The National Higher Education Fund (PTPTN) needs to be abolished sooner rather than later, otherwise it would bankrupt the nation, said PKR strategy director Rafizi Ramli.
He said PTPTN has thus far borrowed RM45 billion from financial institutions, mainly from the Employee’s Provident Fund (EPF) and Permodalan Nasional Berhad (PNB). Of that sum, RM30 billion has been disbursed to provide higher education loans.
This increases at 11 percent annually he said, and is projected to hit the RM100 billion mark in 2022.
“When that happens, it will start having an impact on our financial system. Then what happens? We have to bail out PTPTN,” he said yesterday.
Rafizi (right) argued that it is better to abolish the fund now and refinance the RM30 billion debt over the next 20 years, than to take on the RM100 billion debt later.
He added PTPTN has only managed to collect RM2 billion of its loans since it was founded in 1997, and noted that the US had similarly dismal collection rates until student debts grew to USD1 trillion (about RM3.12 trillion) last year.
“So much so that the US congress and senate are already working out a deal and new legislation to forgive the debt, but not because the US wants to emulate our move to abolish PTPTN.
“They realised that the largest risk to their financial stability after housing loans and credit cards is actually student loans.
“If they can’t service it, it will collapse the whole thing like the 2008 asset bubble,” he said.
Rafizi, a former accountant, was speaking at a dialogue session between PKR de facto leader Anwar Ibrahim and some 200 youths in Bandar Utama, Selangor yesterday.
He said PTPTN has thus far borrowed RM45 billion from financial institutions, mainly from the Employee’s Provident Fund (EPF) and Permodalan Nasional Berhad (PNB). Of that sum, RM30 billion has been disbursed to provide higher education loans.
This increases at 11 percent annually he said, and is projected to hit the RM100 billion mark in 2022.“When that happens, it will start having an impact on our financial system. Then what happens? We have to bail out PTPTN,” he said yesterday.
Rafizi (right) argued that it is better to abolish the fund now and refinance the RM30 billion debt over the next 20 years, than to take on the RM100 billion debt later.
He added PTPTN has only managed to collect RM2 billion of its loans since it was founded in 1997, and noted that the US had similarly dismal collection rates until student debts grew to USD1 trillion (about RM3.12 trillion) last year.
“So much so that the US congress and senate are already working out a deal and new legislation to forgive the debt, but not because the US wants to emulate our move to abolish PTPTN.
“They realised that the largest risk to their financial stability after housing loans and credit cards is actually student loans.
“If they can’t service it, it will collapse the whole thing like the 2008 asset bubble,” he said.
Rafizi, a former accountant, was speaking at a dialogue session between PKR de facto leader Anwar Ibrahim and some 200 youths in Bandar Utama, Selangor yesterday.
PTPTN popular topic
He fielded questions from the floor for over an hour prior to the Anwar’s arrival, many of which dealt with PTPTN.
Abolishing the fund is a key Pakatan Rakyat election promise, and is part of the coalition’s pledge to provide free tertiary education at public institutions.
When one member of the audience - who claimed he had refinanced his PTPTN loan with a commercial loan - asked what Pakatan Rakyat would do with those who have settled their debts, Rafizi said there is a need to show a ‘token appreciation’ for such people.
He said there were a number of ideas on what form this ‘token appreciation’ would take, but no decision has been made because there is not enough information publically available about the PTPTN loan to decide.
One popular idea, he said, was to offer a rebate. An independent body would have to decide on a formula to calculate the rebate once detailed information about the loan is available.
However, he said offering rebates would make governing difficult, since it would mean the government would have to pay compensation each time it makes policy changes.
Another prevailing idea, he said, is to offer incentives for those who have already paid their dues to further their studies.
‘Tax structures outdated’
Answering a question on the nation’s income tax structure, Rafizi said the present rates were based on the pay scales of about 40 years ago and needs to be reformed to reflect today’s conditions.
He pointed out that today, even a senior executive in a multinational company can earn about RM10,000 per month, and a manager even higher.
“If you are earning RM10,000 per month, you are already paying the highest tax bracket (26 percent) in this country. What does it mean?
“You, a ‘ma chye’ (Cantonese for low level worker), a mere executive, have to pay the same tax rate as the (tycoon) Ananda Krishnan who has RM18 billion.
“Nowhere in the world do you have this (situation), only in Malaysia,” he said.
Therefore, he said the highest tax band needs to be pushed up to RM450,000 from the current RM100,000 in annual income.
As for corporate taxes, he said it is presently geared towards the 1970’s policy of enticing large foreign investments with incentives and subsidies, but focus should now be given to small and medium-sized enterprises (SMEs) to grow the economy.
Furthermore, he said, the system is open to abuse as with the right tax planning, a company entering Malaysia with a pioneer status may not need to pay any tax at all by the time it leaves the country.
Making such plans for national oil company Petronas’ forays overseas used to be his job, he said.
Country not ready for GST
To a question about the Goods and Services Tax (GST), Rafizi said the idea has been put on the backburner until more Malaysians become taxable.
This is because GST is normally introduced as a ‘substitute tax’ and is accompanied by a proportionate drop in income tax.
Its main advantage is that there is no need to file tax returns, and hence leaving a smaller room for tax evasion, and reduces need for a large bureaucracy to deal with tax returns and rebates, he said.
However, in Malaysia only one million out of a 12 million workforce is taxable and would benefit from the drop in income tax in event GST is introduced, while the rest of Malaysia’s 28 million population would find themselves paying a new tax.
“So it is not that we are against the GST, it is a question fairness. It is not fair to introduce GST now because the wages are too low, and if we implement GST, it would tax those who are the poorest.
“Thus for now, we are keeping GST in view until such time our economy is reformed. Then we can start talking about GST,” he said.
He fielded questions from the floor for over an hour prior to the Anwar’s arrival, many of which dealt with PTPTN.
Abolishing the fund is a key Pakatan Rakyat election promise, and is part of the coalition’s pledge to provide free tertiary education at public institutions.When one member of the audience - who claimed he had refinanced his PTPTN loan with a commercial loan - asked what Pakatan Rakyat would do with those who have settled their debts, Rafizi said there is a need to show a ‘token appreciation’ for such people.
He said there were a number of ideas on what form this ‘token appreciation’ would take, but no decision has been made because there is not enough information publically available about the PTPTN loan to decide.
One popular idea, he said, was to offer a rebate. An independent body would have to decide on a formula to calculate the rebate once detailed information about the loan is available.
However, he said offering rebates would make governing difficult, since it would mean the government would have to pay compensation each time it makes policy changes.
Another prevailing idea, he said, is to offer incentives for those who have already paid their dues to further their studies.
‘Tax structures outdated’
Answering a question on the nation’s income tax structure, Rafizi said the present rates were based on the pay scales of about 40 years ago and needs to be reformed to reflect today’s conditions.
He pointed out that today, even a senior executive in a multinational company can earn about RM10,000 per month, and a manager even higher.
“If you are earning RM10,000 per month, you are already paying the highest tax bracket (26 percent) in this country. What does it mean?“You, a ‘ma chye’ (Cantonese for low level worker), a mere executive, have to pay the same tax rate as the (tycoon) Ananda Krishnan who has RM18 billion.
“Nowhere in the world do you have this (situation), only in Malaysia,” he said.
Therefore, he said the highest tax band needs to be pushed up to RM450,000 from the current RM100,000 in annual income.
As for corporate taxes, he said it is presently geared towards the 1970’s policy of enticing large foreign investments with incentives and subsidies, but focus should now be given to small and medium-sized enterprises (SMEs) to grow the economy.
Furthermore, he said, the system is open to abuse as with the right tax planning, a company entering Malaysia with a pioneer status may not need to pay any tax at all by the time it leaves the country.
Making such plans for national oil company Petronas’ forays overseas used to be his job, he said.
Country not ready for GST
To a question about the Goods and Services Tax (GST), Rafizi said the idea has been put on the backburner until more Malaysians become taxable.
This is because GST is normally introduced as a ‘substitute tax’ and is accompanied by a proportionate drop in income tax.
Its main advantage is that there is no need to file tax returns, and hence leaving a smaller room for tax evasion, and reduces need for a large bureaucracy to deal with tax returns and rebates, he said.
However, in Malaysia only one million out of a 12 million workforce is taxable and would benefit from the drop in income tax in event GST is introduced, while the rest of Malaysia’s 28 million population would find themselves paying a new tax.
“So it is not that we are against the GST, it is a question fairness. It is not fair to introduce GST now because the wages are too low, and if we implement GST, it would tax those who are the poorest.
“Thus for now, we are keeping GST in view until such time our economy is reformed. Then we can start talking about GST,” he said.
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