Budget 2010 ...

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Towards Higher Income ? 1Malaysia Together We Prosper?

By Syed Akbar Ali

Here is an obvious contradiction : whenever the Government gets more income it almost always comes at the taxpayers expense. This is Rule No 1. So lets bear this in mind.

In this Budget, the Government has decided against selling cheap APs. Why? I thought the idea is to move Malaysians towards higher income? Together we prosper and all that? The Government will now impose RM10,000 for each AP to Open AP holders. This will definitely be passed on the public in terms of higher prices.

Why not just remove the APs – abolish saja.

So Rule No 1 again – when the Government makes more money, the public gets poorer.

Then the Budget says income tax will be reduced from 27% down to 26% for those earning RM100,000 pa. Firstly just how many people are involved here? Just how many million Malaysians are in this RM100,000 tax bracket? Ini nak tolong orang kaya saja kut?

Here I see only the “CCC Class” benefiting. The CCC Class are those who can at least buy the Mercedes Benz C Class. They include the Chinese business class, the Corporate class (better spelt ‘korporat’) and the Crony class. Put together they become the “CCC Class”.

Other than this the ordinary Chinese working class, the ordinary Indian and Malay need not worry too much about calling their tax accountants just yet. They can go back to watching Awani, Thangathirai or Wah Lah Toi.

And yes I too would like to know the justification for the 15% tax for all income earned in Iskandar. What is so special about Iskandar? I have got nothing to do with Iskandar. The same goes for about 27 million other Malaysians.

The fact is Kuala Lumpur, the Klang Valley, Penang and other places generate huge chunks of our GDP. Why not give some real tax breaks to us hardworking folks? My wife and I work seven days a week. And why 15%? Who and how did they come up with this magic number? Why not 25% or 20% or 18% or 16.555%? Ada logic ke?

And this also creates huge amounts of room for cheating. You can open a “name plate” office in Iskandar – just an office, a table and chair with a fax and phone. Then do all your business in KL but issue all your invoices, receipts, cheques addressed from Iskandar. Close your accounts in Iskandar. Then you pay only 15% income tax. In fact I think many of the businesses in KL are considering this already. Tak terpikir ke?

And the only bumiputera who may benefit from this is the multi billionaire Tan Sri Syed Mokhtar Bukhari who has extensive business operations in the area.

Just like the Labuan Offshore Financial Centre or LOFC. For the past 20 years the Labuan OFC has actually been operating from the UBN Tower in KL beside the Shangrila Hotel. Because that’s where many of Japanese offshore banks operate from. They maintain a simple office, fax machine and telephone in Labuan just for appearances but most of the business is done from KL. Big deal.

And those who will benefit most from this 15% tax in Iskandar will also be those who pay taxes - again mostly the CCC Class only. What about the ordinary Malay, Indian and Chinese? 1Malaysia Together we prosper – remember ?

The majority of Civil Servants are Malays. So are wage earners. So how will they benefit much from this 15% tax rate? This Budget can kick up greater economic divisions among the people.

The idea to impose a RM50 fee on Credit Cards is also quite mind boggling. Who is the genius who thought up this little nugget? Firstly the Banks can easily award bonus points, give fee waivers etc that can overcome this extra RM50 fee. But again Rule No 1 applies here. This RM50 tax per credit card makes us poorer . Only the Government moves to a higher income bracket.

First of all lets state clearly what is the desired outcome? What does the Government want to achieve? If the idea is to reduce the abuse of credit cards and prevent people (especially the middle and low income) from incurring unnecessary credit card debt, here is a suggestion, a simpler method : Just tell the Banks ‘No Cash Withdrawals Using Credit Cards for Malaysian Citizens inside Malaysia’ (or something like that).

Malaysians on genuine travel overseas can still withdraw money using Credit Cards and foreign tourists and travellers inside Malaysia can also withdraw money using Credit Cards. But the 25 year old Malaysian who has got five credit cards will be prevented from withdrawing RM2000 cash from each and every one of his five credit cards and then default on his payments in two months.

I think there are other ways too, to skin this cat instead of walloping everyone with a blanket RM50 per credit card to enrich the Government. And it may still not work. Its just Rule No 1 again. It certainly does not move us to higher income. Only the Government gets richer. Lip service saja bang.

Tax relief of RM500 for broadband subscription. Firstly this only applies to those who pay taxes. The CCC Class will again benefit most from this. But how many Malays pay taxes in the first place (to benefit from this)? If they don’t they will not benefit from this. And how many Malays or Indians or Chinese have broadband connections ? We need statistics. So to me these are just Christmas tree decorations to decorate the Budget. They don’t really move many people towards “higher income.” What we need most is better broadband connection.

First Class Honors Grads will get their loans converted to scholarships. Again can we have some numbers? How many grads get 1^st class Honours in the first place? 100? 1000? 10,000? Can we see some numbers? I can say straight off that over 99% will be non Malays. Which is fine. I hope more Malays will also work hard and get 1^st Class Honours too.

But how does this move the rest of us 28.0 million Malaysians (especially the Malays and Indians) towards higher income? How does this have an effect on the economy as a whole?

I feel this idea about the 1st Class Honours grads should have just been announced by the Minister of Higher Education or the Government without having to include it as part of the Budget.

I have this feeling the Goverment ran out of ideas for the Budget and is just throwing in more Christmas tree decorations to make the Budget sound good. I remember when I was a student, we used to add extra pages on our answer papers in our written examinations to “bagi berat” ie make our answers look longer. We could not fool the teachers though. That was in the 1970s.

The same can be said about adding eight new EMU coaches by Keretapi Tanah Melayu and building covered walkways linking LRT stations to activity centres. I find it strange that little things like this were also included as part of the Annual Budget. These are operating items which can be announced by General Manager of KTM or the LRT folks.

I certainly hope the covered walkways do not become mega projects (like the RM110 million now being spent to build a flyover and road works in Jalan Travers).

The same goes for the 30 top students getting scholarships. This is a very, very good thing but does it have to be part of the Budget? 30 students will have a chance at a better life but how does that move the rest of us 28 million not so clever ones to a higher income?

The RM2.3 Billion infrastructure spending in Sabah and Sarawak is good. It is long overdue. Build big and build fast. But don’t waste money to only benefit the “cahaya mata” cronies. Thats an entire "C" class by itself. Spread it out to others too.

The RM6.0 Billion allocated under Agriculture can be a huge sinkhole. We must get maximum bang for each Ringgit spent. Lets face it : Agriculture spending is just handing out subsidies and dole to the farm folks.

But there is a new player now : agricultural corporations linked to GLCs. They are goofing up big time. (Like spending RM200.0 million on losing prawn farms). I hope we dont lose too much money there. GLC = Government Losing Concern?

But what is the big deal about the 20% stamp duty exemption on Islamic Financing instruments? Why discriminate based on religion? Money is still money. And there is really no such thing as Islamic Banking or Islamic Financing in the first place.

The point I am trying to make? The point I am trying to make is we are dealing with the real world here. We are dealing with 28.0 million Malaysians and we need to move the real economy of the whole country – and not just the Islamic Financing part of it (which is imaginary anyway because there is no such thing as Islamic financing).

If you want to give a 20% tax break on financing instruments then do it across the board – and not just on Islamic Financing.

This will really move us all together towards a higher income. Since the Government has taken away the exemption from RPGT (Real Property Gains Tax) then at least ease up a little lah on the stamp duties. Kasi kat semua orang la. Ini nak kasi Islamic Financing saja not fair lah. How does this fit the 1Malaysia Concept ?

I do hope the Government will review the Moneylaundering and Anti Terrorism Financing Act. At the same time please also put a stop on a lot of the hot money that is flowing into the country, especially from the Middle East. The Government may want to pay more attention to where much of the Arab money originates from. Some of it usually comes from very “sheikhy” hands. Lets not make our country a haven for “hot money” under the camouflage of Islamic networking, Islamic financing, Islamic Bank licenses etc.

There is already talk that with Pakistan breaking up, Pakistani generals, warlords, politicians etc will be moving out their money to other countries. They too may soon be looking for “Islamic brotherhood”. Jangan kita jadi kaldai.

The tax exemptions for the Green Building Index may also be minimal in its effect. It is a good thing – no doubt about it and I don’t disagree with Green Buildings. But it is like giving a tax break for Outer Space Exploration to Malaysians. Just how many Malaysians will benefit?

First of all Green Buildings are expensive. Green actually adds cost, it does not save cost. So it does not move anyone towards higher income.

My son just finished his Diploma in Architecture and is now working for an Architect where they are into Green Buildings. To go Green, you need new materials, new designs etc all of which cost more.

But here is something else : according to The Star’s front page, the construction sector only makes up about 1.6% of the economy.

In contrast The Star also quotes from the Economic Report 2009/10 which says that the size of the Malaysian Economy will be RM1.026 TRILLION in 2010. Syabas and Alhamdulillah. This is a tremendous achievement.

Out of this RM1.026 Trillion, 40.2% (RM412 Billion) is the Import Sector and 45.4% (RM465 Billion) is the Export Sector. This is where our economy really thrives : imports and exports.

So where are the Budget Incentives to help these very important sectors of our economy? Faster Customs clearance for Importers, less red tape, duty exemption, tax incentives for more export etc? Green Buildings will only benefit 1.6% of our economy.

So again – how many people will benefit from going Green? And how many Malays are in this sector? (I am not being prejudiced or racist folks but we really have to do things to move as many people forward together and not just some people . And the Malays make up the largest number of folks who need to be moved forward in a hurry). To me this thing about Green are just more Christmas tree decorations on the Budget.

And why remove the RPGT exemption? Its just Rule No 1 again : it only enriches the Government but makes the citizens poorer. The RPGT exemption was just helping the property and construction sector turn around. Now with the RPGT reimposed, it will certainly dampen some activity in this area. The Government gets richer but the public gets poorer. How to move to higher income? Apa sudah jadi "1Malaysia together we prosper"?

The financial and non financial rewards for headmasters is unclear. What exactly are they? RM10 for every ‘A’ scored by students in PMR and SPM?

The Deputy PM Ustaz Muhyuddin Yassin says it is a new ‘bai’ah’ or New Deal which the Government will introduce for principals and head teachers. Brader, pasai apa cakap Arab ? Apa itu bai’ah? Kalau “New Deal” maksudnya ‘Perjanjian Baru’ pun boleh. But Perjanjian Baru is also the name for the New Testament !

How are the Guru Besar going to get the teachers (who may not get the bonus) to work harder so that the Guru Besar can collect his bonus? Even if the teachers dont work harder, they still get paid. The KPI does not potong gaji for non performance. There is no such thing. And teachers salaries are according to Government salary scales. This bonus for the Guru Besar scheme may promote more budaya hasad dengki in school.

I feel it is better to cut down on guru ponteng sekolah. By this I mean the number of days teachers are NOT IN CLASS because they are away on kursus, away on leave, away on naik haji, umrah, more kursus, away attending meetings etc. If teachers spend more time teaching in class, our students may make better grades.

The biggest problem I see in this Budget is the plan to remove fuel subsidies but give it to “needy” target groups. Some crazy scheme about using MyKad etc, starting sometime later. I assume those in the target group will get a special classification that will be tagged inside their MyKads. Then when they buy gas, they may have to swipe their MyKads at the gas station to get the subsidised price.

We have forgotten a fuel subsidy fiasco that is still going on in Kuala Perlis, Kuala Kedah, Terengganu and other places. The Government decided to let inshore fishermen buy diesel subsidised at RM1.00 per litre (I dont know what is the price now but it is still subsidised).

This has created a new class of instant “oilmen” among our fishermen. They fill their tanks (including plastic containers etc) with subsidised diesel and then sell it to Chinese offshore men (or behind the lorong in the fishing villages), Thai trawlers etc on the high seas. And they have also stopped fishing. Why fish when you can sell subsidised diesel and make more money?

And the Customs Department has had to spend hundreds of Millions of Ringgit buying new speed boats to chase down this new ‘oilmen’ on the high seas. What a dumb idea that was. And it is still going on.

So this is now going to happen throughout the country. I can imagine the Mat Rempit boys standing just outside the petrol stations ready to ‘rent out’ their MyKads for a fee. Pay them some Ringgits, they ‘pinjam’ their MyKad to you, you go to the station and swipe it and get cheaper petrol.

Or the Mat Rempits may buy cheaper subsidised petrol, put it in tanks and go around the housing estates selling cheap petrol. ‘Minyak Murah, Minyak Murah’. Its bound to happen.

Then to curb the abuse the Police or Domestic Trade boys will be asked to increase their ‘enforcement’, buy new equipment, new procedures etc. More time and energy wasted.

Here are some ideas : impose a standard 20% Corporate and Personal Income Tax rate. Then waive the Personal Income Tax rate just for this year, since the economy is bad.

Remove the RPGT.

Reduce Stamp Duty for land transactions to a standard RM100 for all land title transactions below RM5.0 million. (Ok can tweak the figure lah).

Give real money incentives to industry and businesses for employment creation for Malaysian citizens (not Bangla factory workers or Indon contstruction workers).

Give more tax breaks to parents for paying college and university fees.

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Berapa ramai yang dapat atau akan dapat manafaat ya????