A DAUNTING TASK
The finance minister has warned that it will be a difficult budget and Malaysians will have to make sacrifices
THE Malaysian government’s annual budget, one of the major news events every year, will be even more significant this time around.
Finance Minister Lim Guan Eng will table his maiden budget in Parliament this Friday (Nov 2). It will be the Pakatan Harapan government’s first budget since taking over following the historic 14th General Election (GE14).
This year’s budget presentation is expected to be different than those of previous years. For one, there will likely be very little crowing about accomplishments by the previous administration and its 2018 Budget that was dubbed “The Mother of all Budgets”.
Rather, given the financial irregularities the new government uncovered since capturing Putrajaya, any praise will be measured, and positive economic data will
include highlighting the weaknesses that still need to be overcome.
We had a taste of this in the Mid-Term Review of the 11th Malaysia Plan released recently. By Lim’s own admission in recent press conferences and interviews, legacy issues will make the 2019 Budget a “very difficult budget”, with “no goodies to give out”, and warning that Malaysians would have to make “sacrifices”.
Since May 9, there is a tangible sense that the country has entered a new era. The majority of voters who handed the new government its victory, are both euphoric and tolerant with the new administration as it learns the ropes.
Those on the other side of the political divide, meanwhile, find themselves in an unimaginable position never before experienced in recent memory. Some are still struggling to accept the new reality.
Given the unprecedented GE14 outcome, it is tough to pinpoint another period in our nation’s history when the people’s psyche and the government’s daunting task ahead were in a similar state. The closest equivalent could be the early years of Malaysia’s independence, when financial and natural resources were limited, and the government struggled to balance the well-being of the rakyat with the need to develop a young nation.
The 1960 Budget — one of the earliest available on record — offers some interesting insights. Tabled by Tun Tan Siew Sin, it was his first budget as finance minister. He would hold the post for 15 years until 1974. He was succeeded by Tun Hussein Onn.
For 1960, the government budgeted M$888 million for ordinary expenditure, and M$874 million revenue, resulting in a deficit of M$14 million. In his speech, Tan stressed the need to substantially increase revenue, to boost savings and avoid wastage or excessive spending. He proposed a review of the tender system to ensure the public received good value for its money, both in goods and services.
He compared how government expenditure had increased nearly 260 per cent over the last 10 years, compared with only a 197 per cent rise in revenue.
“These figures ... indicate the paramount need to ensure that we spend only on what is really necessary and that we get full value for every dollar spent if we are not to run into serious difficulties in the coming years,” he said.
Tan pointed out how the deficit would drastically increase (to M$77 million) if the government did not make any changes to tax rates and duties for the coming year.
In the 1960 Budget, the government cut personal allowance for taxpayers, and increased the percentage of tax payable on chargeable income at the top level (45 per cent on incomes in excess of M$55,000).
“While the government takes no pleasure in increasing taxation, we are convinced these changes ... will not cause hardship and that we can rightly expect the people to accept them as a part of the responsibilities which the independent status of this country and its present circumstances impose upon them,” said Tan.
The 44-year-old finance minister also vowed to go after tax evasion, which he described as “substantial and widespread and is the case of serious loss of revenue”.
The budget that year introduced new duties and increased existing duties on various goods to boost government revenue. Heavy duties were imposed on luxuries or materials used in the manufacture of luxuries.
In closing, the minister anticipated that many elected representatives would urge the government to increase spending on social services including more schools and hospitals.
“There will be some who, while urging an increase in social services, would also like to reduce both the incidence and the rates of taxation. One cannot, of course, have it both ways and whatever is done by the Government has to be paid for by the people of this country in some form or another. There is no such thing as ‘free’ education or ‘free’ medical services. They have to be paid for by somebody.”
Fifty-nine years ago, the finance minister of Malaysia delivered a budget devoid of any political showboating, addressing the stark realities of the day and the need to maintain financial and economic stability “without which the best political system in the world and the best-laid paper plans will come to nought”.
Which part of history will repeat itself on Nov 2?
The 1960 Budget — one of the earliest available on record — offers some interesting insights. Tabled by Tun
Tan Siew Sin, it was his first budget as finance minister.