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Returning wealth to the people

By LIM SUE GOAN
Translated by Soong Phui Jee
Sin Chew Daily

The government has reduced and removed some subsidies, including sugar and fuel subsidies for deep-sea fishing vessels in Zone C2 (over 30 nautical miles) and lorries.

The move of reducing subsidies is understandable as it is to ease the government's financial burden and maintain the deficit at 5.4%. The government has been having a fiscal deficit for 14 consecutive years and it might need a bailout from the International Monetary Fund (IMF) in the future.

However, cutting costs without increasing income will affect livelihood economy.

Increasing sugar prices by 10 sen allows the country to save RM116.6 million annually while removing fuel subsidies for deep-sea fishing vessels can save RM226.8 million. It seems to be a great amount of money but it is in fact only a drop in the bucket of this year's total expenses of RM212 billion.

Cutting expenses during economic downturn will affect business performances, such as the hotel industry which relies on government expenses.

In addition, the recent unusual climate might cause further food price hikes. Removing fuel subsidies for lorries will inevitably worsen inflation and fail to keep the inflation rate below 3%.

Chinese Premier Wen Jiabao said that like a tiger, once you release inflation, it would be hard to lock it up again. Similarly, stronger ringgit could not offset the pressure of imported inflation, particularly food prices.

In my opinion, increasing income is more effective than reducing expenses. A short-term approach to increase income is taxing the rich.

Firstly, real property gain tax should be increased. The current 5% is indeed too low and it is imposed only on property sold within five years of the date of purchase. These has encouraged real estate speculation. The government should restore the 1976 real property gain measure in which property sold within two years of purchase would be taxed 30% on the profit, property sold within three years would be taxed 20% and property sold within five years would be taxed 5%.

The total value of real property transactions last year has reached RM100 billion and real estate prices have averagely risen 17.5% over the past three years. Based on the above taxing measures, the treasury could have increased at least billions of ringgit of tax income.

Foreign countries are struggling in preventing real property speculation. For example, sellers and buyers in Hong Kong have to pay 19.25% of stamp duty for property sold within six months of the date. Meanwhile, buyers and sellers in Singapore must pay 16% of stamp duty for property sold within a year of the date of purchase. The low property tax in Malaysia is weird.

Secondly, luxury tax should be imposed. Luxury goods are not essential and buyers of these items will definitely have the ability to pay the tax.

For example, Taiwan plans to levy luxury tax starting in July. In addition to real estate, the sales of private jets, yachts, cars and other expensive items that cost more than NT$3 million, as well as golf and business club memberships cost more than NT$500,000 would be taxed by 10%.

Many countries and regions are recently studying how to return wealth to the people to solve the problem of extreme disparity between the rich and the poor. Therefore, they tax the rich to support the poor.

Malaysia must learn a lesson from the recent general election of Singapore. The economic prosperity has benefited the rich the most while the middle and lower classes are suffering. Therefore, 40% of voters voted to express their dissatisfaction over the lack of fairness.

If we do not curb real estate speculation, return wealth to the people and implement social justice, similar incident might take place in Malaysia.

MySinchew 2011.05.16

 

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