WITH a mandate to continue his administration at least until the next general election in four years, Prime Minister Datuk Seri Anwar Ibrahim has embarked on the journey of creating healthier coffers for the nation through Budget 2024.
Some decisions may not be popular but the prime minister has been consistent in not mincing his words that poor fiscal policies, leakages, corruption and subsidies are costing the country billions.
The 1MDB debt alone is setting taxpayers back by RM13 billion.
Anwar had already forewarned that the country cannot afford to continue with subsidies as the flawed implementation of government subsidies is benefitting 60% of those who generally do not qualify; and this includes, in the prime minister’s words “the elites and super-rich”.
He explained the rationale in removing electricity subsidies for the top 10%, which will save the government RM4.6 billion: “In 2022, data indicated that the top 10% of electricity users received 50% of the subsidy, while the bottom 50% of users received only 10% of the subsidy.”
The diesel subsidy rationalisation to curb smuggling and opportunistic practices that he announced at the tabling of the budget yesterday is set to save at least RM1.6 billion annually.
The temporary removal of price controls for chicken and egg – the main source of protein for Malaysians – may at first raise questions of further taxing the middle class and the poor, but Anwar explained that with market forces keeping the price of these food items below the ceiling price, it made sense to remove the subsidy, which costs the government RM3.8 billion annually.
Meanwhile, despite earlier expectations of the reintroduction of the Goods and Services Tax (GST) starting at 2%, what is being implemented instead is the hike of Sales and Services Tax from 6% to 8%.
This would form among the main revenue generators for the country, albeit its implementation is not as widespread as GST. What is certain though as in any increase in taxes, the end user will end up paying for it.
This is complemented by a capital gains tax increase at 1% and a luxury goods tax, which in general would affect connoisseurs of jewellery, luxury watches and handbags.
Budget 2024 also saw the government compromising on several policies, primarily on the initial prohibition on withdrawing savings from Account II of the Employees Provident Fund.
The prime minister announced a mechanism for a flexible account where savings could be withdrawn at any time.
The limitations of revenue streams other than taxation may put the prime minister on the backfoot during the ensuing debate on the budget. However the resurrection of certain projects such as the construction of five LRT3 stations will go a long way in stimulating the economy.
Anwar’s 17 overseas trips in the past 10 months have also brought in a promise of RM216 billion in investments. But this must be complemented by the ease of doing business, stamping out bureaucracy and the eradication of corruption and leakages that increase the cost of doing business – all issues that this budget promises to address.
In the coming months, the Madani Budget will be under the microscope to determine if it is indeed the antidote needed to regain our fiscal strength. And as is common in any rehabilitation, the road to recovery can be difficult and painful. – October 14, 2023