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Giving RM 500 Tax Exemptions To Alleviate The Adverse Impact On The Poor By Removing Fuel Subsidies Is Ineffective Whe The Low-Income Groups Do Not Earn Enough Income To Qualify To Pay Tax


Press Statement
by
Lim Guan Eng

(Petaling Jaya, Tuesday): DAP disagrees with Petronas president and chief executive officer Tan Sri Mohd Hassan Maricanís who suggested that the Government find ways such as giving tax exemption of RM500 to reduce the lower-income group's dependence on fuel subsidies amounting RM14bil a year. So long as Petronas refuses to respect transparency and accountability by fully publicizing its financial reports, 25 million Malaysians would prefer that Petronas subsidises low fuel prices than use the money to save certain financial scandals and BN cronies. 

Tan Sri Mohd Merican revealed that Petronas earned RM37 billion this year. Petronas pays 38% tax for petroleum revenue, 28% income tax, royalties and import tax, amounting to RM29.92billion. But how much are Petronas accumulated profits and how is this money utilised for projects that benefit ordinary Malaysians. If the government refuses to explain how such huge profits of RM 37 billion is spent, then the people can not be blamed for suspecting that it is used to benefit the few undertaking multi-billion ringgit mega projects. This lack of public confidence is evident with the recent numerous failed public projects and scandals such as Perwaja.   

Tan Sri Mohd Merican is correct that any removal of subsidies must not adversely affect the poorís livelihood. However his suggestion of giving RM 500 tax exemptions would not benefit the lower-income groups if they do not have enough income to qualify to pay income tax. Under the present tax structure those earning RM 2,000 monthly do not need to pay any income tax. Tan Sri Mohd Merican should realize that as many as 40% of Malaysian households do not earn enough to pay any income tax. So how does the RM 500 tax exemption assist the poor when they do not even earn enough to pay income tax? 

The government should carefully consider such advice from Petronas before making hasty decisions on removing the fuel subidies. Without fuel subsidies, fuel price may rise RM 1 to RM 2.40 per litre. Giving tax exemptions which do not benefit the poor would only cause them not only to face the brunt of tax increase but also cause inflation with the rise of commodities and transportation costs.  

DAP acknowledges that subsidies are inefficient and distorts the market. DAP insists that it is the governmentís social obligation to maintain such fuel prices and help the poor. Unless the government can demonstrate that Petronas profits from higher fuel prices are used and channeled for projects benefiting the poor and ordinary Malaysians, DAP believes that 25 million Malaysians prefers fuel subsidies of RM 14 billion to RM 14 billion being used to salvage multi-billion ringgit scandals. 

(2/11/2004)


* Lim Guan Eng, DAP Secretary-General