MIDDLE-CLASS Malaysians, or those in the M40 group, should take advantage of the tax breaks and enterprise assistance offered in Budget 2020 after they were yet again ignored by Putrajaya, said economists.

While Putrajaya is focused on alleviating the burdens of those in the low-income bracket, or B40 group, the M40 group is overlooked even though the economic burden of people in this category is the same, they said.

Economist Soon Hoh Sing told The Malaysian Insight the government’s focus on the lower-income group is reflected throughout the world, with the exception of the United States and wealthy European countries.

“The government’s resources are limited, so naturally they help those who need it the most, there is no way to satisfy everyone and the middle class is often ignored.

“If the government adopts the policies of higher-income countries which take care of the welfare of all, this will also mean higher taxes. So, the M40 class should at least console themselves as although they did not get much from the budget, their taxes are still low,” Soon said.

“But we should not ignore the fact that out of Malaysia’s workforce of 15 million, only 2.5 million pay taxes, and they are predominantly from the M40 group.”

Soon said policies in Budget 2020, such as an increased tax break from RM1,000 to RM2,000 for sending children to kindergartens, is a good way to alleviate the burden of the middle class.

Petrol subsidy not viable

Soon also said taking over major highways to replace tolls with cheaper congestion charges, even though it goes against the Pakatan Harapan manifesto, is better than nothing.

“I believe this policy will help somewhat and it will also be an achievement to prove to the people.

“But many of these highways are in the Klang Valley. I’m concerned that those in other states, especially Sabah and Sarawak, will feel that this is unfair as there was no particular focus on them.”

Budget 2020 announced the takeover of four highways in the Klang Valley, with tolls replaced with congestion charges. Users of PLUS Bhd’s North-South Highway will also get a 18% discount on toll rates.

Soon disagreed with the policy to subsidise fuel according to income bracket, saying the subsidies are inefficient as the country’s car ownership and use of petrol is far higher than supply.

“Malaysia produces only 600,000 tonnes of oil a day, but we have more than 10 million cars in the country and the number is increasing. The government cannot keep subsidising it as the country will not remain an oil producer forever, sooner or later we will become a full importer.”

Malaysians have become too reliant on subsidies and it is difficult to get rid of the crutch, he said.

In addition to the need to upgrade the public transport system, Malaysians also need to change their mentality on cars and driving.

“In developed nations, there are no petrol subsidies, some even have extra taxation. This is to encourage people to use public transport and reduce carbon emission, but can we do that? Malaysians have got too used to driving and is our public transport also a viable alternative?”

According to the new subsidy scheme, those who qualify for the cost of living aid will automatically qualify for the petrol subsidy, which is RM30 a month for cars and RM12 for motorcycles.

For those who do not qualify for the cost of living aid, they can register for Kad95, which subsidises 30 sen per litre of RON95 petrol, with a limit of 100 litres per month.

M40 group, SME benefits

Overall, Soon said Budget 2020 was populist and aimed at pleasing voters. He said the government should have focused on long-term economic problems.

“The PH government is only in its second year, but there’s a considerable increase in expenditure. I believe this will only increase as we get closer to the next general election.

“This will increase the gap in expenditure and balance and it will only worsen. As for the future, nobody cares. For the government, the regime’s stability is more important.”

Malaysia SME Association director Koong Lin Loong said the M40 group has some assistance under Budget 2020, including small and medium enterprises.

“For example, the government’s ‘one-to-one’ aid for small and medium enterprises, and the RM25,000 aid for enterprises that want to expand abroad. The government is also encouraging SMEs to move towards digitisation, and they can apply for aid for that,” Koong said.

Putrajaya announced aid for SMEs to digitise, with the government subsidising 50% of the bill to purchase new operating systems with a maximum limit of RM5,000. 

The aid is also limited to the first 100,000 companies that apply.

Other aid for SMEs in the M40 group include increasing the company tax threshold from RM500,000 to RM600,000, incentives for hiring locals, and micro-financing for Chinese SMEs, which was raised to RM100 million and a 4% preferential loan.

“The government also did not neglect women, with RM200 million allocated to fund and encourage women to set up enterprises, encouraging increased workforce participation among women, and a RM1 million loan that all can apply for,” he said.

Job search ‘rewards’

However, the RM500 monthly aid for graduates who managed to find a job after being unemployed for a year or more, which lasts for two years, drew mixed responses from the two economists.

Soon said the aid fails to address the cause of unemployment among graduates as the matter is not about pay.

“Unemployment among graduates is not about how high or low the pay is, it’s about their work ethics, and the mismatch in qualifications.”

Soon said the problem is also with education, which is not supplying the market with graduates with matching qualifications, resulting in an imbalance of supply and demand in manpower.

Koong, however, said the policy will encourage the unemployed to look for jobs and fill up empty positions.

He said it is possible for the policy to be abused by unscrupulous parties but said this can be mitigated by setting additional conditions. – October 17, 2019.