- Najib unveils an ‘F’ budget: 6% GST but keeps mega projects, govt debt SOARS
- Anwar: Gov’t punishing the people with GST
- In Budget 2014, MP sees no curb to Putrajaya’s appetite
- Pakatan’s shadow budget to address measures on curbing ‘twin deficits’
- [PROGRAM] Dato’ Seri Anwar Ibrahim Di Melaka 26 Oktober 2013 (Sabtu)
Posted: 25 Oct 2013 05:04 AM PDT
As expected, Prime Minister Najib Razak announced the implementation of Goods and Services Tax, to be effective from April 1, 2015.
The GST start rate at 6% is higher than the 4% expected, although not as bad as the 7% first pitched by Minister in the Prime Minister’s Department Idris Jala.
"The government will do what is right for our economy. Some measures may not be popular now, but over the medium term what is good for the economy is also good for the people," Najib said in his Budget 2014 presentation.
Horrid set of priorities: I give him an ‘F’
Nonetheless, the move will open the floodgates to public anger once Malaysians start to grapple with already fast-rising prices of everyday items.
“Horrid set of priorities, still going for mammoth mega projects, fanciful pursuits of making Malaysia a shopping haven and thoughtlessness in adopting the regressive GST without walking the talk of addressing wastages,” Nurul Izzah, the Opposition MP for Lembah Pantai, told Malaysia Chronicle.
“An overall ‘F’ for the PM. What’s more worrying is the face of future Malaysia. What more can the average Malaysian worker suffer.”
Mega projects push already high govt debt to 54.8% of GDP from 53.3%
Indeed, Malaysians and foreign investors may soon find that the 60-year-old Najib has been playing both sides of the fence.
His minders have painted a picture of an urgent need to trim the deficit and record-high government bogey, using the recent Fitch downgrade in country outlook as a bogey, so as to justify the GST implementation which is expected to raise tax revenue from April next year.
However, despite projecting higher economic growth and a 50 basis points cut in the fiscal deficit for 2014, government debt has been forecast at 54.7% of GDP or hardly budged from this year’s record-high.
"Despite collecting the significantly higher than expected revenue, the deficit for 2013 remained at RM39.3 billion. It means that almost every single sen of extra revenue collected by the Government is immediately expended, instead of contributing towards reducing our debt," MP for PJ Utara Tony Pua said in a statement.
The just released Finance Ministry’s Economic Report had forecast government debt at an unprecedented RM541.3 billion or 54.8% of the GDP this year versus RM501.6 billion or 53.3% in 2012. The legal ceiling on Malaysia’s government borrowing is 55% of GDP and this exposes the Najib administration to running foul of the limit just as the US government was forced to shut down for nearly 2 weeks earlier this month.
“This is really like sleight of hand. You say the government needs money to cut borrowings, so you introduce GST. We can argue the borrowings were in the first place unjustified, with a lot of corrupt wastage. Then now, we can see very clearly the GST is not going to be plowed back to cut debt but to allow Najib to keep financing mega projects,” Opposition MP for Batu Tian Chua told Malaysia Chronicle.
“My sense tells me we can expect GST to be raised and subsidies to be continually cut in the future. There is no sincere commitment to cut debt. What this means is soaring prices and the poor getting poorer while the richer keep getting richer.”
Higher growth, lower deficit, higher government debt
Najib had this afternoon unveiled total budget of RM264.2 billion for 2014. Operation expenditure was estimated at RM217.7 billion and development expenditure at RM46.5 billion versus revenue of 224.1 billion.
He projected a lower fiscal deficit of 3.5% of GDP in 2014. This compares against the 2013 target of 4%, which most analysts already expect him to miss.
There will also be a RM7.3 billion cut in the subsidies budget from RM46.7 billion in 2013 to RM39.4 billion in 2014. Ultimately, this will translate into high prices for consumers as the government will be subsidizing less of their costs.
“Why is the Government asking ordinary Malaysians to tighten their belts and suffer higher prices, but the Government chooses to continue with its big spending ways. The subsidy cuts aren’t going toward reducing our debt or deficit, instead it is just providing more funds for the Government to go shopping,” said Tony.
While the government insists that GST was necessary to expand Malaysia's narrow tax base, which has been limited as only 10 percent of the workforce pay income tax, critics say that real wages have not risen and in fact have turned negative for many due to runaway property prices.
The GST will replace the Sales and Services Tax. Items to be exempted from GST are rice, sugar, salt, flour, cooking oil, dhal, chilli, herbs, salted fish, cincalok, budu, belacan, pipe water, electricity (for domestic use), government services, public transport (bus, LRT, ferry, toll) sales and purchase of property or rental of property.
Among the mega projects announced in Budget 2014 are the 316km West Coast Expressway from Banting to Taiping, the double-tracking projects from Ipoh to Padang Besar and later from Gemas to Johor Bahru.
RM700 million will also be allocated to build new air traffic control and management system at KLIA. This is to replace the existing one in Subang. RM312 million will be spent to upgrade Kota Kinabalu, Sandakan, Miri, Sibu and Mukah airports, additional upgrade of terminals in Langkawi International Airport and Kuantan Airport.
The services sector blueprint will also be launched next year, while the logistics sector master plan and national aviation policy will also be formulated. - Malaysia Chronicle
Further details of the Budget 2014 are listed below:
Total budget: RM264.2 billion
Operation expenditure: RM217.7 billion
2014: 4.5% – 5.5%
2014: RM224.1 bil
2014: 3.5% of GDP
Domestic economic prospects
Goods and Services Tax
Projects and allocations
2013 – RM25 mil tourist arrivals
2014 – Visit Malaysia Year
Increase of Real Property Gain Tax (RPGT)
- 30% (first 3 years)
- 20% (fourth year)
- 15% (fifth year)
- For foreigners: 30% for all five years
Posted: 25 Oct 2013 04:59 AM PDT
The introduction of the good and services tax (GST), as just recently announced by Prime Minister Najib Abdul Razak as part of the 2014 Budget only serves to "punish the people", said Anwar Ibrahim.
In an immediate reaction to the budget, the opposition leader said this will only further serve to widen the divide between the rich and the poor and vowed that Pakatan Rakyat will continue to oppose the GST in earnest.
However, he said the budget further lacked focus "fundamental issues and good governance".
"There was feeble argument on reducing sugar subsidy. There is no focus on the issue of good governance.
"(There was) Lower taxes for the rich, special funds for companies (but) at the same time you impose general tax that will affect a large segment of the population. It is a paradox," he said
Najib today announced that the Sales and Service Tax will be abolished, and in its place will be the much-critised GST at 6 percent, effective from April 1, 2015.
Posted: 25 Oct 2013 04:57 AM PDT
A government deficit that remains unmoved despite a RM14.4 billion surfeit in tax collections suggests that Putrajaya is incapable of reining in its excess spending even as it imposes a Good and Services Tax (GST) on the public, DAP's Tony Pua said today.
Pointing out that the reported excess in tax collections disclosed in Economic Report 2013/14 should have helped slash the chronic deficit to a "euphoric" 2.6 per cent, the Petaling Jaya Utara MP said this has instead remained unchanged at the projected 4 per cent.
"Despite collecting the significantly higher than expected revenue, the deficit for 2013 remained at RM39.3 billion. It means that almost every single sen of extra revenue collected by the Government is immediately expended, instead of contributing towards reducing our debt," Pua said in a statement today.
Putrajaya today announced the introduction of the long-delayed GST that will begin at 6 per cent from April 1, 2015 in a bid to widen its revenue base and tackle its chronic overspending that dates back to the Asian Financial Crisis of the 90s.
But despite seeking to shift the burden to the public, Pua said the Budget for 2014 also showed that Putrajaya was not slowing down its spending.
"Datuk Seri Najib (Razak) is seeking the Parliament to increase the operating expenditure further to RM217.7 billion, despite a massive RM7.3 billion cut in the subsidies budget from RM46.7 billion in 2013 to RM39.4 billion in 2014.
"Effectively, that means whatever that is saved from the subsidies reduction goes entirely towards other government operating expenditure," Pua added.
While billed as a "brave reform", Pua noted that any benefit from the introduction of the GST would be negated by the government's inability to spend less than it takes in.
He added that instead of addressing the deficit, the new tax would become another avenue to fill "the coffers of the government so as to reduce the need for the BN administration to cut down on its excesses.
"The GST is a consumption tax, meaning all Malaysians will be taxed according to their level of spending, regardless of income. This differs from income tax that is only applicable after a certain salary level is exceeded.
Najib announced today that essential food items would be exempted from the tax, in addition to tap water and the first 200 units of electricity. Government services and public transport will also be exempted.
The tax was first announced during Budget 2005 and was originally scheduled to be implemented in 2007 before it was deferred.
The GST Bill was then tabled for the first reading in 2009 for implementation in late 2011, but was withdrawn during the second reading in 2010 following fierce public resistance.
Posted: 25 Oct 2013 04:56 AM PDT
Economic analysts, rating agencies and policymakers have expressed their concerns on the broadening risk of "twin deficits" in several countries. Malaysia is one of the countries that encounters the potential due to the shrinking of national current-account surplus and its continuous budget deficits every year. The Fitch-Ratings agency warns about the country's poor economic performance and thus, downgrades its credit-rating of the Malaysian economy from stable to negative. Dozens of private investors have shown their dwindling interest in local market, but the BN government has continued its lavish spending on unnecessary purchases.
A gloomier outlook of the economy plus the low-recovering speed of BRICS countries have caused emerging markets to become more vulnerable. Whether the Federal Reserve will continue its long-term asset purchase through Quantitative Easing (QE) still remains obscure. Prime Minister Datuk Seri Najib Tun Razak has pledged to trim the fiscal deficit from 4.5 per cent to 4 per cent this year. However, this may be piecemeal reforms and blanket approaches seemed far from forthcoming. To maintain macroeconomic stability with a sustainable pace of growth requires bold and courageous effort but with his lacklustre reform policies it will seem impossible to meet the requirement of its undertaking.
Pakatan's 2014 shadow budget foresees its capabilities to reduce the concerns over the potential of "twin deficits" by proposing a balanced fiscal reform with a greater prospect of fostering the people's needs. Below are excerpts from Pakatan Rakyat's 2014 Budget that address the underlying fiscal consolidation:
Malaysia's relatively large public debt at 53.3 per cent of GDP was also one of the key issues behind the downgrade of Malaysia's economic outlook by Fitch-Ratings. The ballooning public debt in Malaysia is narrowly reaching its debt ceiling due to government wastages and corruption that breeds easily under the BN government. Therefore, Pakatan Rakyat proposed a refining policy to curb these problems by increasing spending efficiency and start its work on the rationalisation process.
Pakatan holds a radical approach to encourage wise spending by introducing a broad-cost rationalisation programme in all ministries and government departments to achieve an across the board 10 per cent cut in annual operating expenditure. The 2012 Auditor-General Report has drawn heavy criticism from every quarters due to the inefficiency of the government agency's handling of taxpayer's money. This led to the conclusion that Najib's announcement of policy reforms is merely cosmetic.
Pakatan has unveiled its cost-containment and savings initiative programmes through specific measures such as:
This measure is a bold attempt to punish parties that do not fulfil their responsibilities within the timeframe. They must compensate for the loss incurred in the project. Hence, this system should ensure all parties are heavily dedicated to complete their assigned project without allocations of additional cost. The regular practice of this policy may avoid any postponement of projects from its original planning
Pakatan Rakyat aspires to perform an in-depth assessment of projects from both qualitative and quantitative aspect. Furthermore, government projects will undergo stricter regulation to comply with international standards.
These measures are vital to the development of the nation's economy, while at the same time comply with Pakatan's effort to provide a comprehensive solution of the rising deficit each year. Dealing with the concerns about the twin deficits' threat to Malaysia's economy, Pakatan's shadow budget unleashes its measures to reduce government spending through practical solutions. This could help to boost government's savings estimated at RM 5.7 billion each year.
Pakatan also anticipates a lower budget deficit over GDP this year at 3.2 per cent as compared to the government projection at 4 per cent this year from 4.5 per cent in 2012 while it targets a higher pace of growth estimated a 5.2 per cent due to efficient government spending. It holds the view that spending efficiency is a massive consideration while trimming the deficit. Some of the concerns about Malaysia's mounting public debt at 53 per cent of GDP this year might be well addressed if the current government knows how to spend wisely. Hence, a few measures from Pakatan's shadow budget 2014 can be an eye-opener of how the rationalisation of government spending will help to curb the potential of "twin-deficits" in Malaysia.
Posted: 25 Oct 2013 01:36 AM PDT
1) 4:00 ptg – 6:00 ptg : #MeetAnwar ‘Dialog Anak Muda Bersama Dato’Seri Anwar Ibrahim’ (AIC) di King’s Hotel, Lebuh Ayer Keroh
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