DEPUTY Finance Minister II Steven Sim said earlier this week it was not the right time to implement the Goods and Services Tax.

He then went on to state his rationale – the global economic slowdown, sluggish economy, and the fact that there was still room for other measures to be taken, citing the higher tax collection this year compared with the last, roughly 20% above estimated targets. 

He is right. In the heels of weaning the higher income groups out of subsidies, rising cost of goods, the relatively still-high levels of poverty and joblessness, all affirm this position. 

Our economic indicators, like many that depend on average statistics, do not tell the full economic story.

As the oft-cited example goes, a billionaire walks into a bar, and everyone is an average millionaire. 

Similarly, our T20 classification starts from RM10,971, and there is no ceiling for it. Your tax bracket is the same as Tony Fernandes when you’re likely someone losing money from lack of refunds on your AirAsia flight rather than an airline mogul.

Conversely, you are also not eligible for all aid and assistance, and if Prime Minister Anwar Ibrahim executes what he said he was planning to do, subsidies, same as a cash-rich tycoon. 

Not only is the classification rigid, but it also does not reflect the fluidity of our ringgit and rapidly changing economic data.

Revised only a few years once, it does not really reflect the condition on the ground – RM 10,971 today is already worth much less than it was in 2017 when these brackets were last revised.

Rice, for example, has risen more than five times and about 30% since then, and our currency has since dipped about 40% against the US dollar, making imported apparel, medicine, and items traded in the greenback cost much more. 

While we do need a more universal form of taxation to enlarge our severely undersized taxable citizen base, to press on the T20 group, many of whom are professionals and middle to senior management of corporations, with skills transferability and occupational mobility, and ready demand in neighbouring countries, could potentially worsen the already terrible brain drain we are suffering from. 

The tax brackets could be revised to reflect realities of the day, and more taxable events could be created upon execution of windfall or largely profitable activities, like sales of houses and assets, shareholder bonuses, sales of collectibles and even online sales activities. 

This makes more sense as you will be taxing out of profit rather than collecting from a shrinking money pool, straining a category of people often misunderstood as rich, but are themselves only slightly better than the struggling middle income groups. 

The T20 group is also arguably the most valuable consumer group, and bolstering their economic spending ability will help Malaysia drive its mainstream economy as spending is a major growth engine for the economy. Instead of cannibalising their reducing market share. 

A large proportion of subsidies are indirect – fuel for fishing trawlers, fertiliser for farmers and tax relief for various businesses.

As these have been reportedly abused in the past, it makes sense to plug these leakages before gunning for the T20. 

The classification system itself should be relooked and adjusted to current realities if we were to be honest with ourselves.

The bottom 10 bracket for Singapore is set at SG$2,314 (RM7,961.42) or squarely in the upper half of Malaysia’s M40.  

We can no longer afford to squander our national coffers away, but in formulating sustainable and equitable solutions, we should not jump the gun and look for scapegoats that would eventually cost us in other areas, to pursue what seems like popular moves without taking into account the larger economic picture. – September 20, 2023.

* 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.