros Prepared by Rebekah Pink Student ID: 0061029305 Introduction Ethics in business addresses the ‘right’ and ‘wrong’ behaviours of business practises, and how these practices impact the employees, shareholders, the general public and the environment. This essay will take a look at two different types of business structures; the capitalist corporation and the workers cooperative, and review how the differing approach to business and the fundamental ideologies of each, impacts ethical practises. To highlight this, I will look at more specifically at capitalist organisation ANZ and cooperative Mondragon Cooperative Corporation and how they deal with the potential ethical dilemmas of fair wages for employees and executive remuneration. Fundamental Ideologies of a Capitalist Corporation The fundamental ideologies of a capitalist corporation can vary from company to company, but typically all have the same underlying purpose – to make a profit. Often, a business’ ideologies are expressed in the form of an organisational vision or mission statement – a simple statement demonstrating to the public, and reminding the employees, the goal of the organisation. These vision or mission statements usually look at the ‘bigger picture’ of what an organisation wants to achieve. Examples being: †¢ â€Å"To be a trusted partner setting the standard of excellence for recruitment inShow MoreRelatedThe Integration Of Law And Ethics945 Words   |  4 PagesAs the subject title indicates, Substantive ethics is about the integration of law and ethics in corporate ethics programs. The author of this article gives numerous examples of why integration of law and ethics is needed. 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Strong Brand Influence Purchase Behavior - 1295 Words

With Products, Is It Form or Function? Strong brands influence purchase behavior (Dyson, 2016). Marketers must, therefore, focus on triggering motivating impressions amongst the consumers. Particularly, they must ensure that as consumers contact the brands, news, gossip and publicity will be inevitable (Gassmann, 2010). To achieve this, the functionality of the product should be unrivaled. Simply, product functionality is the key to brand success. With the massive expansion of credit availability since the 1970’s, consumers have been allured into making impulse purchases (Pusvasiu, 2015). They are therefore likely to be attracted to the design of the product and in the process fail to consider its functionality. Nevertheless, when the†¦show more content†¦Accordingly, a product must perform to an acceptable level, where the benefits that a consumer expects to receive after the purchases are gained. Otherwise, the consumer will discard the product, regardless of its form, and may not re-purchase it in the future. More so, the proper definition of a product’s form is when its functionality is considered (Pusvasiu, 2015). Design should not be limited to what a product looks like and how it feels like, but rather on how well a product functions. Engineers who spend a lot of time trimming and decorating a product to improve its aesthetics may not necessarily help a company achieve success. Instead, they should spend time translating the functional specifications of a product in branding; only when an expression and support of functionality in a brand is achieved that design becomes a selling point (Gassmann, 2010). Undeniably, whereas a consumer hopes to be rational in decision-making, they are also likely to rely on their emotions (Dyson, 2016). For this reason, some marketers rely on their ability to ensure that a design of a product is outstanding. However, the most successful companies channel their efforts towards ensuring that products that add tangible value to the consumers’ lives are created. Emotion will automatically emerge after the functional

Managing Price Discounting Free Essays

A leading website defines Discounts as â€Å"Percentage reduction in the gross price given by a seller to a buyer who pays within a set period of time. Cash discounts are given to shorten the length of time the seller must wait to collect the amount due. Cash discounts are offered to buyers in most industries, including media buyers. We will write a custom essay sample on Managing Price Discounting or any similar topic only for you Order Now A common business phrase for a cash discount is â€Å"2/10, net/30,† meaning that a 2% discount is offered if the amount due is paid within 10 days; otherwise 100% of the amount due is payable in 30 days. For example, if the amount due is $100, the buyer may pay $98 within 10 days or $100 within 30 days.† Discounting is becoming a popular mean to attract the customers. Simon Hathaway, managing director of retail specialist Saatchi Saatchi X, says discounting has become part of the business model for many retailers, especially those in the furnishing sector. He believes that much of this is driven by retailers taking advantage of consumers’ ignorance of the price of many products. ‘If you asked 20 people the price of a pint of milk, you would get 20 different answers,’ he says. Mike Watkins, senior manager of retail services at A.C. Nielsen, says the potential rewards of tempting shoppers with discounting are huge. ‘Consumers are hooked on promotions,’ he says. ‘On average, about 80% of UK shoppers are looking for price promotions — that’s the highest in Europe. Low prices are now expected.’ Merchants often advertise various types of price discounts in attempts to affect favorably the price-related evaluations and shopping intentions of consumers. Why does price discounting occur – why is it so prevalent? Kevin Cancy, chairman of Copernicus, a major marketing research and consulting firm found that only 5 to 35 percent of the customers are price sensitive. People with higher income and higher product involvement are ready to pay the price for features, customer service, quality , added convenience and the brand name. Most companies will adjust their list price and give discounts and allowance for early payment, volume purchases and off-season buying. It is well-accepted fact that short-term promotion leads to an increase in the sales. Although the size of the discount determines absolute or relative prices, an important additional type of consumer behavior relating to the processing of information concerning the size of the discount, per se, may have to be addressed before predictions concerning the impact of size of discount can be made. Besides this there are many other objectives that a firm seeks to achieve with discounts. Some of them are: Keeping up with competition: a sale or a discount offer is likely to be perceived and accepted as a good value when the advertiser is perceived as price competitive (Fry and McDougall, 1974; Biswas and Blair, 1991). Occupying more shelf space in the retail showrooms: Keeping good relations with the dealer often causes discounts. This is more evident in the cases when the dealer is strong. Either he has strong brand value in the region or is a bulk buyer of the product. To promote a new innovation To clear the decks for new stocks ( change of season/fashion) Price promotions showing tangible increase in Sales Attracting new customers to the brand which may result in increased brand switching. Also, Research has indicated that a sale or a discount offer is likely to be perceived and accepted as a good value when the advertiser is perceived as price competitive. One reason for such effects relating to store price image may be the nature of attributions for the price discount made by the consumers. For example, for a low-price image store, consumers may be more likely to make merchant-related attributions that indicate â€Å"meeting competitors’ prices† or â€Å"passing on savings from bulk purchases from manufacturers† than for a high-price image store. Differences may also be observed in product-related attributions between the stores. Because many consumers believe there is a positive relationship between price and product quality (Rao and Monroe, 1989; Lichtenstein and Burton, 1989), a price discount on merchandise at a store that has a low-price image may sometimes be perceived as related to something negative about the products (such as out-of-date models or inferior quality). The key reason often sighted by marketers is that it is done to is done to invite new users to try the product. If these people appreciate the product they may switch to your brand.  Does it work well to achieve the objectives that are typically set for it? Though the prices discounts do spike up the demands temporarily it is very rare cases that it actually spikes the demand in the long run. But there is a negative side to it, like: Long run price promotions make consumers more sensitive in both loyal and non-loyal segments. They also train non-loyal segments to seek price discounts, thereby making them more sensitive to price promotion (Mela, Gupta and Lehmann, 1997). Discounting can be a useful tool if the company can gain some concessions in return, like an extended contract of bulk order. Short run price discounts also cause the loyal customers towards bulk buying. This means increase in customer inventories and thus may result in the reduction of subsequent buying. Research suggests that the price promotion more often then not is unsuccessful in brand switching. The reasons for that are very evident, perhaps one of them can be the price perception of the customer is set to the discounted price of the product. For a brand positioned as an aspiration brand the discounts can be suicidal. This may lead more people to buy the brand but it may result in the loss of loyal customers who constitute the major chunk of buyers in the normal course. The price discounts works well in a few cases like: Discounts offered in the time of need Discounts towards the end of season achieve their objective of clearing the decks for the new stocks Are there some objectives it is well suited for and others it is not suited for? There is lots of confusion on the impact of price discounts, Mela, Gupta and Lehmann in their paper â€Å"The long term effects of Promotion and Advertising on consumer brand choice† state that companies like Colgate Palmolive Ralston, PG have curtailed the price based promotions but there are some like Heinz who continue to adhere to it. In a research M. P. MARTI ´ NEZ-RUIZ, A. MOLLA ´ -DESCALS, M. A. GO ´ MEZ-BORJA J. L. ROJO-A ´ LVAREZ (May 2006)   found that for The high-priced brands of the storable category that promotional discounts had a bigger impact during the first days of the promotional period, whereas no special pattern was detected in the low-priced brands of this category. There are some places where the discounts are very well suited for like: Discounts to people visiting in lean season at resorts. This brings extends the brand to people who otherwise may not use it. In an attempt to divert competition attention from the innovations. A price discount leads competition to fight the discount and in the mean time you can position your new innovation. Though there is no research evidence to justify these observations How can a product manager or a brand manager plan a discounting strategy that does not harm brand value? Some guidelines can be suggested for the retailer to set adequate promotional discounts periods. Objective of Discounts: The Product manager should very clearly announce the objective of the discounts. Generally discounts offered for pumping the sagging sales should be avoided. A clear motive and the time frame to achieve that motive should be clear. Timing of the Discount: Timing of the discounts is very important. A end of season sale may not have that bad an impact on the brand as a sale in the peak season. A grocery store offering a discount in the year of drought is bound to have more loyal customer’s that any other store around the neighborhood. Limit the Duration: In the first place, promotional periods for the high-priced brands of the storable category should not exceed 10 days; otherwise the promotion profitability could be reduced. In addition to this, discount levels should not exceed a certain magnitude, which depends on the considered brand. Add Value Added Services: An even better strategy than discounting your price is to add value to your goods or services – such as free installation, maintenance training, and longer product warranties. For example, â€Å"I can’t lower my price but I am going to give you consulting which will save you the same amount of money, had you received the lower price.† As Mr. Kotler explained, there are some companies that are extremely knowledgeable about their customer’s business, and able to point out to their customer ways in which they can save money. Baxter, a hospital supplies company, provides a good example of adding value. â€Å"They give credit points to hospitals who buy their products – just like airlines do.† These points can be redeemed for a cash rebate or for consulting days. Baxter has 12 key consulting teams, each with a different focus. One team, for example, will help the hospital improve its information management system while another team will help it better manage its wastes, elaborated Mr. Kotler. As it turns out, the consulting is so useful that the points are better used for consulting days. Avoid Frequent Discounts: Frequent discounts might influence the consumers’ reference price points and so produce a wear out effect. Evaluate other options like bundling instead of price discounts: Bundling leads to repackaging the products along with other products. Even in this case the frequency and duration should be kept in mind. Cited References M. P. MARTI ´ NEZ-RUIZ, A. MOLLA ´ -DESCALS, M. A. GO ´ MEZ-BORJA J. L. ROJO-A ´ LVAREZ (May 2006) ‘Assessing the Impact of Temporary Retail Price Discounts Intervals Using SVM Semi-parametric Regression’ Int. Rev. of Retail, Distribution and Consumer Research Vol. 16, No. 2, 181 – 197 DONALD R. LICHTENSTEIN, ABHIJIT BISWAS, KATHERINE FRACCASTORO   (1994) ‘The Role of Attributions in Consumer Perceptions of Retail Advertisements Promoting Price Discounts’ Marketing Letters 5:2, (1994): 131-140, Kluwer Academic Publishers Carf Mela, Gupta Sunil, Lehmann Donald   (May 1997) ‘The long Term Impact of Promotion and Advertising on Consumer Brand Choice.’ Journal of Marketing Research 34 (May) p248-261 Quilter, James (March 2007) Marketing, p20-20, Kotler Philip (2003), Marketing Management Pearson Education p-489-490 How to cite Managing Price Discounting, Essay examples

Managing People And Team of Mining Company †MyAssignmenthelp.com

Question: Discuss about the Managing People And Team of Mining Company. Answer: Introduction: The report is prepared for Mining Company operating in isolated locations. It has many fly in and fly out staffs on a rotating on roaster basis. There are three scenarios presented for the company where HR executive are required to make recommendation in all the particular cases. Report would involve discussion of theories related to human resource management, performance management and motivation. In involves the discussion of severalperformance management strategy and how it would motivate current employees of organization. Several retention strategies adopted by Mining Company have also been demonstrated along with the structure and forms of crisis management team. Discussion: In this particular scenario, HR executive of Mining Co is required to identify the impact of initiatives of performancemanagement motivation of staffs in that particular location. Performance management can be considered as a process that helps employees to focus on their task that helps in achieving mission of organization. There are several model of performance management according to literature and the building block of approach of performance management system that helps in enhancement of communication within organizations for making then acquainted with business plan and its mission (Armstrong Taylor, 2014). Some of initiatives of performance management taken by Mining Co is management by objective, planning and pay for performance. Management by objective is a model that is employed by organization that helps in clearly defining objectives o employees and management. It is a technique of performance management that involves flow top down of planning and goal of organization and translating the same into personal goals. Management by objective requires employee and staffs to set and measure their personal goals based on goals of organization. An organizing is able to assess contribution of any individual employees or staffs by means of any goal setting system such as MBO (Van Dooren et al., 2015). This particular system helps in providing regular view of progress of employees that helps in improving the efficiency quality of work produced. The efficient system of performance management helps in supporting employee motivation through goal setting process. Low performers are required to be monitored that would help in increasing motivation in team for which managers are required to work continuously. Performance m anagement system helps in supporting motivation within team members. Setting and tracking of performance of goals of employees requires mangers to set goals for employees by aligning it with the goals of organization. This will help in facilitating dialogue and conversation between employees and managers. Satisfaction of employees are enhanced through this particular system of performance management by encouraging coaching of employees in spite of focusing of negative feedback (Pulakos et al., 2015). Following recommendations can be made to Mining Company for motivating and enhancing the performance of employees. Mining Company has the objective of enhancing their employee performance and thereby improving their overall productivity. Managers should avoid getting involved in their day-to-day activities and activity trap should be avoided. They should participate in strategy planning process that will help in properly implementing the strategy of performance management. Managers are required to empower employees by measuring their performance in terms of goal setting and rewarding them for their achievements. Specific objectives of roles and duties of employees are required to be understood by managers so that each staffs objectives should align with objectives of organization. It is required to strike balance between empowerment of employees and management while making staffs as their self-managers. Tracking of staffs performance helps in aligning the daily activities of employees with business objectives. Managers are required to regularly track the goals of employees that will help in providing them with necessary feedback and accordingly make adjustment in plan of measuring performance, preparing for contingencies and tacking obstacles (Jackson et al., 2014). In the second scenario, company is facing the issue of staff retention as most of employees due to prevailing economic crisis in Greece and presence of ISIS. Moreover, each site operates as single entity and there is not staff rotation and cross over. The staffing issues in Mining Company is prevailing due to environmental factors that is comprising of political and socio-cultural factors. Staffs are getting scared and nervous due to social disturbances in Middle East. Secondly, operations of organization is getting impacted by the economic condition of Greece that worrying employees about gaining profit out of their operations activities. Employees are getting demotivated because of fear that organization might not be capable of generating enough money to sustain their business (Langton et al., 2013). All these factors are tempting employees to leave the organization. Valuable senior executives can be retained by the implementation of various strategies of retaining staffs and employing successful planning. Employee retention is of utmost importance for organizations as they make huge investment in recruiting human resources. Employee retention can be enhanced through some motivational strategies for empowering employees (Jackson et al., 2014). Prevailing hysteria in Mining Company can be dealt with recommendation of following staff retention strategies to the board: Some of retention strategies that can be appointed by Mining Company are as follows: Social grouping- It is certainly possible that employees would get scared due to changes in environmental factors. In such situation, employees require social support that can be provided to them by creating social meeting and grouping of employees that will also help in creating a sense of belongingness. Job securities- One of important factor that helps in motivating employees is providing them with job security that can be used as retention strategy by Mining Company. Security of executives wishing to leave organization can be ensured by putting a security system. Such security system would involve technological platform is isolated sites and communicating them immediately about any danger by having departure plan in place. Ensuring basic and recognition needs- Economic condition of Greece are influencing mining company along with their employees. In such scenario, some of basic needs and self-esteem of employees are not getting satisfied. Therefore, organization is required to ensure employee about providing such satisfaction. Compensation or rewarding employees- Employees in an organization can be retained in form of proving compensation and rewarding by way of paying insurance, bonuses, free health checkups and flying compensation. Work life balance- There is no staff rotation at the isolated sites of company as they are operating on rotating roaster. As per Maslows hierarchy of needs, employees needs to have lobe and a feel of belongingness (Wilson, 2013). It is required by Mining Company to rotation of such executives based on roaster by rotating them to less dangerous place that will assist them in dealing with their nervousness. Succession strategies is another technique that can be employed by organization seeking staff retention. Having right people at right place and in right time is the main objective of succession planning. It is required by Mining Co. to develop a large taken pool for overcoming situation of difficulties and where staff retention becomes an issue. Encouragement of promotional strategies and leadership development among employees for empowering them should be done by Mining Company. Furthermore, such situations can be handled by employing some sort of development programs. Therefore, it is recommended for Mining Company to employ succession and retention strategies that will help in keeping and retaining talented employees within organization. In this particular scenario, a substantial talent gap emerges at individual site of Mining Company that requires the formation of crisis management team. Formation of crisis management team helps an organization to protect themselves against the adverse impact of any prevailing crisis resulting from internal or external factors. It would further assist organization in devising strategies and taking future course of actions for overcoming situations of crisis. Format of crisis management team: The format of crisis management team would be comprise of three level that is corporate crisis management team, special crisis management team and local crisis management team Structure of crisis management team: Crisis management team mainly comprised of senior management team possessing authority and resources to expedite the response of some external or internal incidence of company. The crisis management team of Mining Company involves several key personnel of organization such as chief executive officer, head of departments, representatives of human resources, media advisors and board of directors (Mitchell et al.,2013). The structure of crisis management team of Mining Company incorporates several elements that would be mobilized to deal with crisis. Corporate Crisis management team: This particulate am of crisis management include senior managers and corporate office executives who have the responsibility of implementing crisis and communication management plan. Best and qualified employees should form the team for achieving required objective of formation of such crisis team (De Waal, 2013). There is no direct involvement of Chief executive officer and the whole team should be accountable to him. Special Crisis Response team: Formation of this particular team requires additional resources of organization and the team is generally assembled by either chairperson or corporate crisis management team. Local crisis management team: Local crisis management team is required to deal with the crisis faced in individual sites in addition to operation response emergence team. Responsibility for this particular team would be on site management of crisis and creating a route for directly communicating with corporate crisis management team. Roles, composition and responsibilities of this particular team would be operation specific (Lee Lawrence, 2013). The member of crisis management team of Mining Company would involve following members along with alternatives: Role Department Crisis management team coordinator Operations Communication coordinator Corporate affairs Human resource coordinator Human resource Legal council Legal Administrative assistant Administration Function of team: One of the functions of such team is providing guidance and strategic direction to organization for mitigating the impact of prevailing crisis or crisis that is faced by organization. Functions involves responsibilities by way of saving lives of employees, protecting property of organization, meeting needs of community and restoring operations that have been disrupted. It provides support to organization by managing the issues related with crisis along with mitigation of some additional risk and thereby safeguarding the interest of employees and several stakeholders. They are designed in a way that helps in addressing the impacts of ongoing crisis faced by Mining Company. Other function of such team lies in the area of motivating employees to deal with problems and motivating them to put their best to enable organization come out of this situation (Marler Fisher, 2013). Preparation of plan of crisis management for dealing with emergency situations such as prevailing economic crisis in Greece along with adopting future course of actions. Ways of rewarding such team: There are various ways in which an organization can reward crisis management team and they are as follows: Types of reward Description of reward Incentive pay The individual in a team receives monetary benefits based on their performance against handling of various crisis efficiently. This would help in enhancing the performance of team as a whole. Recognition It is actually a onetime award for any team or group of employees for successful completion of any project or any program. This helps in motivating them to further increase their efficiency and productivity. Profit sharing In this type of reward, a particular proportion of corporate profits is distributed among team that also provides them information about financial well-being of organization. Conclusion: The report discusses about three particular scenarios faced by Mining Company. It can be inferred from the analysis of the first case that employing several performance management initiative would help in motivating employees and increasing their productivity. For dealing with situation of retaining employees, they are required to adopt retention and succession strategies. Furthermore, it can be concluded that formation of crisis management team would enable them to deal with various crisis faced by organization. References: Armstrong, M., Taylor, S. (2014). Armstrong's handbook of human resource management practice. Kogan Page Publishers. De Waal, A. (2013). Strategic Performance Management: A managerial and behavioral approach. Palgrave Macmillan. Jackson, S. E., Schuler, R. S., Jiang, K. (2014). An aspirational framework for strategic human resource management. Academy of Management Annals, 8(1), 1-56. Kramar, R. (2014). Beyond strategic human resource management: is sustainable human resource management the next approach?. The International Journal of Human Resource Management, 25(8), 1069-1089 Langton, N., Robbins, S. P., Judge, T. A. (2013). Fundamentals of organizational behaviour. Pearson Education Canada. Lee, R., Lawrence, P. (2013). Organizational Behaviour (RLE: Organizations): Politics at Work (Vol. 18). Routledge. Lengnick-Hall, M. L., Lengnick-Hall, C. A., Rigsbee, C. M. (2013). Strategic human resource management and supply chain orientation. Human Resource Management Review, 23(4), 366-377. Marler, J. H., Fisher, S. L. (2013). An evidence-based review of e-HRM and strategic human resource management. Human Resource Management Review, 23(1), 18-36. Mitchell, R., Obeidat, S., Bray, M. (2013). The Effect of Strategic Human Resource Management on Organizational Performance: The Mediating Role of High?Performance Human Resource Practices. Human Resource Management, 52(6), 899-921. Pollitt, C. (2013). The logics of performance management. Evaluation, 19(4), 346-363. Pulakos, E. D., Hanson, R. M., Arad, S., Moye, N. (2015). Performance management can be fixed: An on-the-job experiential learning approach for complex behavior change. Industrial and Organizational Psychology, 8(1), 51-76. Storey, J. (2014). New Perspectives on Human Resource Management (Routledge Revivals). Routledge. Storey, J. (2016). What is Strategic Human Resource Management?. van der Weijden, I., Belder, R., Van Arensbergen, P., Van Den Besselaar, P. (2015). How do young tenured professors benefit from a mentor? Effects on management, motivation and performance. Higher Education, 69(2), 275-287. Van Dooren, W., Bouckaert, G., Halligan, J. (2015). Performance management in the public sector. Routledge. Wilson, F. M. (2013). Organizational behaviour and work: a critical introduction. Oxford University Press.

Strength In A Dolls House Essays - Films, British Films, Lost Films

Strength In A Dolls House Strength in Henrik Ibsen's A Doll House Women have played many roles in marriage throughout history but the primary one has been the role of the submissive, attentive, attractive wife. This role mainly composed of living for her husband and her children. Henrik Ibsen, in his play A Doll's House examines the of the roles of women and men in marriage. A Doll House shows us the story of a woman regaining her strength and self-respect. The main character, Nora begins a difficult search for the self esteem and self worth she has never experienced before. In the beginning of the play Ibsen outlines the typical marital relationship between Torvald and Nora. Torvald is the strong, dignified husband while Nora is little lark twittering. (1565) Torvald's continual reference to Nora using bird names parallels Nora's image of herself. In the first act, Torvald continually refers to Nora as his little spendthrift, his little scatterbrain, his squirrel sulking, and most importantly his song bird.(1565) These images of weak birds characterize Nora as a weak person. The simple twittering, little birds we see every day are very susceptible to cold weather and to dying and so is Nora. The images of a little spendthrift and a little scatterbrain indicate stupidity and ignorance. Nora can't think for herself because her thoughts are scattered and unorganized. She can't assume responsibility for money because she will waste it. In the character of Torvald we are led to believe that he is the loving and accommodating husband. He treats Nora like a child, and she, not knowing any better at this stage, acts accordingly. For example, as a child forbidden by its mother from eating candy before dinner, Nora hides her macaroons from Torvald. Acting like her parent, Torvald suspects her of hiding macaroons from him. He repeatedly asks her if she is sure she didn't eat any macaroons. Surely my sweet tooth hasn't been running riot in town today, has she? he asks (1567) Nora's response to Torvald shows us her lack of self-esteem. Instead of sharing with him her love for macaroons she hides it. Instead of standing up for her rights as a human being to eat what she likes, she acts like a little bird afraid of her own shadow. In the beginning of the play we are introduced to Nora as the weak, stupid, dependent wife. The second stage of her independence is introduced by the invitation to the Stenborgs' costume party. Her invitation to the party with Torvald is extremely significance to her self-esteem. She is desperately trying to find a way to charm Torvald into keeping Krogsard on as an employee at the bank. Through the use of her feminine wiles she hopes to convince her husband that what she requests of him is only a minor request. At this point she is caged as a bird would be caged. She cannot fly away till she gets her independence. Her attendance at the party signifies the fact that she is attempting to break free. She will dance the Tarantella at the party with wild abandonment as this will prove, she realizes to be her last performance, her swan song. In her attempt to break free, she views Mrs. Linde, her childhood friend, as a woman of the world who has experience in the matters of independence. Whenever Torvald is not around Nora, we can see Nora's efforts to break free. Nora shows her strength in the fact that she saved her husband's life. In revealing her secret to Mrs. Linde she attempts to gain independence. When Mrs. Linde comes to visit we see Nora ready to crack wide open with a confession. In explaining her lifes' hardships, Mrs. Linde says, You know so little of life's burdens yourself. (1570) Nora's answer is of strength, I-? I know so little. (1571) You can hear the sarcasm in Nora's words. Mrs. Linde continues on to say, You're just a child. (1571) In response Nora answers, You don't have to act so superior. (1571) This show of strength is typical of Nora as long as Torvald is not around to hear it. After being fully under the control of Torvald, Nora is

Lessons of The parable of the sadhu Essays

Lessons of The parable of the sadhu Essays Lessons of The parable of the sadhu Paper Lessons of The parable of the sadhu Paper In The parable of the sadhu Bowen H. McCoy recounts an ethical conflict that confronted he and his companion Stephan while on a private mountaineering expedition in the Himalayas. On the verge of traversing a high altitude pass, which constituted the goal of their expedition, McCoy’s group discovered a near naked local native (sadhu) on the verge of death from starvation and hypothermia.   McCoy’s group clothed the old man and pointed him in a direction where after two days of walking he could find a hut.   McCoy and Stephan then continued with their own trek with a full complement of attending porters and Sherpa guides.   Stephan immediately challenged McCoy for leaving the elderly sadhu to near certain death. McCoy attempts to transfer his own bygone, inhumane moral choice into the broader problem of corporate ethics and business organization.While the essay is apparently utilized by institutions of higher learning such as Berkeley and Harvard to open discussions on those business topics, The parable of the sadhu reads more like the tormented justifications of a errant man attempting to shed his own guilt. If McCoy really believes his experience with the sadhu should be analyzed in the context of the organization of his expedition, then he should have provided the most glaring omission from his essay.   To wit, who was in charge of his group?   Who retained the Sherpa guides?   Who retained their porters?   After all, the most obvious solution to the ethical dilemma of McCoy was to have one or more of his guides and porters accompany the sadhu to the safety of lower elevations.   If the reader were provided with that bit of information, the weighty metaphysical questions raised by McCoy would be a snap to answer. Having been deprived of that vital data, the reader is left to surmise.   One can infer from the essay that McCoy, in fact, had the final say.  Ã‚   McCoy is confronted by Stephan for having left the old man to die, and it is McCoy who begins the justification process to quiet Stephan’s protestations.   Look says McCoy to Stephan we all cared. We all stopped and gave aid and comfort.  Ã‚  Ã‚   At the conclusion of his essay, McCoy postulates as a possible reason for their neglect of the sadhu’s life perhaps because we did not have a leader who could reveal the greater purpose of the trip to us. It is McCoy who plies Stephan with the incredulous, rhetorical question are you really saying that, no matter what the implications, we should, at the drop of a hat, have changed our entire plan?  Ã‚   The wealthy, Western investment banker considers his recreational trek   of far greater importance (our entire plan) to the life of an Eastern religious pilgrim (the drop of a hat). As McCoy’s justifications mount, they take on a social darwinistic tone.   First, he arbitrarily distinguishes business from philosophy by ascribing action and implementation getting things done exclusively to the former.   If business is individuated and apart from philosophy, when then, anything goes.   When combined with his pronunciamento that the manager who pauses to contemplate what is the ’good’ thing to do threatens the entire enterprise, McCoy has all but nullified any evil in his decision to allow the old sadhu to perish in the snow. Once McCoy acknowledges that hypothetically it could be argued it was not an ethical decision to leave the sadhu behind, he begins to transfer responsibility from any one individual, including himself, to the group as a whole.   Having taken the moral load off his own shoulders he ponders where such a thing as collective or institutional ethics even exists.   He chafes at the idea of the formulation formalized, group ethical rules that clearly delineate what is right and good conduct and what is wrong or evil conduct within an organization.   He find this impractical.   In support of that idea, he describes how he eschews lawyer and colleague advice to avoid conflicts of interest, instead opting to feel my way through conflicts. Two lessons can be learned from The parable of the sadhu that university professors, and certainly business executives, are not likely to suggest. First, beware the philosophizing business man who maintains that business and philosophy do not mix.   While putting on airs of caring a wit for another member of humanity, Mr. McCoy injects ideas that would justify a leader plowing under the weak in achieving the greater interest of strong.   Even when such an overarching interest consists merely of a recreational pursuit.   It is akin to Nike positioning itself as hip and international while at the same time operating inhuman, slave labor sweat shops in Third World countries to maximize its own profits. Second, beware the man who tells you ethical   problems are of such complexity they are beyond the reckoning ability of any single individual.   By telling us the difficulties of dealing with the sadhu were so complex that no one person could handle it, McCoy perfects his own irresponsibility.  Ã‚   I cannot think of a single working class American I have encountered in a half century who would consider the sadhu problem complex in the slightest.   I also cannot think of a common man or woman I have met who would have solved the sadhu problem as Mr. McCoy saw fit.   No, they would not have marched over the pass, porters and Sherpa guides abreast. To   one, they would have accompanied the sadhu back to safety. The essence of The parable of the sadhu is its own antithesis.   McCoy, while making the case for the opposite, quite clearly validates the notion that humanitarian philosophers are required to draft black-letter ethics law for the leaders of industry and commerce (including bankers) who left to their own devices would lose the weak to save the strong.

Guanxi, Cultural Antecedents and Trust Building in Chinese Business Research Paper

Guanxi, Cultural Antecedents and Trust Building in Chinese Business Markets - Research Paper Example The focus in this paper is on the concept of Guanxi, central to the Chinese society. The literal translations of this term could mean 'connections' and 'relationships', but both these translated terms cannot describe the deeper meaning and implications that it actually stands for.The concept of guanxi is no longer confined to China and is accepted in the West also. Guanxi has been defined in different ways depending on the various perspectives. The Chinese construct considers guanxi as a very specific personal connection between two different people. This connection is exemplified by an inherent psychological contract that needs to be followed. The social norms include being committed, maintaining loyalty and ensuring that the relationship is maintained over a long term. Guanxi also has the key characteristics of trust for the parties involved that is developed through long term interactions, reciprocity and self-disclosure.In literal sense, guanxi means connection. When it comes to relationships, this term either refers to the connection between the parties that are involved, or to the connected parties.There are different stages of guanxi - either existent or non-existent, either good or bad, distant or close, deep or superficial and so on. Guanxi can exist between two or more individuals or even between organizations or different networks.It is also necessary to know that guanxi is function in the different spheres of human life, such as the families, friends, and professional groups, political and business. The term guanxi is used along with different verbs to give it different connotations and meanings. For example, if the phrase 'pull guanxi' is used, then it means the set of actions that indicate initiating and establishing a connection. Similarly, if the phrases ‘walk guanxi' would mean using the established connections to achieve any purpose that needs to be achieved.Similarly, the term has been used in other verb forms such as building, developi ng, breaking etc. According to Gold et al, (2002), guanxi can be described as part of China's national character. Over the years, Guanxi has played a very important role in the business relationships in China. If the businesses are Guanxi based, then, there would be a higher probability to reduce uncertainty, reduce the transaction costs, and lower the search costs as trusted suppliers are already known. Guanxi based business relationships also add to strong sense of connectedness (Tung and Worm, 2001). Even while dealing with foreign investors, Guanxi helps in reducing the uncertainty associated with doing business with outsiders. This is because Guanxi helps in establishing informal relationships that can guard against any opportunistic behaviour on

A report for organization expansion into global sector Assignment

A report for organization expansion into global sector - Assignment Example The third section deals with overall strategies that any global firms should take when initializing internationalization processes. The fourth section deals with specific entrant strategies that Clippy should take. The fifth and final section deals with the overall recommendations and conclusions on how Clippy should internationalize. Introduction Clippy bags is a London operation that seems like its time has come. Specializing in customizable bags that may be designed with the individuals’ favorite photographs or print, the bags may become the next big thing. That said, Clippy must roll out a careful globalization plan if it is to capitalize fully on its idea. If it attempts to globalize too soon, in the wrong markets, or with the wrong plan, then it may not be successful in all markets, which might lead to the demise of the company. Further, if it does not partner with domestic firms in the targeted countries, at least at first, then it may succumb to any number of pitfalls that would cause it to fail in that market. These pitfalls range from regulatory hurdles to cultural barriers that are subtle and must be mastered by individuals who are native to that country. The following report recommends the proper strategy for Clippy to use to internationalize. First, it must research countries with the proper analysis of the political, economical, social and technological factors (PEST), along with doing an analysis of the rivals in each country and the relative strength of buyers verses suppliers in each country, using Porter’s Five Forces. From there, it should roll out a gradual strategy of internationalizing, beginning with imports/exports to these countries combined with foreign direct investment. From there, it should gradually establish a presence in each country with a joint venture strategy, followed by a parent-subsidiary strategy, with finally implementing a strategy of opening up retail chains, along with manufacturing and distribution cent ers in these countries. Therefore, the strategy for Clippy is based upon the internationalisation process (IP) model, which states that firms must first acquire market knowledge and gradually internationalize in a series of steps. This reduces the risk that firms take when entering foreign markets. Moreover, countries with smaller cultural distance, as explained below, are the countries that will be the first countries to enter, according to the IP theory, followed by countries with gradually larger cultural distance (Eiche, 2010, p. 6). These are the steps that Clippy should take to ensure success. Exporting and Importing One way that Clippy can get involved on the international stage would be importing/exporting her goods. International trade is important to a growing firm, as it is linked to a firm having higher productivity, a larger size and greater capital intensity then before it begins to export/import (Bernard et al., 2009, p. 514). Further, multi-national companies who eng age in importing and exporting pay higher wages than firms which do not do either of these, and also tend to be the leader in innovation in their respective industry (Bernard et al., 2009, p. 514). Moreover, trading tends to be concentrated in a small number of firms. For instance, Bernard et al. found that the top 1% of firms, in terms of international trading, accounted for 82% of all trades in the United States (Bernard et al., 2009, p. 515). Moreover, while most firms trade only a small percentage of goods to a

Evidence based design-healthcare Assignment Example | Topics and Well Written Essays - 1250 words

Evidence based design-healthcare - Assignment Example Some of the factors considered in evidenced based design include the impact of getting connected to the natural environment on human biology and use of daylight, improving movement of people within a healthcare facility to improve safety, ergonomics, efficiency and hygienic issues which are very important for a healthcare facility. According to Kirk (95), improving outdoor views as well as optimizing daylight exposure has been considered as one of the design objectives especially for a wellness centre. Previous studies have also suggested that the provision of patients with a view of the natural world reduces their need for pain medication thus has the impact of shortening their stay in the hospital. Other studies have also suggested that the improved view of the biological world while patients are in hospitals reduces their length of stay. According to Verderber et al (238), this evidence based design discovery positively affects circadian rhythms of sleep as well as alertness thus improves the general experience of patients. When patients get access or are exposed to abundant sunlight. An example of this was seen at the Butter County healthcare center in David city in which a new wellness center featured a unique three thousand plus square foot curved glass curtain wall that goes up to twenty two feet high. This design offers beautiful views of a park and the surrounding natural environment. The design of the building was aimed at creating a more comfortable healing environment and provides a connection through which patients and healthcare staff meet the outside environment. Designs at this healthcare center used building information management technology as well as sun tracking analysis software to create a comfortable environment. Researchers on the impacts of natural environment have also suggested that the impacts

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.