Despite a boost to the Welfare Department and direct cash transfers, an economist said Prime Minister Anwar Ibrahim’s Budget 2024 proposal yesterday still falls short of ensuring adequate social protections.
While the increased allocation for Rahmah cash aid (STR) is welcomed, Malaysia University of Science and Technology economics professor Geoffrey Williams pointed out that the RM10 billion sum amounts to an average of only RM92 per month for the six million people who are expected to benefit.
As for the RM2.4 billion aid to be channelled through the Welfare Department, Williams said this only amounts to RM440 per month for the 450,000 intended recipients, who come from Malaysia’s most underprivileged and vulnerable groups.
He said neither programme represents a significant improvement in social protections for the rakyat.
He also said the Budget 2024 proposal lacks details of the government’s promised progressive wage system and its long-term plans for subsidy rationalisation.
“Again, the biggest structural problems of pensions and social protection have been largely ignored,” he said yesterday.
Overall, however, Williams said Budget 2024’s fiscal framework is what he hoped for – a small increase in spending to cover inflation, and a smaller deficit from higher revenues due to better management.
Where there are extra spending commitments, they are focused on where they are needed rather than being a list of projects cascading to special interest groups.
“This shows clearer focus and better fiscal responsibility,” he said.
‘Can be bolder’
Meanwhile, Khazanah Institute deputy research director Hawati Abdul Hamid believed the budget should have been bolder in reform efforts and structural changes.
“There are several goodies for all and some good initiatives, some of which stood out: the implementation of capital gains tax, increase in sales tax, and the announcement of some subsidy rationalisation.
“I did not hear about petrol if I am not mistaken. Considering state elections are behind us, the budget can be a bit bolder in reformation and structural changes,” she said.
For Tricia Yeoh, who heads the think tank Institute for Democracy and Economic Affairs (Ideas) as its CEO, the budget proposal is encouraging because it creates new sources of revenue for the government.
However, the government’s efforts to create more fiscal space for itself must continue.
“Malaysia’s growth projection of 4-5 percent for the budget year is realistic, and so is the fiscal deficit target of 4.3 percent of GDP.
“The government’s target to achieve the fiscal deficit target by 3 percent of GDP in the next three to five years as mandated by the Public Finance and Fiscal Responsibility Act could possibly be achieved, especially because of the announcement of new sources of revenues, namely the capital gains tax, luxury goods tax, and the increase in the service tax rate from six to eight percent.
“However, in the long run, the government may wish to seriously consider restoring the Goods and Services Tax to further widen our tax base, given Malaysia’s poor tax-to-GDP ratio when compared with our regional peers,” Yeoh said in a statement.
She also pointed out that Budget 2024’s reduced allocation for electricity and diesel subsidies is minimal, and is not enough to create fiscal space for long-term development.
Disrupting investor plans
On the other hand, Bait Al-Amanah researcher T Kannu Sivakumaran said the government should be cautious with its capital gains tax proposal.
“The plan on capital gains tax is something to worry about. It can heavily disrupt investors’ expansion plans due to lower profits.
“In the end, if the government implements this, they need to provide investors with other benefits to counterbalance this,” he said.
Meanwhile, Williams urged the government to clarify the RM40 million Shop Malaysia Online scheme, which is intended to help small businesses, particularly food vendors, conduct their business from home.
He said the scheme gave the appearance of a “pre-awarded project for a preferred web or app designer”.
“There are actually many local and international sharing economy platforms that already do this without cost to the government,” the economics professor said.
He levelled similar criticism against the RM27 million Buy Made in Malaysia Goods Campaign and the Use of Goods and Services from Local R&D (MySTI) programme, that it appears to be an award to a favoured marketing and branding agent. - Mkini
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