Consumers Association of Penang

Giving voice to the little people...since 1970

NO to hidden costs when eating out: Service tax and service charge should be included in the prices advertised

Consumers should always know exactly how much is the price of their food and drinks before they purchase them.  Thus the price of any food or beverage should automatically include extras like the 6% service tax (to be paid to the government) or/and where applicable, the 5-10% service charge (to be paid to the waiter).  The present practice of putting a notice saying (often in fine print) that there will be a 6% service charge and 10% service charge added on to the price on the bill is not fair to consumers.

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Consumers are being misled on how much it costs to eat in the restaurant when the extra charges are not included in the individual prices.  These hidden costs deceive consumers about the real cost of dining since all prices are on the menu actually cost 16% more, assuming there is a 6% service tax and 10 % service charge.

When the customer is going to end up paying RM11.60 for a dish, it is not fair to list it only as RM10 on the menu.  

Apart from the actual cost of dining out, consumers often wonder if the 6% service tax actually goes to the government’s coffers and whether the workers actually get the 10% service charge.

There have been cases where the outlets have collected the service tax even they were not authorized to do so by the Royal Malaysian Customs Department (RMCD).  Certain conditions have to be met before a restaurant is licensed to collect the service tax, one of the conditions is that the restaurant must have a turnover of RM 3 million a year.

Similarly, some restaurants have been known to keep the service charge for themselves instead of giving it to the workers. Consumers normally will not leave the waiter a tip when the service charge is added on to the bill.  By keeping the service charge for themselves, the restaurants are cheating both workers and customers.  

Therefore, to protect consumers prices for food and drinks quoted must be the final price which the consumer pays.

The company that collects the 6% service tax should have the number of the license printed on the receipt so that doubtful consumers can then check its authenticity with the RMCD.

To protect both workers and consumers, the service charge should not be included in the bill. Consumers should have the right to decide on how much tips to give. If a dinner costs RM100, the consumer should not be forced to pay RM10 as service charge when the service was unsatisfactory. Tipping the waiter directly will ensure that the tips get to the person who provided the service.

Press Statement - 31 July 2012