2012 budget: Not transformative but a desperate vote buying bid with tax payers’ money

A transformative buget?

Najib administration’s 2012 budgeted expenditure totaled RM230.8 billion with operating and development components at RM181.6billion (78%) and RM49.2 billion (22%) respectively.

It is bandied as a budget for next phase of development and transformative in nature but I can’t see how transformative this budget can be when the bulk of allocation is not meant for development but just keeping the existing machinery moving. A damning indicator is that salaries and allowances for our bloated civil servants are budgeted at RM52billion, much greater than development expenditure and more than double the total amount of personnel income tax collected at RM21billion.


Instead I see plenty of handouts for vote buying but no clear indication of how this budget is going to be financed. Revenue for 2012 is budgeted to increase up to RM186.9 billion, up tremendously from RM159.6 billion in 2010, with steep increases from petroleum income and company taxes.

The BN administration has taken heart from the increases reflected in its latest forecast for 2011 but there is no consideration about being prudent with the windfall and starting to trim excesses. Let’s hope BN's revenue forecast for 2012 is not erring on the optimistic side in view of the difficult economic climate predicted for 2012.


But you can't do any good to your revenue collection by granting Lynas, who is setting up a grim reaper kind of factory and enjoying super normal profit, a 12 year tax holiday (which is 2 years beyond the stipulated period in our Income Tax Act, 1967)

There is more than 1 budget, you know

Total expenditure in Pakatan Rakyat’s alternate budget for 2012 is RM220.5 billion which is lower than BN’s latest forecast for 2011 RM230.8 billion and yet BN MPs are already calling it plucking figures out of thin air/irresponsbible etc.


http://www.themalaysianinsider.com/malaysia/article/pakatan-budget-cant-rein-in-spending-says-bn/

How can a bigger spender with proven record of weak financial control criticise a new administration which have proven financial management record and praised by the Auditor General?

 http://dinmerican.wordpress.com/2009/10/21/penang-pakatan-government-praised-by-auditor-general-for-prudent-financial-management/


The state of national debt is worrying. The decline in foreign debt is overshadowed by steep increase in Hutang Dalam Negeri Persekutuan (financed chiefly by KWSP and the various ASN bonds) as well as foreign bonds hidden from public scrutiny sitting inside Khazanah and various other GLCs

Hand outs are not real tools to combat raising cost of living but mere gimmicks

 Some of the goodies BN presented are base on Pakatan Rakyat’s ideas too, a benefit accruing to the rakyat as a result of Pakatan Rakyat emerging as a viable alternative administration:

1)  book vouchers of RM200 to students (Pakatan Rakyat’s 2010 alternate budget suggested vouchers of RM100 to students belonging to poor, rural households)

2)  RM500 handout to family with monthly income below RM3,000 on condition that the head of family register with the IRB. Penang state government top up income of hardcore poor family to ensure their household monthly income reaches RM500 and this initiative is financed by surplus state budget while in BN’s case, in addition to being financed by perpetual deficit budgets, smells like another 6P initiative to track down previously unknown potential tax payers instead of illegal immigrants.

All these BN handouts are financed by tax payers who also have to pay for the borrowings and interest expense incurred by BN administration who failed year in year out to impose financial discipline and prudence. The higher the handouts, the higher price tax payers have to bear.

Handouts are one time relief but to address the issue of raising cost of living, preventing leakages via corruption, actual structural reforms and supply chain redesign is the key.

3) Tax exemption for donation to places of worship and government schools sounds nice but how easy it is for people to have places of worship to be approved by BN administration in the first place?

http://www.malaysianmirror.com/homedetail/6-nation/49385-orang-asli-church-in-kelantan-faces-demolition-order

Orang Asli church in Kelantan faces demolition order    

Besides, shouldn’t education be a public goods financed by our tax money?  The fact that vernacular and private schools have to survive on public donation and occasional windfall whenever there is a by-election, while public funds are wasted on cronies enriched by toll concessionaires directly negotiated mega projects, IPPs, as well as collapsing stadiums, MRR II recurring repair cost, cost overrun of Istana Negara by 100%  etc, makes damning interpretation. 

4) 13% EPF contribution for wages up to RM5,000, instead of 12%

Payroll staff would have more workload to split EPF contribution rates between 12% and 13%. The additional 1% for employees earning up to RM5,000 translate into additional RM600 per annum/RM50 per month, frozen in EPF accounts until retirement. How does this address the immediate, day to day cost of living issue?

5) Raising RPGT from 5% to 10%

Property speculation is one of the key elements of driving up cost of living. Raising RPGT from 5% to 10% for won’t bother speculators too much as it is levied on profits earned.

When RPGT was introduced in 1976, the tax rate was 20%  within 2 years from acquisition of property, reducing 5% per year until 5% or 0% (depending whether the seller is a company or a person) after a holding period of 5ytears.

The current revised regime of 10% tax for holding period of 2 years and 5% thereafter is hardly impressive and would not deter speculators, who would just push up the selling price then. Maybe the BN administration is going easy on RPGT in view of its hostile on going take over of SP Setia. 

More effective and direct methods like limiting the number of bank loans, reviewing the deposit required for subsequent housing loans etc should be explored.

If the BN administration really want to assist the population, take at look at the big gap between banks’ fixed deposit rate and their lending rates, in view of the super profits recorded year after year by these banks.

The BN administration also appear to favour civil servants by granting them superb 7% to 13% increment while not having a minimum wage provision in the budget. Civil servants may argue their pay scale is lower but I would say their productivity needs to be examined, performance must be appraised (performing staff should be rewarded but little napoleons like Siti Inshah should take pay cut or job loss instead) and they do not bear the risk of losing jobs as well as having pension hence no need to save for old age.

Proper structural reforms is the key

In contrast, Pakatan Rakyat’s alternate budget has more reformative initiatives and attack the currect entrenched structures.

Raising minimum wage level present an immediate address compared to the locked away 1% more for EPF. The Pakatan budget stipulated a minimum level of RM1,100 while the Selangor state government has set its minimum wage lelel at RM1,500.  In addition, the proposed Unfair Public Contract Commission and breaking up monopolies held by cronies will go a long way into breaking up the crony controlled economy of Malaysia.

Pakatan Rakyat’s alternate budget 2012 emphasize on making it easier for private sector to initiate and operate economic activities hence facilitate job creation while BNs budget stated that 85 more Kedai 1Rakyat Malaysia to be opened, selling products at 40% cheaper.

Not only this is killing off other shops around its area, I wonder what special concession is made available to Mydin Group; what kind of compensation or subsidies it is getting behind closed doors to enable it to operate at an unfair advantage? Najib administration has created a threat to small businesses with this sprinkling of dodgy shops in return for some cheap publicity.

Lack of financial control

One glaring omission is there is no cost cutting initiatives in the 2012 BN budget. Note the annual numbing or infuriating disclosure of the auditor general reports are missing this year? (the last I heard from the AG is his praise for Pakatan states financial administration, then silence...hmmm....) You know, for instance, buying a screw driver or a laptop many times above market price?

Pakatan stipulated open tender as a means of cost savings but the closest thing BN has is “all new government projects worth RM50million and above will undergo value management appraisal to ensure benefit to rakyat”.

Firstly, only a few bureaucrats would know how objective and how subjective the appraisal is. Secondly, projects below RM50mil escape scrutiny and what is there to stop creative financial management to break up a RM100mil project into 3 RM33mil projects? Isn’t it better to have open tender to get the best deal for all expenditure items?

The tradition of lax financial control, or the culture of anti-financial control of BN administration is thriving and thriving well, it seems.

 Year after year, every deficit BN budget is followed by Supplementary Supply Bills, indicating no control of expenditure what so ever and making a mockery of all budget presentation and debate.

Cost overrun against budget exceeding 30% is normal for successuve BN administrations.

This is what happens when you do not have a separate finance minister to check on the prime minister, which Tunku Abdul Rahman allowed Tan Siew Sin to provide a sense of balance in the years gone by. MCA has, alas, lost the finance ministry post to UMNO. Even the MCA transport minister have no say over the MRT project, the mother of all cookie jar in Malaysia.

Budget 2012 is really a vote buying budget. With the huge amount of handouts, the strain on the financial position of the country would probably mean a snap election and GST to follow suit.

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