RECKLESS SPENDING BEGINS AGAIN UNDER MUHYIDDIN REGIME? AS OIL PRICES COLLAPSE & COVID-19 STRANGLES THE ECONOMY, MUHYIDDIN INSTEAD OF TRIMMING THE FAT GOES FOR SUPERSIZED CABINET COSTING THE COUNTRY 30% MORE IN SALARIES & PERKS

 PUTRAJAYA, 11 Mac -- Perdana Menteri Tan Sri Muhyiddin Yassin bergambar bersama jemaah menteri sebelum mesyuarat kabinet pertama kerajaan baharu di Bangunan Perdana Putra hari ini. --fotoBERNAMA (2020) HAK CIPTA TERPELIHARA PUTRAJAYA, March 11 -- Prime Minister Tan Sri Muhyiddin Yassin poses with a cabinet ministers before the first new cabinet meeting at the Perdana Putra today. --fotoBERNAMA (2020) COPYRIGHTS RESERVED

AN analysis into Prime Minister Muhyiddin Yassin’s cabinet line-up shows that his bigger pool of ministers and deputies will cost the government an additional RM7.6 million a year compared with Pakatan Harapan’s cabinet.

Muhyiddin’s new team of ministers and deputies announced on Monday comprises 15 more individuals compared with the previous one and is dubbed the second-largest cabinet in Malaysian history.

But unlike PH, Muhyiddin did not announce a 10% pay cut for members of the cabinet, which means that monthly salary and allowance expenses will increase by RM630,000, or about RM7.6 million a year.

In the previous government, the allowance difference between the deputy prime minister’s post and a minister was under RM3,000, and it is likely so in the new cabinet, with the additional amount paid out to four senior ministers who replaced the deputy prime minister.

Even if the new government announces a 10% pay cut for its cabinet members, the additional expense per month is still RM540,000, or RM6.5 million a year.

The PH cabinet had 55 ministers and deputies while Muhyiddin’s line-up has 70 members, with 31 ministers and 38 deputy ministers.

There are five additional ministers, 11 more deputies but no deputy prime minister in the Perikatan Nasional cabinet.

If Muhyiddin follows the example set by his predecessor, Dr Mahathir Mohamad, taking a 10% pay cut, he will receive RM58,604 in salary plus allowance per month, similar to former prime minister Najib Razak’s emoluments.

If Muhyiddin takes the pay cut, his salary and allowance will be similar to Dr Mahathir’s at RM56,318 monthly.

This works to RM675,816 a year if he takes the pay cut and RM703,248 a year if he does not.

For total expenses, PH spent some RM10.5 million per month on the salaries and allowances of its cabinet members. The PN cabinet is estimated to cost almost RM13 million, or RM12.5 million if the 10% pay cut materialises.

Currently, the salary of a PN minister is RM1,491 more than a PH minister but the additional cost of five full ministers will still be RM200,000 (10% cut) to RM240,000 a month.

This works out to a 19% to 23.6% increase in monthly salary expenses for ministers compared with the previous government.

The lack of a deputy prime minister in Muhyiddin’s cabinet, however, will also save RM42,566 (pay cut) to RM44,383.

On the deputies’ side, the 11 extra slots mean RM382,382 in additional monthly expenses – a 40% increase – even if Muhyiddin announces a 10% pay cut.

In total, the PH government spent more than RM2 million a month on the salaries and allowances of its cabinet members. PN is estimated to spend between RM2.63 million and RM2.71 million for the same purpose, a 25% to 30% increase.

This works out to additional expenses of RM6.5 million to RM7.5 million a year.

Najib’s Barisan Nasional administration had 68 members, with 33 ministers and 33 deputies, excluding the prime minister and deputy prime minister.

Compared with PN’s cabinet, the difference in expenses for the Najib cabinet is an estimated RM30,000 to RM150,000.

Asked if it is wise to spend so much on the cabinet, an economist said the amount is not as important as their performance.

Associated Chinese Chambers of Commerce and Industry of Malaysia research centre executive director Lee Xing Yu said it’s more important for the new cabinet to be effective and the priority right now should be to stimulate the economy.

The economist said the PN cabinet only had one additional ministry compared with the previous government, but the new administration must address issues of overlapping jurisdictions.

The government must pay close attention to the economy at present, especially exports, which are a major factor sustaining the economy as domestic consumers and investors’ confidence continues to slide as it has for the past two year, Lee said.

He said it will be difficult to grow exports due to the global economic slowdown, but the government must maintain the confidence of both foreign and domestic investors. – March 13, 2020.

Tanking oil price, Covid-19 pile pressure on Putrajaya

MALAYSIA is in a tough spot with government revenues falling because of the low oil prices as well as effects of the Covid-19 outbreak on the economy and will find it challenging either way if it raises taxes or opts for loans.

Putrajaya could consider turning to loans, although this would increase national debt, said tax experts.

Raising tax rates, on the other hand, would also have a negative impact on the economy, cautioned K-Konsult Taxation Sdn Bhd managing partner Koong Lin Loong.

It’s not possible to increase the tax rate for the sales and services tax (SST), which means the option to raise revenue from indirect taxes is limited, he said.

The current situation does not provide the government with many options to diversify revenue streams.

With limited fiscal space to manoeuvre, borrowing could be an option, said Koong.

“The only way would be by increasing non-tax revenue, which is to get a loan but that will increase the government’s debt,”   he said.

With oil price plunging to US$30 (RM129), the government could expect some adjustments to its revenues.

Direct tax accounts for a lion’s share of government revenues at 51%.

Oil-related revenue, such as dividends from Petronas, make up 19%, while indirect tax and non-tax accounts form 11% and 20% respectively.

Chua Tia Guan, head of tax and financial consulting at Asia Business Centre said this is not the right time to introduce new tax rates with the intention of increasing revenue.

He said if the government were to revert to the goods and services tax, it should be with the aim of fulfilling the revenue targets for the SST.

“But if they implement GST, it would indirectly increase income tax income as there is a form of self-assessment in it, which will make businesses more cautious with their account.”

“So if they want to reimplement GST, they should wait until the economy recovers to increase the tax rate.”

Putrajaya should instead look into stimulating the economy to ensure sustainability of businesses and jobs, he said.

However, Chua said under the current circumstances where oil revenue will likely be lower, the fiscal deficit is expected to widen.

The new Perikatan Nasional government which took over Putrajaya last week is to study the country’s financial standing at the economic action council meeting on Monday, before any decision to recalibrate the budget.

Budget 2020 was drawn up based on the Brent crude oil price of US$62 per barrel.

AmBank Research said in a note recently the reliance on oil revenue is leaving the Malaysian economy vulnerable to global oil market movements.

“The risk stems from the government’s estimate in Budget 2020 that the Brent oil price will be at US$62 per barrel. For every US$1 per barrel drop in the oil price, it will reduce oil revenue by RM300 million.

“Thus, pressure on the fiscal deficit/GDP, which is now at 3.4%, could rise to 3.6%-3.8% of GDP based on an RM8.1 billion loss in revenue,” it said.

If the oil price further weakens to the range of US$20-25 per barrel, Malaysia could experience a revenue of shortfall of RM RM11.1-RM12.6 billion.

THE MALAYSIAN INSIGHT