More of the same or bet­ter?

The Sun (Malaysia) - - SPEAK UP -

ALL Malaysians are look­ing for­ward to Bud­get Day on Oct 21. They in­vari­ably ask: “What is there for me? We should also ask – what is there for the whole coun­try?”

The gov­ern­ment should ex­plain more of the think­ing be­hind the Bud­get so that peo­ple don’t look only for hand­outs and good­ies. It must also seek to find pol­icy mea­sures that will bring in more eco­nomic growth and bet­ter in­come eq­uity and fairer in­come distri­bu­tion on a sus­tain­able ba­sis.

Bud­get 2017 can­not be just another in­cre­men­tal bud­get, where we con­tinue to get more of the same. With the on­slaught of glob­al­i­sa­tion and the world eco­nomic trans­for­ma­tion we have to be more in­no­va­tive. The bud­get has to be­come more rel­e­vant. It should bet­ter re­spond to the peo­ples’ wish lists and plan for the long haul.

The gov­ern­ment has to be com­mended for hav­ing con­sulted civil so­ci­ety, the aca­demic and busi­ness communities and gen­eral public. How­ever it has to lis­ten care­fully and fol­low up with con­crete pro­pos­als for tax ad­just­ments and ex­pen­di­ture al­lo­ca­tions.

Tax cuts for big busi­ness are con­stantly re­quested, but they can­not or should not be fully en­ter­tained. Big busi­ness­men usu­ally want more cuts in cor­po­rate tax and per­sonal tax but this con­ces­sion can­not be pru­den­tially given at this time of bud­get strain. Some would ar­gue that there is a good case for gov­ern­ment to raise taxes for the rich to pro­vide more for the bot­tom 40%. Then there is the mid­dle 40% in­come group whose stan­dards of liv­ing have been di­min­ish­ing with ris­ing in­fla­tion. Should they also not en­joy bet­ter qual­ity gov­ern­ment fa­cil­i­ties and ser­vices?

It has to come from more re­serve and not more bor­row­ing. Hence could the Bud­get in­tro­duce some in­come eq­uity taxes to off­set against the se­ri­ous widen­ing in­come dis­par­i­ties that can cause so­cial un­rest? Could there be bet­ter es­tate du­ties on huge prop­er­ties, wealth taxes on the very wealthy, etc?

The peo­ple want fewer taxes and more tax relief for the lower- and mid­dle-in­come groups. These re­quests are fair, given the na­tional need to raise liv­ing stan­dards for the peo­ple whose real in­comes have been fall­ing, es­pe­cially with un­duly slow wage rises.

More ba­sic needs for the poor (B40) – like hous­ing, health, ed­u­ca­tion, trans­port, etc, could be pro­vided on a grad­ual ba­sis, so that the bud­get deficits could be con­trolled and con­strained. But again – if we are not to bor­row too much, then the fi­nance has to come from more tax­a­tion at the top brack­ets. In­vestors may protest against higher taxes. But the re­sponse should be that in­vestors are at­tracted to not only lower tax regimes, but more im­por­tantly to the at­trac­tive in­vest­ment cli­mate cre­ated by many fac­tors.

In­fla­tion has to be bet­ter con­tained. The steadily ris­ing prices of food is es­pe­cially de­press­ing. Fur­ther­more the ris­ing prices on the ground, may not be ad­e­quately re­flected in of­fi­cial price sta­tis­tics. This could mean that peo­ple are pay­ing far more for es­sen­tial foods and ser­vices than we think. The im­pact of ris­ing prices on the poor can be more painful than the mid­dle and up­per-in­come classes can imag­ine. So what can the Bud­get do about in­fla­tion? i) Af­ford­able hous­ing – pro­vide more in­cen­tives to build more low-cost houses through the in­dus­trial build­ing sys­tem.

De­vel­op­ers can be en­cour­aged to build more af­ford­able hous­ing by pro­mot­ing the public pri­vate part­ner­ship con­cept on a win­win ba­sis.

ii) Health can be im­proved if higher taxes are im­posed on food and goods that spoil our health like sugar, salt, cig­a­rettes, al­co­hol. Lower taxes on sports equip­ment can also en­cour­age peo­ple to ex­er­cise and be healthy.

iii) Schol­ar­ships and bur­saries can be pro­vided to more stu­dents in the B40 and M40 groups, by en­abling pri­vate schools, col­leges and uni­ver­si­ties to in­crease their schol­ar­ships to poor, bright stu­dents. This can be done by grant­ing these in­sti­tu­tions full tax relief on their sur­pluses. More sav­ings from these sur­pluses can be di­verted to fee ex­emp­tion and schol­ar­ships. This will en­cour­age the es­tab­lish­ment of more ed­u­ca­tion en­dow­ments and foun­da­tions – and thus re­lieve the gov­ern­ment of huge ed­u­ca­tion Bud­get ex­pen­di­tures. Sim­i­larly public uni­ver­si­ties should be en­cour­aged to raise fees from the well-to-do par­ents.

iv) Trans­port charges and fees can also be given more tax con­ces­sions. There is no point build­ing large trans­port in­fra­struc­tures like the MRT, LRT and BRTs and to pro­vide bus ser­vices, if these ex­pen­sive fa­cil­i­ties and their ser­vices are highly priced and not ad­e­quately used. The pric­ing has to be con­stantly reviewed and made more mar­ket ori­ented. Some­times the author­i­ties lose the “con­sumer feel” and both sides lose out and gov­ern­ment un­nec­es­sar­ily loses the good­will that it can richly earn from pro­vid­ing bet­ter trans­port to the peo­ple.

v) Sup­plies must be in­creased as short­ages are the main causes of in­fla­tion. More pro­duc­tion, higher pro­duc­tiv­ity and larger sup­plies could be en­cour­aged to meet the stronger and ris­ing de­mand for more goods and ser­vices. So the bud­get has to iden­tify the many sup­ply bot­tle­necks and break them, to in­crease sup­plies of food, goods and ser­vices. Of­ten these sup­ply short­ages are man-made. For in­stance, bad bu­reau­cracy and waste­ful pro­tec­tion­ism can se­ri­ously hin­der and ham­per pro­duc­tion and pro­duc­tiv­ity. The care­less de­nials of suit­able land alien­ation for food and agri­cul­ture, and for hous­ing, the de­pri­va­tion of li­cences and per­mits for trade and es­pe­cially for the small and medium in­dus­tries and the se­vere com­pli­ance costs and wide and ris­ing grand cor­rup­tion, can sti­fle ef­fi­cien­cies and sup­press sup­plies badly. Cor­rup­tion causes cost in­fla­tion too.

The 2017 Bud­get has to be dif­fer­ent. It can­not of­fer more of the same, but should be bet­ter than in the past. This is be­cause we are fac­ing more chal­leng­ing cir­cum­stances.

We have to do much more for the B40 and M40 in­come groups. Yes, they want eco­nomic growth and jobs and higher in­comes – but for whose ben­e­fit – the rich or the poor?

Cor­rup­tion, crony­ism and ex­pen­di­ture wastage have to be over­come ur­gently.

The Bud­get should adopt more of the New Eco­nomic Model and en­sure that it grad­u­ally re­places the New Eco­nomic Pol­icy.

The peo­ple must re­alise that Bud­get 2017 will be a tight bud­get be­cause of many eco­nomic con­straints. The global econ­omy is slow­ing down, our bud­get deficits have to be re­duced to about 3% of GDP, the na­tional debt has also to be lim­ited to about 55% of the GDP, the bal­ance of pay­ments and our ring­git are un­der pres­sure. Hence, all these con­straints al­low lit­tle ma­noeu­vra­bil­ity.

Fi­nally, we have to have a prag­matic and pru­dent Bud­get 2017, so that we can move for­ward with greater con­fi­dence to build a stronger and more sus­tain­able econ­omy.

Tan Sri Ra­mon Navarat­nam Chair­man Asli Cen­tre for Public Pol­icy Stud­ies

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