MANY analysts have praised Budget 2024 as being a balanced, expansionary, and compassionate spending plan. 

The much-feared removal or reduction of subsidies did not happen and only a 2% increase in SST and an additional tax on sweet beverages were presented. 

The foreshadowing of future developments is already evident in the government’s stance, which aims to be tough on the wealthy while supporting the less privileged. Although this is commendable, the government must recognise that the middle class plays a pivotal role in driving the economy.

While the B40 segment forms the bulk of our working class and is essential to keep the economic machine running, the primary buyers of higher-end products and mid-tier essentials and fast-moving consumer goods, are in fact, the M40.

These consumers are the lifeblood of our many malls, cafes, and restaurants. They are the ones revitalising SMEs, particularly in the service sector, and jumpstarting local tourism in the post-Covid era.

In terms of human capital, we’re talking about knowledge workers and technocrats. Together with the T20 category, to a large extent, they are the consumers of premium products, including locally produced items such as chocolates and artisanal goods and coffee, which provide our local businesses with a platform to test the market before expanding globally.

With the depreciation of the ringgit, these consumers also tend to consume imports, as the B40 group tends to focus more on locally produced goods. This import consumption helps balance our trade deficit, making Malaysia more attractive to countries that might otherwise be reluctant to engage in trade or investment with us.

It’s crucial to understand that the T20 range, and even the T10s, are quite broad and continually expanding. The fact that a specialist doctor and a billionaire tycoon fall within the same tax bracket may seem unfair, but it’s the reality we must grapple with.

There must be a clear distinction between relatively well-compensated Malaysian professionals who make meaningful contributions to society and tax-avoiding super-rich individuals. Usually, a consumption-based tax, instead of an income tax, is a good solution, but the level of vilification that the GST has faced has rendered it a taboo topic.

In the absence of this option, the next best approach is a targeted tax, just as the government intends to target subsidies.

A property gains tax makes more sense than a luxury goods tax because the government will get a portion of the gains when a person sells property in Malaysia. On the other hand, a luxury goods tax will likely encourage people to buy the goods overseas.

People who make significant contributions to our economy should not be made to feel like victims; otherwise, we risk them taking their skills, resources, and enthusiasm elsewhere, possibly to neighboring Singapore, which has benefited from our past policy missteps.

Improving the fiscal discipline of the rakyat should also be a central focus in future budgets. Rewarding responsible loan repayments will not only reduce the overall cost of borrowing but also instill positive financial habits, especially among young professionals.

Conversely, these professionals, including those serving in the government, should be sufficiently motivated to contribute to the development of Malaysia. It’s challenging to achieve this when they prefer picking opportunities in wealthier countries due to the perceived lack of adequate treatment here.

In our zeal to help the poor, let’s not lose sight of the bigger socio-economic picture. – October 18, 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.