KUALA LUMPUR: Malaysia should move towards targeted subsidy so that low-income earners could benefit the most, said an economist.
Alliance DSB Research chief economist Manokaran Mottain advocated that the nation move away from blanket subsidy to ensure that the subsidies were distributed fairly to the people, particularly the low-income bracket.
The government should introduce a mechanism to move away from blanket subsidy under the 2015 Budget, he said, adding that targeted subsidy based on the income levels of the people could ensure those in the low-income bracket would benefit the most, which would result in more savings for the government.
“The introduction of a targeted subsidy system will ensure the subsidy benefited the low- and middle-income groups as compared with the current system, which is being enjoyed by all. The use of a secure verification system, such as MyKad or petrol card, should be considered. Security to prevent abuse of price differences is key.”
Manokaran also said a reduction in income tax of up to three per cent would be most welcomed in view of the rising cost of living.
The introduction of the Goods and Services Tax (GST) by April next year, however, could prove to be challenging, but he expressed confidence that the government had ways to make people more receptive and understand the new taxation system.
Asian Strategic and Leadership Institute’s centre of public policy studies chairman, Tan Sri Ramon Navaratnam, said the budget must focus on better assessment for the people, especially the low- and middle-income groups.
“One big issue our nation is facing is the growing disparity income between the rich and the poor. The government should introduce a better equitable policy, where the people can continue to enjoy better equal rights and opportunities,” he told the New Straits Times yesterday.
On the GST, he said the tax would not greatly affect the low-income group because of many exemptions to be introduced by the government.
“This new tax will ensure that we are on the right track to become a high-income nation by 2020. What the government has done, so far, is good for investment, but it is not changing the structure of the economy.”
Navaratnam said a reasonable taxation would be welcomed by most people, knowing that their hard-earned money would be spent wisely by the government.
“The government has to come out with more transparent and holistic ways to combat corruption, crime, cronyism and wasteful spending, as highlighted in the Auditor-General’s Report, to enhance the confidence of the people.”
Economic analyst Dr Nazri Khan Adam Khan said the tax relief in the 2015 Budget would help middle-income earners to cushion the blow of the increasing cost of living.
The Affin Investment Bank vice-president and head of retail research said more allocations should be set aside for public investment and to improve the infrastructure.
“The government should also introduce aggressive cost-cutting measures to meet the standards of international rating agencies, focusing on developmental expenditure without straining the budget while being mindful of the country’s deficit level.”