BUDGET 2013: A Review

The Budget 2013 presented by the PM last Friday was a surprise.  I was caught off-guard with the lack of “election promises” in it.. well, if you take out the handouts and unprecedented 1.5 months bonus for civil servants.  I think Budget 2012 had more election promises (thus, the Janji Ditepati campaign).  The plea for votes at the start and near the end of the presentation is a proof however, that it was still an election budget.

I would say the Budget 2013 is fair (in a rating system, I would give it a 3.5 star rating from 5).  The Government does well to balance its fiscal responsibilities and populist measures.  However, it lacks creative solutions in handling “hot issues” such as high cost of living, high crime rates, etc.  Most of the measures are direct subsidies and incentives taken straight from conventional economic text books (PR’s Belanjawan did better with creative proposals).  As a country undergoing economic transformation, the lack of “out of the box” measures is disappointing.

Below are my thoughts on some of the measures in Budget 2013.

Children

·       Tax Incentives for operators of childcare centres and employers who provide allowance or subsidies to their employees for the maintenance of childcare centres. 

I believe this will provide some relief especially to middle and lower-income families in the city.  Lack of affordable childcare centres have caused many families to hire maid to take care of their young children.  With the rising cost of hiring a maid, the cost of taking care young children has become one of the major expenses for families in urban areas (By the way, I am surprise that childcare/maid is not part of expenses for average middle income households).

Handouts

·      Continuation and extension of BR1M.

·      Schooling Assistance of RM100 to all primary and secondary students.

Continuation of handouts will make it harder for the Government to stop them in the future.  The handouts are given at a time when Malaysia is recording 5% economic growth.  Just imagine if Malaysia records 2% of growth or lower, the rakyat will expect bigger handouts.

As for the Schooling Assistance, how many of us did really use them to purchase something ‘educational’.  Not to forget, the extra expenses by the schools in hiring security to collect those money in cash and keep them at school.  It is much better if the allocation is channelled to individual schools (based on the number of students) for the schools to spend as they deem fit (for the benefits of their students of course).

Internet-related

·     100 1Malaysia Internet Centres in selected urban poor areas

·     Smartphone rebates for youth

These measures were intended to increase the poor and youth access to the information highway.  However, both measures targeted have its limitation.  Internet centres have its limitation in capacity.  As for smartphones, they are available in the market in wide range of prices as cheap as RM500.  Most youth already has a smartphone and a rebate will only make youth upgrade their phone to a more expensive one.  I think the issue at hand is the cost of accessing the information highway and a better measure would be the creation of more free Wi-Fi hotspots in targeted areas to reduce cost of access.

Investment

·     Tax incentives on investment made by an angel investor in a venture company.

This is one of my wish list.  It would be much better if the Government tops up the investment to reduce the investors’ risk.

PTPTN

·      PTPTN discounts.

Although the Government tried to put the discounts as a measure to reduce the burden of young people, I see the discount as a way for the Government to collect the debt as soon as possible for its coffers.  There are other ways to reduce the burden of PTPTN debtors such as reducing/eliminating the administration fees.

Subsidies

·       Reduction of sugar subsidy.

I was not expecting many subsidy reductions as it is an election budget but only one subsidy reduction is very disappointing.  I was expecting at least a timetable on subsidy reduction as what suggested in PEMANDU’s subsidy rationalisation plan.  Admittedly, cutting back on subsidies is a tough choice to make but delaying it further will make it tougher in the future to restructure the government’s finance.  

Tax

·       "A review of Malaysia’s taxation system will be continued to ensure the taxation system better reflects the household’s financial position”.

Another one in my wish list although it was just a sentence in the Budget.  It hinted the implementation of GST in the next few years.

·       Reduction on individual income tax rate by 1 percentage point for individuals with annual income less than RM50,000.

I find this measure puzzling.  This measure will only provide a maximum saving of RM425 per person.  After taking into account the new tax rebates and reliefs, I guess the saving will be RM300 at most.  As a result of this measure, 170,000 taxpayers will be removed from paying tax. It further reduces the number of people in the workforce that pays tax, cutting further the government’s revenue sources.  This measure shall be introduced at the same time with GST, as a carrot for GST implementation.  Now, the government has one carrot less when the time to implement GST comes.