Budget’s financial initiatives will help M40 stay afloat, say economists

Cash assistance ensures that affected households have sufficient money for their daily needs.

PETALING JAYA: Financial aid for the M40 group under Budget 2022 can help address the middle-income group’s specific needs and support their post-pandemic recovery, economists say.

In addition to direct cash transfers of up to RM800 for those in the M40, the government has also introduced tax incentives for mobile devices, mental health services, child day care, electric vehicles and domestic tourism.

There are also discounts of up to 15% for National Higher Education Fund Corporation (PTPTN) loans, a waiver of the Real Property Gains Tax for some eligible owners, and the minimum EPF contribution has been maintained at the lowered 9% rate.

Acting research director at the Institute for Democracy and Economic Affairs (IDEAS) Wan Ya Shin told FMT that while the bottom 40 (B40) group was the most affected during the pandemic, the M40 group must not be forgotten.

“The challenges faced by the M40 are different from the B40. There are many in the M40 group who have fallen into poverty during this time,” she said.

She said the combination of tax incentives and direct cash aid has a number of benefits for recipients.

“Tax relief is a more direct incentive than cash transfers. It targets items that the government would want to direct spending towards. Recipients of cash transfers could spend the money on anything they want, including items that are not basic necessities.

“The advantage of cash transfers is that it is direct, fast and provides freedom for the recipient to choose how to spend the money.”

She added that keeping the minimum employee contribution to EPF at 9% would also provide workers with more disposable income in the short term, even if it risked lower retirement savings later on.

Yeah Kim Leng, a professor of economics at Sunway University, also said that direct cash assistance was a positive short-term move.

“Cash assistance is desirable from a temporary perspective in terms of ensuring that affected households have sufficient cash for their daily needs, because this is about a basic level of survival.”

He said cash aid would work well with tax breaks to improve the purchasing power of the M40 group, but cautioned that those with access to the incentives should not use them just because they can.

“These (tax reliefs) are desirable in terms of giving them one-off relief, but if they do not need gadgets (for example) since they already have them, it would constitute wasteful spending if they continue to upgrade.” - FMT