APART from a few hiccups here and there, the newly minted prime minister seems to be doing and saying all the right things for a people-centric narrative.

Promises to maintain or reduce some taxes, early announcement of releasing aid for B40 and victims of natural disasters are welcome moves to assist the people cope with the spiralling cost of living.

Anwar Ibrahim took heed of the lessons learnt from the first Pakatan Harapan government, which is to not hold back spending till it is too late, and lessons from the previous administration – to maintain a firm grip of the government without distributing largesse too early.

The problem with announcing a pro-people narrative is, it is often read as an inverse to a business-friendly narrative.

Coupled with its closely related cousin, austerity, it forms a compounded problem of requiring more funds, with removing a major source of funds – business taxes.

Take, for example, the maintenance (and potential reduction) of electricity tariff for home consumers.

As electricity costs in Malaysia are generally passed on to the consumer via the imbalance cost pass-through mechanism, these would require either heavier subsidies from the government, a reduction in fuel quality (generally causing more pollution and reduced burn efficiency), a reduction in staff costs or increasing Tenaga Nasional Bhd’s coffers from another source.

As the second and third options run contrary to the national environmentally sustainable goals direction and keeping Malaysians employed, the government opted to increase high voltage user surcharge by 7.3 times from 3.7 to 27 sen.

On an average manufacturing campus environment, that would cost companies anywhere between RM1 million and RM10 million per year.

That is several million ringgit less in chargeable profit, not to consider the negative multiplier effect down the line and the opportunity cost of a missed positive multiplier effect on bonuses, increments and potential internal or external spending by these companies, with the money now tied onto a fixed cost, with a constant yield.

These companies will now also have to account for increased tariff and taxes based on government policy, driving their spending (and its ensuing multiplier effect) further down.

The government also hinted at increasing tax brackets for both high-performing companies and T20/M40 individuals.

The danger in doing this for both would be the effect it would have in pulling in foreign talent and investment, growing our local talent and businesses and so on.

The government also needs to rethink its tax brackets – figures denoting “high performing” 10 years ago are barely breaking the bank these days, with our foreign exchange rate and purchasing power and creditworthiness dropping on the international stage.

The T20 tax income bracket is so wide, it encompasses both business executives at middle management tier all the way up to tycoons and billionaires.

A senior manager in a multinational corporation would be classified as T20 and placed in a similar (at taxable income rate of 24.5-30%) when he or she can barely afford their two-bedroom Kuala Lumpur apartment, the same bracket as the developer of the said apartment.

Likewise, crossing out of benefits, overtaxing and subsidies based on brackets will only increase illegal and backdoor methods of obtaining exemptions and circumnavigating the regulations at the government’s costs.

Instead, perhaps the government needs to relook the system as a whole, as unpopular as the move may be, including the biggest cash sinks – government pensions and medical benefits.

There needs to be some risk sharing with sectors like insurance, before it balloons beyond salvaging.

There should also be urgent re-prioritisation of government spending, from non-productive departments to where they are sorely needed, like education and hospitals.

It is time for the government to tap its many think tanks and put Malaysia on a sustainable path, one that places emphasis on both its people and economic stakeholders, ultimately a symbiotic relationship that needs to be maintained and nurtured by a strategically wise and long-term looking government. – December 28, 2022.

* Emmanuel Joseph firmly believes that Klang is the best place on Earth, and that motivated people can do far more good than any leader with motive.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.