Everyone has their views on it - from the politicians, the experts, the businessmen to ordinary folk - who link it to the Government’s decision to partially remove subsidies in some basic items that all of us use: fuel, electricity, sugar and, now possibly, highway toll rates.
The public is also faced with the prospect of having to pay goods and services tax (GST) come April 2015.
No doubt this is going to be painful. And many are taking aim at the Government for taking these measures.
Admittedly, there were mistakes made in managing the country’s finances. Overspending also resulted in 16 straight years of fiscal deficits and led to Fitch Ratings downgrading the country’s outlook to “negative” in July.
But it’s pointless crying over spilled milk. What’s important is the Government’s determined and concerted measures to fix past mistakes and excesses.
While many are questioning the speed at which the measures are being implemented, the hard reality of it is there is not much choice.
The subsidy rationalisation being embarked on is really the right step. If we don’t do it now, it will still have to be done later. And by then, the adjustment would be a lot harsher, and more painful.
Subsidy rationalisation and GST are long-delayed reforms, which are necessary to strengthen Malaysia’s fiscal position and economic resilience.
But that does not mean the Government couldn’t care less about the impact of these fiscal reforms on the low-income and underprivileged groups.
In the pipeline are what the Government calls “offset packages” which come in the form of direct income support such as the Bantuan Rakyat 1Malaysia, or BR1M, which has now been expanded to include those earning less than RM4,000 per month. And when GST kicks in to replace the existing sales and services tax (SST), personal income and corporate taxes will be reduced. And the Government has been mindful to exclude basic necessities such as rice and flour from GST.
Subsidy rationalisation is a natural progression, not only because the Government needs to consolidate its finances, but also because the country needs to restructure the subsidy scheme and move away from the existing “blanket” approach to a “more targeted” approach.
Under a “blanket” approach, subsidies provided by the Government are benefiting even those who do not deserve them and who could well afford to pay for the goods and services that they consume daily. Adopting a “targeted” approach, on the other hand, would ensure that the subsidies provided by the Government are really going into benefiting the low-income group.
Meanwhile, GST is not a “new” tax that everyone fears, but merely a “replacement” tax as the Government abolishes the existing SST. GST is meant to broaden the country’s tax base and provide an alternative source of revenue to the Government, which has long been dependent on revenue derived from petroleum sources.
Depending on petroleum-based sources is not sustainable, as the natural resource will one day deplete.
Undoubtedly, with so many reform measures kicking in within such a short span of time, there will be tough times ahead for many Malaysians.
But in order to build a better economy for the future generation, we need to bite the bullet now. Consider it a price to pay for a better future, as they say it is for our long-term gain, that we have to endure this short-term pain.
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