Did the budget meet rakyat’s aspirations?

Budget 2014 confirms the arrival of GST, but will there be backlash in the coming 14th GE? Najib has taken a grave gamble amidst his over-confidence

PETALING JAYA: Prime Minister Najib Tun Razak in tabling the budget today took a dig at the opposition in reminding them that he has been prudent and careful in dispensing his duties as the Finance Minister of the nation.

With God’s grace, they also won the election despite various allegations of fraud and accusations of flying in Bangladeshis to vote for Barisan Nasional.

On those lines, he furthered his motion in parliament on the various aspects of the 2014 Budget, though there were voices from the opposition chiding him for the innuendos thrown at them.

Let us dwell and dissect the salient points underscored and highlighted in bold during the tabling. With the usual areas or segments covered like education, tourism, transport, health, training, human capital development, and administration expenses; points of interest that caught the nation revolved around subsidies and taxes.

GST

It is now confirmed that the much hyped Goods and Services Tax (GST) will be implemented starting on April Fools’ Day in 2015 with a 6% rate while the Sales and Service Tax (SST) will be removed.

In tandem, Najib assured the nation that prices of goods will indeed be cheaper as compared to now. He also said that 160 nations have implemented GST and that it was inaccurate to claim that GST is regressive and bad for the Malaysia.

Our GST will be the lowest among Asean countries which have rates from 7% to 10% across the board.

In contrast to SST, where there is an element of double taxation, GST only imposes a one- time tax thus the reduced prices of goods and services.

Nevertheless, a considerable number of essentials are exempted from GST, namely, food items like sugar, rice, flour, lentils, salt, herbs, and even salted fish.

There will also be no GST on piped water and first 200 units of electricity per month for domestic users. GST will also be exempted for government related services like issuing of passports, licenses, health sector and education services.

Above that, during the transition period, one-off cash assistance of RM300 will be given to households that are receiving the BRIM.

Though the implementation of the GST is a good 17 months away, for sure the opposition and a segment of crowd that has been actively protesting against this tax will continue to do so without any doubt.

Heated debates are for sure to erupt in the House next week. We shall witness how that will unfold.

Taxes
To damper the effect of GST, Najib went further by proposing in Budget 2014 a restructuring of the tax system.

Individual tax will be reduced by 1 to 3 percentage points for all tax payers thus by default families earning a monthly income of RM4,000 will no longer pay taxes; and chargeable income subject to maximum rate will be increased from exceeding RM100,000 to RM400,000.

The current maximum rate at 26% will also be reduced to 24%, 24.5% and 25%; which will all take place in 2015.

He also reduced corporate income tax by 1 percentage point; from 25 to 24%.

It is with the hope that by reducing taxes and broadening the tax base using GST, there will be more disposable income in all households.

Though he has promised to monitor prices by forming a special team, much will be left to be seen when reality strikes at ground level.

The public has always been on the receiving end, for the bad or good. And history is evident enough to point towards a complete failure of the government on controlling prices; in particular of services and good that are not priced controlled.

Per capita income

There was no mention on the detail mechanics of how wages will be and can be increased but Najib is confident of increasing the per capita income to RM34,126 in 2014, which is 37% higher than 2009.

Issue of wages has always been unpopular among employers, far more since the minimum wage was implemented. How successful will Najib be on this aspects will very much depend on the cooperation given by the private sector.

Not much insight was given on this aspect too.

It is surprising that despite the grouses from many unemployed graduates, the inflation rate announced by Najib remains lowest at 2-3% with an unemployment rate of 3.1%.

Can this statistics be accounted for as the gospel truth remains a mystery.

In unfounded confidence, the PM also boasts of the possibility to achieve developed nation status well before 2020.

That will definitely demand a Herculean task especially in ensuring that wages will need an increment in the circa of 10% annually from today’s baseline income.

Subsidies

Not much was covered in this area though sugar will see an increase of 34 sen effective tomorrow. His argument to remove sugar subsidy was indeed very rudimentary, i.e. nearly 10% of the population is diabetic.

Guess, with the sugar price going up, he has solved a major health problem plaguing the nation. How superbly crafted! Had he not thought of the chain reaction that will follow on the prices of food?

Sugar is the spine in the food industry thus at retail or consumer level, we all are bracing for significant hike in prices. GST may reduce the added tax but the reduction may well be nullified by increased sugar prices.

Najib forgot his home sciences lesson from Rosmah; that is for sure.

But intriguingly he did not mention if sugar subsidies to manufacturers will also be removed. Silence on this aspect means no?

In summary

As anticipated, Budget 2014 did not really make much impact except for the little tweaking and fine tuning done, which can be accepted as gross to a certain degree.

The BRIM aid will be increased to RM650 but will the extra RM150 make much impact to the families receiving? A decent meal out with five family members at a seafood restaurant will cost you more.

Najib has already secured his position on firm grounds. First he won the GE. Second he retained his Umno presidency. Thereafter, he got all his firm and loyal warlords back into the camp.

Above that, he is the de facto president of MIC and MCA, while Gerakan is in zombie-land.

Budget debates will not mean much too as witnessed in the past sittings. His men will hammer through all the proposals and sentiments of the ordinary will be fit to be anchored on the archive shelves.

Pillaring on his so-called five thrusts of the budget, in my frank opinion Najib recycled the last version by altering the figures only.

Budget 2014 was nothing short of being mundane and definitely not proactive in any manner.