It’s imperative that our government holds serious consultations during the 43rd Asean Summit with Thailand, Indonesia, the Philippines and Vietnam to stop the race to the bottom in corporate tax rates.
The government must reform the economic and taxation system which is currently too one-sided and lax towards foreign investors and multinational corporations (MNCs).
Thailand, Indonesia, the Philippines and Vietnam are Malaysia’s main competitors for FDI (Foreign Direct Investment).
They also face budget deficit problems like Malaysia, and need funds to implement programmes to strengthen their social safety nets.
They also need funds to switch to electricity generation using solar, hydro and wind power, and to strengthen public transport in an effort to reduce petrol consumption by private cars.
If one of these countries increases its corporate tax rate privately, there is a possibility that it will lose its FDI to other Asean countries in order to avoid paying higher taxes.
But if all these four countries and Malaysia increase their respective corporate taxes at the same rate, they will not face the problem of losing FDI to their Asean neighbours, as all these countries will be collectively imposing higher tax rates.
As a result of these higher taxes, all these countries, including Malaysia, will be able to acquire more funds, thus making it a win-win situation.
These funds can then be used to significantly improve and strengthen people’s socio-economic status.
For a while now, the socio-economic status of most Malaysians has been dire, thus resulting in high socio-economic insecurity, especially among the B40 and lower half of M40.
And thanks to the constant propaganda and fear-mongering by certain individuals and groups, this in turn has created deep racial and religious insecurities that weigh heavily on a large segment of Malaysians.
With the acquisition of financial resources from the above measure, our government will be able to spend it on truly impactful pro-people programmes that can significantly improve the socio-economic status of ordinary people.
Examples of such programmes are:
1. Increasing the minimum wageto a more appropriate as well as fair level.
2. The establishment of trust funds using government funds for the provision of basic needs and services to the B40 and lower half of the M40 groups. These include low-cost housing, education, medical treatment and services, etc.
3. Providing much more support in terms of finance, infrastructure, skills training and access to large markets to all micro and small enterprises in the country.
4. Implementing a monthly RM500 pension scheme to all retirees aged 65 years and above from the B40 and M40 categories, who are not covered by any other pension scheme.
5. Taking over of the management and maintenance of low-cost flats by local councils throughout the country.
6. Strengthening programmes for the development, maintenance and upgrading of public facilities and housing for rural residents.
It’s high time the government stops trying hard to please these MNCs and for them to be more responsible by paying their due level of taxes according to their actual wealth status.
The government’s mission to eradicate corruption to stop fund wastage is very important and good.
However, our broken and one-sided economic and taxation system is indeed a huge problem as well as a weakness that must be dealt with immediately in order for the government to acquire the much-needed funds to implement truly impactful pro-people programmes such as the above.
Such programmes will definitely help eradicate people’s insecurities, and create a more thriving and prosperous society.
(Raveen Jeyakumar is a writer who is passionate about social and environmental issues, and whose work can be found at reform-the-system.com.)