PSM BUDGET ANALYSIS 2014

Once again the much anticipated budget presentation by the prime Minister in the parliament is over, and the majority of Malaysians are still wondering how is it going to uplift their livelihood.  Prior to the presentation,the media ran a ‘wish list’ hype throughout the week getting Malaysians from various sectors of society to share on what they would like to see in the budget. But everyone knows that their wish remains a dream and the budget is nothing else but a list of hand outs.

The BN governments through the years has convincingly presented its own version of the nations budget being nothing more than a list of  allocations of spending to different programmes and departments plus several give away announcements to the rakyat.  NajibRazakbelieves that Malaysians have no thinking capacity beyond give away’s and they will not realise the mismatch between their version of the budget and the actual economic problems plaguing the society.

How is the budget going the reduce the income disparity in the country?  Malaysia has the highest income disparity in Asia. Where are the real measures to curb house price increases? What is the government plans to reduce food imports and enhance our food sovereignity ?What measures is it going to take to regulate government spending, plug the leakages, address the excesses highlighted by the auditor general report?

PSM fails to see how the above concerns are addressed by the Budget 2014.  The government is bullish to maintain its growth at 5.5% for 2014. Mainstream economic figures such as GDP only reflect economic growth for the top 20% ,because it relies on a trickle down effect and the socio economic reality of the masses remain the same.  Furthermore most would predict that global economy will face a downturn with the crisis in the USA. When the exports to USA begin to lag how will Malaysia maintain its upward growth? Budget 2014 fails to put in place significant measures to shield our economy from this anticipated phenomena.

GST impoverishing the poor further

Eventhough experiences from other countries that have implemented GST (VAT) clearly shows a domestic price increase on general goods and services as soon as the tax regime is implemented , but the government believes otherwise . They assure the rakyat that items such as  rice, sugar, salt, flour, cooking oil, dhal, chilli, herbs, salted fish, cincalok, budu, belacan, piped water, electricity (for first 200 for domestic use), government services, public transport (bus, LRT, ferry, toll) sales and purchase of property or rental of property will be exempted from GST . But how about the raw materials and machinery that is involved in the production of these goods? Will it not indirectly increase the production cost of these items, even though the items per se will be GST free?

Lets not forget the cost of complying to GST which will affect all businesses and thus be passed on to the customer. A one off payment of RM300 to counter GST is only for those receiving BRIM assistance, how about the rest, as all consumers are affected by GST. Reducing income tax does not make an impact as those mostly affected by the GST do not pay income tax anyway!

Increase Minimum wage before GST

We complement government initiative to ensure that workers are paid minimum wage by proposing to ease the employer's burden of implementing of minimum wage scheme - RM900 in Peninsula Malaysia and RM800 in Sabah and Sarawak. The government will introduce extra tax incentives for whole of 2014, which in return should help employers to top up salaries of their employees to the minimum level. PSM is concerned on the enforcement to ensure that from 1st Jan 2014 all employers duly pay the workers minimum wage without excuse.

Even now employers are not really forking out more to pay wages since the Human Resource Ministry has given leeway to employers to include allowances (paid before) to make up the package to RM900. Thus further tax incentives to employers could just increase company’s net profit margin and not really benefit workers.

With the GST due to be implemented in 2015, PSM strongly recommends that the minimum wage level of RM 900 must be reviewed before the implementation of the tax scheme. With the increase in consumer  price index , real wages will see no real improvement with GST .

Corporate Tax cuts ? Why?

PSM questions the justification to further reduce corporate tax by 1 percentage point from 25% to 24% from year of assessment 2016. Corporations in the capitalist economy are known to do price transferring and under declaring their profits to evade taxes!  Instead of religiously offering corporate tax cuts every budget year, the government should enhance its enforcement to collect taxes from those that manipulate their turnover.

Highways and public transport, contradicting directions

Budget 2014 announced another highway project, a 316km West Coast Expressway from Banting to Taiping. There are really more highways in the pipeline. The Kinrara, Puchong to Damansara Highway is also in the planning stages. How does the government plan to improve public transport when it builts more highways increasing private vehicle usage?  If it is truly serious about public transport than it should focus its resources in connecting the city with bus routes, LRT and komuter not highways.

Making housing truly affordable

PSM feels that short term measures of increasing the Property Gain Tax to - 30% (first 3 years) , 20% (fourth year), 15% (fifth year) and  30% for all five years for all foreigners will not result in cheaper homes. It might control further price increases temporarily but still house prices are still left to market forces . Thus PSM feels that affordable housing should be taken out of the market and be regulated by the government . Only than can the majority  of Malaysians earning below RM 3000/month and the bottom earning below RM 1200/month can realise their dreams.

Housing prices are not determined by the market but by the affordability of the wage earner . As a thumb rule  one should not be paying more than a third of his monthly income to the bank for his housing loan . That would make most workers earning RM1500 to afford homes that are priced at RM 40,000 to RM 50,000.

There is no meaning in claiming an affordable home to be priced at RM 100,000. Is it really affordable for the bottom 20% ?

Increase Public Health budget

Currently Malaysia  is only spending 4.4% of GDP on the healthcare system . It should be well above 6% for a nation aspiring to be a middle income country . Those whom have closely monitored government hospitals will note how less and less medicines and services are being subsidised by the government . Even the number of  HIV  patients receiving subsidised medicines from government is decreasing . Budget 2014 fails to address this discrepancy .

BRIM 3.0 & Subsidies

BRIM is just an extension of a election campaign with no real solutions thought out the ease the financial burden of the rakyat. How far will a one off financial assistance go when cost of all items food, education, transport, housing, health are in the rise. BRIM does not ensure food prices are regulated. BRIM will not pay off their house instalments to the bank. BRIM will not reduce the price of school bus rates for their children . BRIM will not reduce the cost of medical care when you are diagnosed with a critical disease.

A responsible government introduces real solutions to solve socio economic of the rakyat, not vote buying populist schemes.

The withdrawal of subsidies,starting with sugar and fuel reveals the continuation of neoliberal policies to gradually shed the government’s responsibility and surrender to the market forces. Savings can be made in many ways not by pulling back subsidies that benefit the rakyat .

Savings can be made if  government procurement leakages are plugged. Savings can be made when concession contracts on power and highways are reviewed.

PSM concludes that the BN led 2014 Budget fails to address the core issues in the Malaysian society . A structural reconstruction is required to genuinely put forward the progressive budget. BN will never be able to propose a solution as its policies for the last 56 years were a part of the problem itself.