SALARY guidelines for government-linked companies (GLCs) are being drawn up to set an example on how private sector workers should be fairly paid, said an economic adviser to the prime minister.

The initiative is part of Pakatan Harapan’s efforts to increase the share of compensation to employees, which is an aim in the Shared Prosperity Vision 2030 economic agenda.

Economist Dr Muhammed Abdul Khalid said the remuneration guidelines are currently being drawn up by Putrajaya but he declined to say when they would be implemented.

“CEOs and top management get too much, their increments are much higher than average or low-income workers,” he said after a forum on Budget 2020 at Universiti Malaya.

“Economically, it is more optimal to reward low or average workers, as they would usually spend the money and stimulate the economy. They will go out and spend.

“Those overpaid CEOs, they don’t spend, they save, so in terms of economic multiplier, it’s better to give more to the low income rather than big bosses.

“The government can start with GLCs, to start paying better salaries to their low-income workers and manage the obscene salary of the big bosses. This is within the government’s control.

“The remuneration guideline for government-linked companies is being drawn up.”

According to SPV2030’s handbook, Putrajaya wants to increase employee compensation (CE) to gross domestic product (GDP) to 48% from 35.7% – meaning for every ringgit the economy makes, 48 sen goes to workers.

Developed countries, such as Singapore, South Korea, and Australia, have much higher CE rates than Malaysia of 39.7%, 45.7% and 47.2% respectively.

Muhammed told the forum that Malaysia’s revenue from income tax is lower than that of many developed countries and that the rich in Malaysia are either paying low effective tax rates or are under-declaring their income.

And yet every year, there is pressure from the business community to lower corporate and income taxes.

“Last year, the amount of BMWs and Mercedes we sold in the country was about 25,000 units. Yet the number of people who declared an income of RM1 million or more is about 9,800.

“Those who declare an income of more than RM2 million are only 2,000 individuals.”

The new ruling of assigning tax identification numbers for purchases above RM20,000 will also help the government widen its tax collection net to capture those evading taxes. – October 24, 2019.