Fuel subsidy — a conundrum for the rich

 

It hurts when we are made to pay more than others for the same item we purchase. In all fairness, everyone should be treated the same.

However, this is possible only in an ideal world. Reality is an altogether different matter.

Just like getting your fill at the pump. If you are rich enough to drive a Beemer or a Merc, it’s only right that you pay more for the fuel than the poor man in a beat-up Proton Saga.

At least that is what the government thinks. And many do agree.

The world is not fair, to the rich or poor.

The poor miss out on a lot of things and it may not always be their fault.

On the other spectrum, the rich have to fork out a lot more money so the government can continue to function, so that hospitals and schools continue to provide the services they are meant to.

In Malaysia, it’s only the top 20% or so who pay income tax, and those in the highest income bracket are taxed the most.

Those who have to pay may complain a little, but in the end, everyone knows that he cannot get away without paying.

Whether or not it will be the same when it comes to purchasing petrol or diesel for their luxury cars, we just have to wait and see.

The government spends a lot on subsiding the petrol we use. The price of RON95 at the pump today is in the region of RM2.05. If not for the subsidy it can go up to as high as RM3.70.

The government tops up even more for every litre of diesel we buy. At the pump it costs about RM2.15 but it can rise to as high as RM4 if the government does not chip in.

The pump prices vary of course, and so does the subsidy, depending on the prevailing oil prices.

Last year, the government spent RM50.8 billion on subsidising RON95 and diesel. RON97 is sold at the prevailing market price.

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How much will the government save if the richest people in the country, the top 20% or T20, stop getting subsidised fuel?

Deputy finance minister Ahmad Maslan told the Dewan Rakyat in February that the bottom 40% (B40) account for 24% of all the subsidy given while the middle 40% or M40 get 41% of the subsidy.

The remaining 35% of the subsidy goes to the T20, which is quite substantial. That comes up to an estimated RM18 billion.

That is a huge sum of money.

It’s an irony. The rich pay most of the taxes, a lot of which is spent by the government to ensure that we pay less for petrol and diesel. Yet, they will soon have to pay the full price.

But that’s the way it is. The next step is to ensure that the new rule is properly enforced so it is not open to abuse.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.