Taknak 1 Care - justification for more money asked (dwi bahasa)

In a proper commercial organization, whenever a business manager ask for more money for his or her budget, the big boss or the finance director would ask if the applicant controlled his/her expenditure properly and in accordance with the original budget allocations.

Dalam mana-mana syarikat perniagaan yang dikendalikan secara waras, tatkala seseorang pengurus itu memohon peruntukan tambahan, bos besar atau pengarah kewangan akan tanya sama ada beliau telah mengawal perbelanjaannya dengan baik serta menurut peruntukan asal.

When the >50 years old very experience people first  administration say they need more money, just after the 2012 budget exercise, we as tax payers have to examine their justification. Let’s look the how our money is budgeted and spent.

Apabila pentadbiran berpengalaman lebih daripada 50 tahun dan mementingkan rakyat menyatakan bahawa mereka memerlukan peruntukan lagi daripada rakyat tak lama selepas belanjawan 2012, kita sebagai pembayar cukai perlu meneliti permintaan serta penjelasan mereka. Jom, sama-sama kita menilai peruntukan dan pembelanjaan duit cukai kita.

People Housing Programme: simple math don't look right

As an EPF contributor and tax payer, I am most perplexed and worried by this latest pre- general election allocation of our statutory  life savings.

The most powerful prime and finance minister in the world

Democracy is about separation of power and basic internal control principal dictates that segregation of duties as a corner stone of effective check and balance. Having the prime minister doubling up as the finance minister is already a deliberate and gross impropriety design of Malaysia’s executive branch.

However, a not very known amendment to the Income Tax Act 1967 has magnified the abovementioned weakness by unquantifiable folds.

Back in 2005, after the nation gave Pak Lah an overwhelming mandate to run the country (with already well documented results), the then prime minister cum finance minister gave himself a most overwhelming and stunning instrument of power (or potential avenue of abuse).

Section 127(3A) of the Income Act, 1967, has been amended as follows:

Recent tax amendment or harrassment?

In my pre-uni studies, my economics teacher taught me that tax is a way for government to take money from the rich to aid the poor, and help to make our lives better by providing things like street lights, education and health care at affordable cost since these are good for public and not for private profits.

However, after the routinely infuriating and forgetten-after-a -while Auditor General reports, and skyrocking national debts, I wonder if the recent tax amendments is really good for the public, or "maximise tax base" (in layman's word gasak as much as possible) to cover the endless wastage, leakage and every-can-see-except-MACC corrupt practices.

Budget 2012 has introduced some eyebrow raising proposals. Although we have the customary high praise to heavens from the usual BN suspects, even some MCA fellows expressed their reservation over some proposals, most probably they have received protests from business community they are closed to or belong to.

Lynas: an injustice most taxing

Malaysians are no strangers to skewed agreements. From IPP subsidies to guaranteed profits for highway concessionaires, the public has on numerous times endured the consequences of sheer governmental incompetence. Yet, the 12-year tax exemption given to Lynas may prove to be the biggest blunder ever. Lynas is projected to make about AUD 6.2 billion in pre-tax profit in 2012 and 2013 and in exchange, we allow them to contaminate our land for free.

The graph below shows the spectacular rise in rare earth price since Q3 2010. While gold’s bull run has been getting plenty of attention of late, the real star is rare earth, which has taken off to astronomical heights. For Lynas, the price of the rare earths from Mount Weld may increase 15.7 times from JP Morgan’s estimate by the time the Lynas Advanced Materials Plant (LAMP) begins production in 2012.

GST for Dummies

By merely increasing the service tax from 5% to 6% in 2011, the Government need not implement Goods and Services Tax (GST) next year. By the stroke of a pen, the additional revenue from the 1% service tax increase has almost achieve the estimated additional revenue of RM1 billion expected from the first year of implementing the GST.

What is GST?
The GST is a broad-based tax consumption tax. Broad-based means almost every person on the street is taxed when one consumes (buys) goods and services (type of goods and services taxed depending on items the Government decides to be taxed). The argument for GST is that is 'fairer' than income tax- GST is incurred only when one buys goods or services. If you don't buy, you don't get taxed. As opposed to income tax whereby if one has income derived in Malaysia on the tax band the person gets tax as he/ she earns regardless of that person's spending habits. Hence which is fairer- get taxed when you earn or get taxed when you consume goods? The answer is neither. It depends how the GST is implemented- if essential goods are part of the GST list then everyone gets taxed- high-income people, low-income people and no-income people. The next question is then who can weather the GST storm better- the high-income people or the low-income people?

By the way what is 'high income' and what is 'low-income'? These are the questions you'll want to point-blank Najib if he pulls a Badawi-petrol-price-increase-adjust-your-lifestyle act for GST.

On paper, not taking into account social structures, not taking into account the taxable workforce, not taking into account unemployment benefits or anything else, Malaysia looks alright when compared against countries across the globe in terms of tax rates. In fact Malaysia's proposed GST rate of 4% is low.

A common trend amongst countries which has GST implemented is that the GST percentage usually never stayed put- the governments increase the tax rate from time to time (haha- from year to year for certain countries to be exact). Singapore's GST was 3% when it was first implemented; it is now 7%. This October, the New Zealand Government increased its GST to 15% from 12.5%. UK's GST will be increasing from 15% to 17.5% in 2011. GST increase is a global trend. So, don't bet on a decrease in rates once the GST is implemented.

Why GST?
The answer is simple. The Malaysian Government needs more cash to finance its expenditure and petroleum revenue (tax and royalties) are dwindling.

The line graph above (Source: Bank Negara Malaysia)- blue line denotes government revenue; red line is government expenditure and the yellow dotted line is government revenue without petroleum tax and petroleum royalties.  The yellow-dotted line drops consistently below the red line after year 2003 which shows that if the tap turns off right now (no petroleum revenue)- well, we just have to find other ways of financing the cost to run this country. Reading between the lines from what the government says the easiest way to do this is to implement a broad-based consumption tax.

The pie charts below displays how revenue from petroleum tax, corporate tax, individual income tax and service tax are sliced out of the revenue pie over 4 decades (Source: Bank Negara Malaysia). It is interesting to note that corporate tax and personal income tax has grown over 16 fold and 15 fold respectively over the last forty years, contributing to 19% and 10% in 2009 to government revenue respectively. Though dwindling (what I mean is increasing at a less than proportionate rate compared against Government expenditure) petroleum tax is a prominent contributor of income at 17% (2009). The rest is service tax at 2% and stamp duties, excise duties, import/ export duties depicted in the big slice highlighted in yellow (52%- 2009). If you run across the pie charts you would have noticed how corporate tax and personal income tax  have decreased in terms of percentage contribution of the last 40 years- the two components have dropped to more than half.

How much tax can be derived from companies (where corporate taxes decrease by 1% every year) depends on how well the companies are doing. Similarly, the amount of tax collectible from personal income (without an increase in personal income tax rates) generally depends on the number of taxable persons. This number is not big however- only about 2 million people of the total local registered workforce of 12 million pay tax. The Government reckons that somehow the other 10 million people has to start contributing to the national coffers one way or another and GST is a 'good' way to start it off.

However so long the BN Government does not improve its weak enforcement in curbing or reducing corruption in Malaysia, the cost of running the country will always be high, no matter how much money is churned out from the rakyat in terms of taxes and no matter how much Petronas is contributing tax to the Government. Unless there's a big massive protest on the streets, GST will be implemented by the year after next.

It does not take rocket science to guess, that the GST will have a big impact on families earning below RM10,000 per month. The impact will be more significant for families earning below RM5,000 per month. They will find it increasingly difficult to meet ends meet, Bumiputera and non-Bumiputera alike. So much from a racist political party.

GST: Here it comes

"Only the rich shall be taxed..." Haven't we heard this phrase countless times before from any politician's rostrum. In reality, any wide-based tax of this sort (GST) hits the 'poor' harder than the 'rich'. Anyway, the classification of 'poverty' in Malaysia has been a subject of dispute and unrest due its methodology of classification. But if one really looks at the mechanism of GST, it is to tax those on the poorer income group and those who are not declaring their taxes; and also the regular tax payers. A wide-tax net means whack everyone la.

Income tax for 2010 is just being proposed for a 1% reduction man. Not enough to offset the 5-10% GST rise in goods and services.

GST Bill to be tabled by Dec 17
New Straits Times

Tax will not burden poor or middle class, says PM Najib.

THE Goods and Services Tax (GST) Bill will be tabled for first reading by the end of the current parliamentary sitting on Dec 17 to stimulate discussion on the tax among Malaysians.

Prime Minister Datuk Seri Najib Razak said the cabinet, at its meeting last week, agreed on the timing of the tabling of the bill.

The possibility of the GST being introduced was mentioned at the tabling of the 2010 Budget.

The GST will allow for the widening of the tax base and increase revenue collection in an era of a lower tax regime.

The GST will mean a more efficient collection mechanism of getting at those who slipped through the taxation net by taxing some of their spending.

Currently, Malaysia employs the sales and service taxes for some consumption.

“(If implemented) the GST would not be a burden to the poor or middle class or lead to inflation,” Najib told Malaysian reporters here on Monday.

If introduced, the GST would be less than the current sales and service taxes of between five and 10 per cent, he added.

As part of a more efficient economic management system, it would help narrow the nation’s current budget deficit, something to which the government is committed to.

Najib said international investors whom he met on Monday saw this as a sign of fiscal responsibility, especially with the planned reduction of the deficit.

The only countries in the region not employing the GST are Malaysia, Brunei and Myanmar.

Changes in Service Tax ruling

Beginning from July 1 2008 food & beverage outlets earning less than RM3 million p.a in Malaysia does not have to pay the 5% service tax to Royal Malaysian Customs. Service tax, being an indirect pass-through tax, is ultimately borned by the consumer of goods and services- the 5% tax which is charged by the F&B outlet is wholly paid up to the RMC. The current Service Tax Regulations 1975 states that outlets earning RM300,000 and above must pay service tax... with the ruling, many outlets will escape the tax band which will benefit the end customer. If one could remember the Service Tax was scheduled to be replaced by the new GST in January 1 2007 but it never happened due to various reasons. The implementation date of the GST is currently in 'to-be-advised' status.

The abolishment of outlets having a turnover below RM3 million to pay service tax will benefit the business as well as the customer.

The advantages I see with this tax abolishment are:

- customers save 5% when patronising these outlets
- small boost for small businesses if customers know which restaurant to go for savings
- for qualified businesses, the saving of administrative effort in collecting tax and paying tax

The drawbacks are of course enforcement of the new ruling- the RMC will have to be on the ground (most probably undercover) to check illegitimate charging of service tax. Customers must also be looking out- whether the restaurant in question appears to be earning above RM3 million a year. RM3 million a year translates into sales of RM250,000 per month, over RM8,000 sales a day- at over 800 bowls of noodles at RM10 per bowl. RM8,0000 sales is a lot for a small shop- so just take notice the next time you are charged service tax.

Possible tax on petrol rebate

It is interesting to see how the headlines read on the petrol rebate given out since the latest fuel price hike on June 5, 2008:

June 8, NST- Fuel price hike: 'Rebate will help ease fuel price hike pain' A person who drives a small car and travels not more than 50km a day would not be burdened by the higher petrol prices. This is because the RM625 cash back rebate would cover the higher costs incurred.

June 9, The Star- All will get cash rebate, says Shahrir KUALA LUMPUR: Motorists who renewed their road tax before April 1 and therefore fail to qualify for the cash rebate need not fret. Their next road tax renewal would qualify them for it.

June 13, The Star- Rebate in three minutes The process of getting fuel subsidy rebates will be simple and will only take three minutes, Pos Malaysia Bhd said.

July 10, The Star- IRB to decide whether RM625 rebate is taxable The Government has yet to decide whether to tax the RM625 rebate a year given to owners of vehicles with engine capacity of up to 2,500cc.

The IRB chief goes on to say that the rebate may push borderline taxpayers into the higher bracket- of course it will. It will also push non-taxpayers into the taxpayer bracket as well. Whether the tax rebate is taxable or not depends on how the IRB wants to interpret Section 4 of the Income Tax Act 1967. Section 4 has a wide scope, but if one understands it word for word, the RM625 is a clear cut non-taxable item. Just amend Section 6A (section on Tax Rebates) to include this RM625 in this Section and that's it. Additionally, the type of rebates in Section 6a for personal tax payers is pretty small- Eg. An RM400 rebate for personal computer purchase not related to business purposes; rebates for religious dues and rebates related to the RM35,000 tax band.

6.4 million is the number of registered tax payers; 1.14 million is the number who pays taxes; the employed workforce being 10.5 million (Source: 1st quarter 2008- Dept of Statistics Malaysia). I do not have tax payer demographics but taking from the median tax band of 13%, if IRB decides to define this rebate as taxable it may stand to gain about at least RM93 million. This figure could be higher, up to RM171 million depending on taxpayer band. The estimated number of vehicles legible for rebates is estimated to be slightly over 7.05 million (from MAA and JPJ records), giving rise to a possible total pay out of over RM4.4 billion in rebates.

As one can see from the above estimation, the Malaysian Government will never be able to recoup fully the possible RM4.4 billion rebates. Even if it intends to do it the back door way by making the rebate partially or fully taxable, the estimated recoup is just small percentage of the total rebate payout- the Government might as well save the public unrest and ask IRB to shut up and bite the bullet.