The budget 2016 presented by Najib is not an inclusive budget which benefit all Malaysians but Najib’s personal budget where preference and incentives are given to UMNO and Barisan Nasional traditional supporters to save UMNO Barisan Nasional from defeat in the next general election.
The bulk of the announcement in budget 2016 were focused on allocations and tax breaks to Bumiputera, rural areas, public servants and East Malaysia which have largely been UMNO and Barisan Nasional’s traditional supporters.
There is no effort made by Najib in budget 2016 to address the free falling Ringgit, the rising cost of living, high property prices which has become unaffordable to middle class and to stop the wastage and leakages in the budget.
It is clear that Putrajaya’s tap is running dry with Najib slashing the budget from RM273.9 Billion last year to RM267.2 Billion in 2016, a decrease of RM6.7 Billion. Development expenditure in budget 2016 constitutes RM52 Billion which is only 19.46%, less than one fifth of the total budget.
The high operating expenditure is due to the bloated public service and the interest paid for the national debt. These two problems was inherited from the previous administration and made worse under’s Najib watch. The bloated civil service and high national debt problem if not addressed will pose a systemic risk to Malaysian economy causing a cascading failure should an economic crisis hit Malaysia.
Najib told the biggest lie during the presentation of budget 2016 when he said that the opposition who were once against the GST are now supporting GST. Pakatan Harapan has made it crystal clear in the alternative budget that due to the amount of money and resources invested in the GST system, it is unwise to abolish the system in total. Therefore Pakatan Harapan proposed to zero rate all items which basically means Malaysians need not pay a single cent for GST and at the same time retaining the GST system as a mere accounting recording tool to track the buying and selling of goods and services.
The middle class squeeze where the increases in wages failed to keep up with inflation for middle class workers is already happening in Malaysia and getting worse. The only incentive given to the middle class are in the form of tax relief. Tax relief, however high the amount will not be able to translated to a significant amount of tax savings to the middle class.
Let’s take the example of the RM1,500 tax relief per parent listed as independent. Assuming a Malaysian earning an income of RM4,000 per month with an annual chargeable income of RM48,000 which fall in the income tax bracket of 10%. Assuming he receive RM3,000 tax relief from both parents listed as dependent, the RM3,000 tax relief will translate into a mere RM300 tax saving or RM25 per month which is almost negligible in today’s high cost of living! In order to lessen the burden of the middle class, tax incentives should be given in the form of tax rebates where the whole amount will be offset against the income tax payable.
Najib’s move to zero rate an additional 4,415 types of medicine increasing the zero rated medicine list to 8,630 types including cancer medicine was a call made by the opposition even before GST was implemented. This move although welcomed is still insufficient to address the high cost of medication and healthcare services since health services is listed as an exempt supply under the GST. This means that healthcare providers will not be able to claim their int tax and the GST cost will be embedded in the healthcare bill. In order to free sick patients from paying GST, all healthcare sevices should be zero rated instead of given GST exemption.
The budget 2016 as a whole is once again use by Putrajaya to continue its grip on its traditional supporters. It is clear that the current administration under Najib has no political will to carry out budget reforms to address the main issues plaguing Malaysian economy including the middle class squeeze, the high national debt and how to tackle the wastages and leakages in the budget. Until a new government is put in place, Malaysians will continue to pay the price of an ineffective, unproductive and wasteful spending government.