AT a pre-Budget 2025 briefing for editors last Tuesday, Prime Minister Datuk Seri Anwar Ibrahim was asked if there will be an income tax hike to help fill the nation’s coffers.
His answer was an empathetic “no”.
“Each time there is a problem we go back to the people,” the PM said.
“We burden the people to fix the problem. But the problems are not caused by the people, they are caused by the political and business elites.”
And with that he tabled a people friendly budget yesterday which has seen little criticisms from the Opposition.
There was no income tax increase, in fact there were increase in tax reliefs for education and healthcare, for instance; as well as first time home buyers.
The extended scope of Sales and Services Tax (SST) for imports is expected to rake in RM47 billion next year. This will help with the RM80 billion debt (which the Prime Minister said was brought down from RM100 billion in 2022 when he took over the helm of the administration).
The PM was insistent that any tax increase such as the reintroduction of Goods and Services Tax (GST) must not burden 85% of the population. This included the impact of cutting subsidies which cost the Government half a trillion ringgit.
When asked about mega projects. His response was that he would rather consider how many hospitals, schools and universities could be built as well as the corresponding human capital that could be produced.
With an increase in minimum wage by RM200 to RM1,700 the Prime Minister’s budget is targeted more towards pragmatism and sustainability taking into consideration the current world order – as opposed to that of some of his predecessors to make Malaysia a high-income nation, although businesses and industries may be wondering how they are going to pay for the extra wages.
Anwar has always been cynical of these “lofty” aspirations where the high income would be enjoyed by a small fraction of the people and his favourite target: the political and business elites.
As we can see, his wants a bigger pie that can be distributed to more people albeit with smaller slices as opposed to a Budget that dishes out crusts to the people while the lion’s share is enjoyed by a few.
Hence the 2% taxation of dividend earnings of RM100,000 and above is a way to compel the “elites” to pay their dues.
One can understand the concerns of financial observers. How is the Government going to pay for its people’s budget?
Granted there is RM32 billion coming from Petronas, and a targeted RON 95 subsidy rationalisation is expected to bring further savings.
Subsidies and aide of RM52.6 billion in 2025 is a reduction of RM7.5 billion from this year’s allocation.
The one critic perhaps is the lack of clarity on how the subsidy rationalisation on fuel would be implemented, with the scant mention of industries.
A “how to” guide would be helpful and while mega projects is a conduit for leakages and corruption, they also help stimulate the economy, creating jobs and encourage spending.
In this essence many business tycoons and taukeys have pointed out the more development friendly environment provided by the UMNO-lead Barisan Nasional (BN).
The Prime Minister did however, give a state-by-state breakdown on infrastructure projects such as bridges, highways and schools.
But these are not “game changers”, like the High Speed Rail (HSR), which will transform the economic and social landscape of the southern region.
But true to the Madani philosophy, it is a Budget that was intended for the majority of the masses to feel the impact directly and immediately.
This is understandably, politically pragmatic. The lower income B40s need a reason to switch their core allegiance. And this Unity Government has only two years to do it. – October 20, 2024
Terence Fernandez is Editor in Chief of Big Boom Media that publishes Scoop