KUALA LUMPUR: An ageing population needs a broad-based consumption tax such a goods and service tax (GST) or valued-added tax (VAT) to help spread the burden, an economist said.
University Malaya Social Wellbeing Research Centre Visiting Expert Dr Amjad Rabi said other than subsidy reforms, taxes such as GST and VAT should be introduced to inject money into multi-tiered contributory (CSP) and non-contributory social pension (NCSP) schemes.
"What other countries did when they have ageing population or shrinking working age population is to spread the burden. Tax on consumption like GST generates a lot of money by spreading the burden on everyone, not only the workers. However, the disadvantage is it's regressive. Now, how do we make it progressive? By giving it back .. ..to give it to senior citizens, which is what we are proposing," he said during his session on pension reform at the Employees Provident Fund's International Social Wellbeing Conference 2024 today (June 5).
Amjad suggested using at least 0.75 per cent of the taxes collected from the consumption tax to fund the NCSP portion.
He said operationalising the multi-tier system based on CSP and NCSP will enable everyone to enjoy the same amount of funds, regardless of sectors, vulnerability and genders.
Amjad proposes a minimum NCSP of RM300 and a minimum CSP of RM550.
With such a system, he said the system will be able to fill in the gaps between the working population and the economically inactive population, which as at 2023, stood at 24 million and 4 million respectively.
Meanwhile, D3P Global Pension Consulting chief executive office, William Price said there was an urgent need to raise the retirement age in Malaysia to 65 as it has the lowest retirement age in the world and region currently.
The retirement age in Malaysia is 60.
Price said the compulsory retirement age of 60 is relatively low compared with Japan.
He took the example of Italy in proving his case for a an increase in retirement age.
"What you see from the case of Italy, they delayed the increase (retirement age) for a very long time and then after the financial crisis, they had to increase it very rapidly. So they went from relatively low retirement age in Europe to one of the highest and that's obviously much more difficult for people to deal with," he said.
Price suggested that Malaysia start increasing the retirement age gradually on a yearly basis, to prevent such an occurrence here.