Malaysia Today - Your Source of Independent News
Malaysia Today - Your Source of Independent News |
- Tax reliefs: Hidden subsidies that favour the rich
- Grassroots Support The Key To Forming The Next Government
- The Pinnacle of Human Stupidity - The Darwin Awards
- The Bersih Truth Hurts
| Tax reliefs: Hidden subsidies that favour the rich Posted: 05 Oct 2011 05:53 PM PDT Tax reliefs are a very regressive form of government subsidies to the taxpayers. The richer the taxpayer, the more subsidies she receives from the government. Thus it is unfair and inequitable, writes Subramaniam Pillay. In the past couple of years, there has been a lot of talk on subsidy rationalisation i.e. the removal of subsidies for basic items like cooking oil, sugar, flour and petrol. The argument is that it subsidises the poor as well as the rich; it is unfair to provide subsidies for the rich, so we must eliminate the subsidies and let market forces work. Many of these subsidies help the poor and the rich equally. For example, if a family consumes 5kg of cooking oil per month, they get the same subsidy regardless of their wealth and income. Usually, consumption of basic food items does not increase with increasing wealth and income. However, there is a large hidden subsidy which favours the rich over the poor that has been conveniently forgotten. And this comes in the form of the various tax reliefs offered to taxpayers. In this week, before the 2012 budget is announced, there have been numerous calls to increase the tax relief for various items including premiums for medical insurance, educational insurance and life insurance. Tax reliefs are is a very regressive form of government subsidies to the taxpayers. The richer the taxpayer, the more subsidy she gets from the government. Thus it is unfair and inequitable. Tax relief for purchase of books Let us illustrate this with an example. Currently, there is a tax relief of RM1000 for the purchase of books and magazines that is available to all taxpayers. Ostensibly, this is to encourage the reading habit among Malaysians. A high-income earner who is at the top tax bracket will pay a marginal tax rate of 26 per cent i.e. for every extra ringgit she earns, she will pay 26 sen income tax. On the flip side, every ringgit of tax relief that she claims will reduce her income tax by 26 sen. If she now buys books and magazines worth RM1000 for herself or her children, she can claim the full relief and lower her tax bill by RM260. In other words, this high-income person is getting a government subsidy of RM260 to purchase books. Now let us take the case of Mr X, the average citizen of Malaysia whose income is so low that he does not pay taxes. (It has been reported that only 1.7m residents have tax files with IRB which means the remaining 12m-15m working adults are either earning too little to pay income tax or evading paying income tax!) If Mr X now buys RM1000 worth of books to improve his and his children's knowledge to enable them to have a better life in the future, he receives no subsidy as he is not entitled to any tax relief. If Ms Y, a middle income Malaysian has a marginal tax rate of 12 per cent, she will get a subsidy of only RM120 for the RM1000 worth of books she buys. The irony is that it is the families in the lower-income group who need the books more as it will enable them to earn a better income in the future. They need the book subsidy more than the rich. But our tax relief system rewards the rich more than the poor thus widening the income and wealth disparity in this country.
Tax relief for medical insurance premiums An even more unfair tax relief is the one offered for purchase of medical insurance. Using the same reasoning as above, the government is subsidising the rich with 26 per cent of the cost of the medical insurance premium while the poor will be unable to even think of buying medical insurance as they cannot afford it. This subsidy should rightly be diverted to the health care budget so that the public sector health care system can do a better job in terms of delivering quality health care on a consistent basis. The beneficiaries of this medical insurance tax relief (or subsidy as it should be correctly labelled) are not only the high-income taxpayers but also the private medical insurance companies and the profit-seeking private hospital sector.
Why are tax reliefs popular? Given this glaring inequity and unfairness of the tax relief system, why is it popular in many countries? The beneficiaries are well educated and vocal enough to influence politicians to give these reliefs. Industry groups which benefit from these reliefs (e.g. insurance companies, private hospitals, and private education providers) are also powerful lobbies in many countries. The poor on the other hand are voiceless and their welfare is usually neglected. For example, few top leaders in all segments of our society use public hospitals; in fact many go abroad for medical treatment, so they don't see the need for consistently high quality health care from government hospitals which most Malaysians have no choice but to use. Another reason is that the subsidy in the form of tax relief is revenue foregone and not visible directly; it is not recorded anywhere in the government's income and expenditure accounts. On the other hand, a subsidy for cooking oil turns up as an expenditure item in the accounts. So when the government thinks of tightening its belt, it tends to focus on how to cut spending and not how to enhance revenue by removing all these indirect subsidies which favour the rich more than the poor. It is also easier to quantify direct subsidies whereas revenue foregone through tax reliefs is more difficult to estimate and is thus less visible. Given these reasons, it is not going to be easy to get rid of the unjust and massive inequitable subsidy that occurs through tax reliefs in our government budgets.
Dr Subramaniam Pillay is an economist who has just retired from academia. He is also a member of the executive committee of Aliran.
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| Grassroots Support The Key To Forming The Next Government Posted: 05 Oct 2011 05:51 PM PDT By LH Chew Really, the battle for the hearts and minds of the Malaysian voters come GE13 is not the educated and internet-savvy voters but in the grassroots, deep in the kampungs, new villages and estates. The Sarawak state election held a while back proved that statement. And I am sure our Pakatan Rakyat brothers and sisters knew that. No amount of mud-slinging and korek would unseat the BN government. The BN machinery is just too slick working effectively in the rural areas. If you think about it, this is actually the reverse in Thailand where the elites and educated and urbanites worked hard to exclude the parties that have the support from the rural population (the have-nots) from forming the government. Your guess is as good as mine, eventually, the elites and internet-savvy still have to give way to the grassroots. The recently completed Singapore elections also proved this point. It was touted as an internet election with young voters reading up on the alternative media before deciding who to vote but alas, it was the mainstream media that won, according to a survey conducted jointly by the Institute of Policy Studies (IPS) and Nanyang Technological University (see link to the story http://www.asiaone.com/News/AsiaOne%2BNews/Singapore/Story/A1Story20111005-303216.html). That is the reality in Malaysia and those who are internet-savvy can be easily counted with our ten fingers versus the masses in the kampungs, new villages and estates. BN knew this is where the battle will be fought and won and they knew this is one of the main oppositions' weaknesses. As for me, like many of you, I would like to see reforms, hopefully by voting in a new government. Unfortunately, facts are not on our side. I wonder if our pakciks, makciks, ah peks, ah sohs, aunties, uncles, grandmothers and grandfathers ever know what is Pakatan Rakyat because to many of them, they only swear by the dacing symbol.
The opposition parties have to unite and go to the grounds, not squabbling who is going to be the Prime Minister and whether hudud is the way to go. They need to take a leaf from the Workers Party in Singapore where their party members worked the grounds for many years in one of the areas they contested despite losing in several elections and eventually they won it in last year's election, along the way knocking out one of the most prominent Cabinet minister. And now this party is working on a long term plan to replace the PAP government. Well, you can laugh at it. At least they are already working on that plan. It is a tough journey and whether BN can be voted out, depends on how organized the opposition parties are.
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| The Pinnacle of Human Stupidity - The Darwin Awards Posted: 05 Oct 2011 05:46 PM PDT I was thinking, luckily no Malaysian has ever won this award before, so we must be smarter than this, at least. By Socrates It's that time again. The DARWIN Awards are out. The annual honour is given to the persons who did the gene pool the biggest service by killing themselves in the most extraordinarily stupid way. Last year's winner was the fellow who was killed by a Coke machine which toppled over on top of him as he was attempting to tip a free soda out. This year's winner was a real rocket scientist ... HONESTLY! Read on ... and remember that each and every one of these is a TRUE STORY!!! And the nominees were: Semifinalist #2 Three Brazilian men were flying in a light aircraft at low altitude when another plane approached. It appears that they Semifinalist #3 A 22-year-old Reston, VA, man was found dead after he tried to use octopus straps to bungee jump off a 70-foot rail road trestle. Fairfax County police said Eric Barcia, a fast-food worker, taped a bunch of these straps together, wrapped an end around one foot, anchored the other end to the trestle at Lake Accotink Park, jumped and hit the pavement. Warren Carmichael, a police Semifinalist #4 A man in Alabama died from rattlesnake bites. It seems that he and a friend were playing a game of catch, using the Semifinalist #5 Employees in a medium-sized warehouse in west Texas noticed the smell of a gas leak. Sensibly, management And now, for the winner of this year's Darwin Award Award: An amateur rocket scientist had somehow gotten hold of a JATO unit (Jet Assisted Take Off, actually a solid-fuel rocket) that is used to give heavy military transport planes an extra 'push' for taking off from short airfields. He had driven his Chevy Impala out into the desert and found a long, straight stretch of road. He attached the JATO unit to the car, jumped in, got up some speed and fired off the JATO! The facts as best could be determined are that the operator of the 1967 Impala hit the JATO ignition at a distance of approximately The JATO, if operating properly, would have reached maximum thrust within 5 seconds, causing the Chevy to reach speeds well in excess of 350 mph and continuing at full power for an additional 20 -25 seconds. The driver, and soon-to-be pilot, would have experienced G-forces usually reserved for dog fighting F-14 jocks under full afterburners, causing him to become irrelevant for the remainder of the event. However, the automobile remained on the straight highway for about 2.5 miles (15-20 seconds) before the driver applied and completely melted the brakes, blowing the tires and leaving thick rubber marks on the road surface, then becoming airborne for an additional 1.4 miles and impacting the cliff face at a height of 125 feet, leaving a blackened crater 3 feet deep in Epilogue: PEOPLE LIKE THIS WALK AMONG US, AND THEY ARE ALLOWED TO HAVE KIDS AND VOTE!! Certainly, I shall put forward Malaysia as a candidate for the Darwin Award if there is no change in the government after the GE13. To |
| Posted: 05 Oct 2011 10:30 AM PDT By Douglas Tan via Malaysian Digest While our Prime Minister receives accolades from most quarters for the repeal of archaic acts such as the Banishment Act 1959 and the Restricted Residence Act 1993, questions must be asked about when the true reforms would be made. Only now has Najib Razak instructed the Attorney-General to draft the two pieces of alternative legislation to the Internal Security Act (ISA), and he has continued to chide the opposition for claiming to be the champions of the repeal of the act. Clearly, the Prime Minister has not come prepared by announcing that the ISA would be abolished without having anything prepared to replace it. The circus does not stop there. The Medical Device Authority act gives the police the authority to seize any medical devices as evidence with the approval of the Health Minister. In our system where Ministerial authority for criminal matters should be diminished, the wide scope of the act shows that this Barisan Nasional (BN) government is as authoritarian as ever, and has no intention to change. Question Time was intriguing as it forced Ministers to come clean with the information behind their recent actions. Actions are not without consequences, and as it transpires, the justification given for their actions are nothing short of laughable. No rally has been publicized as much as Bersih 2.0, branded by the mainstream media as the July 9th illegal rally. Home Minister Hishammuddin Hussein has been put under an enormous amount of scrutiny as to how the event was handled, and now the spotlight has been redirected at him as he attempts to explain the actions taken and the cost. As we all now know, there were over 11,000 police personnel at a cost in excess of RM2 million borne by the taxpayers. This enormous figure compared with their official claims that only 6,000 people turned up for the rally and that almost 1,700 people were arrested smacks of inefficiency and waste in itself! Or could it be that there were really 50,000 on the ground that day and the police presence and cost was a proportional response to keep public order? The Home Ministry can argue about the facts, but when it comes to footing the bill, it becomes difficult to justify the sheer cost of it all. Repealing the ISA would make Malaysia the best democracy in the world, chimes the Prime Minister, but the Home Minister continues to deem Bersih as an illegal organization as they intended to "overthrow the government". This line of reasoning is a result of paranoia rather than fact. The intent was to reform the electoral system, not to overthrow the government! This is not a justification, rather just a convenient, albeit farfetched, explanation to defend the indefensible. Finally, Health Minister Liow Tiong Lai once again has egg on his face. After his public denial that no teargas or chemical laced water was shot at Tung Shin Hospital, the Home Ministry report conceding that the police has breached their own Standard Operating Procedures is a massive slap on the face. After all the fuss about Lim Guan Eng apologizing for his gaff about Johor security, can we also expect an apology from the Health Minister? Or shall we expect more excuses, and the same holier-than-thou hypocrisy that we are used to? Either way, BN have displayed their true colors yet again by failing to walk the talk. With these half-hearted measures taken to reforms, they are asking for punishment from the Rakyat in the looming General Elections. |
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