Keeping our feet on the ground
As always, all Malaysians are looking forward with hope and even great expectations to Budget Day on Oct 21.
They invariably ask “what is there in the budget for me?”
We should also ask what is there for our economy or indeed for the whole country, not just for now but the longer term welfare of our nation.
After all, the annual budgets reflect the nation’s Five Development Year Plans, as well as the long-term Perspective Plan or Vision 2020.
The Government should explain more of this thinking behind the budget to the people so that they don’t look only for immediate handouts and budget goodies.
They must also find new policy measures that will bring in more economic growth, better income equity and fairer income distribution on a sustainable basis.
With the great onslaught of the dynamic globalisation process and the world economic transformation taking place all around us, we have to be more innovative in our budget planning and implementation.
The Government has to be commended for broadly consulting civil society, the academic and business communities and general public at many meetings at the Treasury and through the Internet in preparing for the 2017 Budget.
What do the people want from the budget?
1. Tax reductions for big business are constantly requested but cannot be fully entertained at this time of budget strain.
Some would convincingly argue that there is a good case to raise taxes for the rich, to allow more allocations for the Bottom 40% of the income groups.
Then there is the Middle 40% income group whose standards of living have been relatively diminishing with rising inflation?
Should they also not enjoy better quality government facilities and services?
The funding has to come from more reserve and not more borrowing.
Hence, could the 2017 budget introduce some income equity taxes to offset the serious widening income disparities that can cause social unrest?
Could there be better estate duties on huge properties and wealth taxes on the very wealthy?
2. The people want less tax and more tax relief for the lower and middle income groups.
3. More basic needs for the poor (B40) – like housing, health, education, transport and others could be provided on a gradual basis so that the budget deficits can be controlled and constrained.
But again, if we are not to borrow too much, the finance has to come from more taxation at the top income brackets.
4. Inflation has to be better contained. The steadily rising prices of food are especially depressing.
Furthermore, the rising prices on the ground may not be adequately reflected in official price statistics.
So what can the budget do about inflation?
i) Affordable housing – surely the budget can provide more incentives to build more low cost houses through the Industrial Building System.
The private developers can be encouraged to build more affordable housing by promoting the Public Private Partnership concept on a win-win basis, as successfully accomplished in infrastructure and other development projects and programmes.
ii) Health can be improved if new and higher taxes are imposed on food and goods that spoil our health like sugar, salt, cigarettes and alcohol.
Lower taxes on sports equipment can also encourage people to exercise more.
iii) Education 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 then be diverted to fees exemption and scholarships.
This will encourage the establishment of more education endowments and foundations – and relieve the Government of huge and rising education budget expenditures.
iv) Transport charges and fees can also be given more tax concessions. There is no point in building large transport infrastructure like the MRT, LRT and BRTs and to provide bus services if these expensive facilities and services are highly priced and inadequately used.
The pricing has to be constantly reviewed and made more market oriented.
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 rising demand for goods and services.
The budget has to identify the many supply bottlenecks and break them.
Very often these supply shortages are man-made as in the case of bad bureaucracy and wasteful protectionism which can seriously hinder and hamper production and productivity.
The careless denials of suitable land alienation for food and agriculture and 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 very badly.
Corruption causes cost inflation too. Budget 2017 has to be different because we are facing more challenging circumstances with greater innovation and competition from abroad.
Corruption, cronyism and expenditure wastage, as testified by the Auditor-General repeatedly, have to be overcome urgently or the Government’s credibility will suffer more.
The budget should adopt more of the New Economic Model that the Government has considered earlier and ensure that it gradually replaces the New Economic Policy which is considered by many economists to be outdated, outmoded, inefficient and much abused.
Finally, the people must realise that Budget 2017 will be a tight budget because of many economic constraints.
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.
The budget could hopefully announce the formation of the NCC2 as soon as possible to consider a more sustainable economic model.
We all sincerely hope that Budget 2017 will live up to our peoples’ simple, humble and realistic expectations.
Article published in The Star.