IF the flood of complaints over the internet and in the newspapers is any indication, many Malaysians doubt that the Price Control and Anti-Profiteering Act is effective in curbing profiteering.

Some have pointed a finger at the Ministry of Domestic Trade, Co-operatives and Consumerism (MDTCC), accusing it of failing in its duty. Prices, they claim, are rising at an unreasonable rate. A bowl of curry noodles or egg tarts from the corner shop cost a lot more now — much more than 6%.

Between April 1 and 15, some 15,233 complaints were made to the MDTCC but according to its secretary-general Datuk Seri Alias Ahmad, the ministry was hard at work, going after errant traders.

“We have five million businesses in Malaysia. With our capacity, we had already inspected 101,614 businesses from April 1 to 15,” he told reporters recently, adding that it will  be some time before the MDTCC finishes checking all the business premises.

Nevertheless, he acknowledged that some businesses were taking advantage of GST by raising prices. “I don’t deny that. I don’t deny that there are good people and bad people. In that context, this is the same. If a trader wants to take advantage of GST to raise prices, I don’t deny that there are [such traders].”

But Alias was quick to point out that the overall situation had improved.  He urged the public to help crack down on profiteering.

“We hope consumers will report cases of suspected errant traders to MDTCC and provide the specific name of the businesses. We have squads in every state that will immediately inspect when a complaint is made,” he said.

“As long as you increase the prices, we will inspect,” he remarked, responding to a question as to whether small traders and hawkers would also be inspected for profiteering.

Since April 1, the ministry has issued 573 notices to traders and business owners, requiring further explanation and justification for price hikes, taken action in 279 cases and inspected 101,614 premises.

The ministry will take the first 18 cases to the deputy public prosecutor this week to determine if the businesses had violated the Act.

This means that it inspects about 6,770 businesses a day on average nationwide, which is not a small number and involves a lot of tedious work.

Of the 101,614 premises inspected, it is perhaps no surprise that sundry shops, night markets and wet markets made up the bulk.

However, public complaints are understandable as the cost of living continues to rise while there is a lag in wage increases for most.

Since Prime Minister Datuk Seri Najib Razak announced the implementation of GST in October 2013, Malaysians have been worried that the new tax will cause inflation to rise.

But the government has assured the public that GST will not inflate prices because the Price Control and Anti-Profiteering Act will be strictly enforced. The Act forbids any net profit margin increase for 18 months, starting Jan 1. The fines are severe, ranging from RM100,000 to RM1 million, depending on the offence.   

Theoretically, the Act should, by itself, be enough of a deterrent to traders hoping to take advantage of GST to raise prices unreasonably. However, people do not seem convinced of its effectiveness.

Some sectors, for example, the motor trade, have announced price reductions post-GST. Car companies are giving discounts from as little as RM200 to as much as  RM19,000 on luxury cars.

But what really concerns ordinary Malaysians is the more than expected increase in prices at their favourite mamak or chicken rice stalls. Will the ministry be able to stop this?

Other than inspections, the more difficult task for the MDTCC is proving profiteering because an increase in price does not necessarily mean profiteering, explain ministry officials.  

It is a long process to prove that a business is profiteering. A complaint is first investigated by the MDTCC. Then, the business is required to submit its documentation to the ministry, which will have to trace the costs and other elements that could prove an increase in profit margin. All this has to be done before the ministry can present its findings to the Attorney General.

The Act mandates that businesses keep records for seven years or risk being penalised. However, it is wishful thinking to expect a  warung owner or char kuey teow seller to keep his books up to date over the years.

Alias admitted that it was not easy to prove profiteering. “If the business we inspect says it increased prices because it was charged higher raw material prices, we have to inspect the supplier. We do track back to the first entity in the supply chain if necessary,” he said.

Apart from that, there are the grey areas. Take the prepaid mobile top-up card business, a problem that the Customs and telcos have to smooth out.

Soon after the implementation of GST, there was a public outcry  over the imposition of the tax on prepaid top-up cards — those with a value of RM10 suddenly cost the  consumer RM10.60.

Customs Department GST director Datuk Subromaniam Tholasy says the telcos have been given until the end of the month to conduct a survey on the issue.  

Technically, GST was not supposed to have any effect on prepaid cards because the previous 6% Sales and Services Tax had been absorbed by the telcos for many years. But they decided to pass on the new tax to consumers.

While it was not wrong of the telcos to do so, the Anti-Profiteering Act could put them in a dilemma if all else remains equal. There is a possibility that the telcos’ expenses will decline as they no longer need to absorb the 6% service tax, which means an increase in profit.

While ensuring that businesses do not take advantage of GST, the government has to be mindful of the fact that the investigations could leave the door open to corruption.

To stamp out any possibility of this, sufficient safeguards have to be put in place to warn the unscrupulous that any transgressions will have severe consequences.

GST aims to broaden the government’s tax scope to enhance public revenue. It should not be another channel for businesses or government officers to make money at the expense of the rakyat.

This article first appeared in The Edge Malaysia Weekly, on April 20 - 26, 2015.

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