KUALA LUMPUR: Discussions as well as benefits and cash handouts to help Malaysians ease soaring living costs are often centred on the lower-income group or B40.
Hence, it was timely for the retabled 2023 Budget to also make tackling the rising cost of living and increasing disposable income among the middle-income group or M40 its immediate priority, economists said.
Universiti Kuala Lumpur Business School economic analyst associate professor Aimi Zulhazmi Abdul Rashid said the M40, just like others, required urgent help.
He said government assistance as well as non-governmental organisations would normally focus on the B40 and the hardcore poor, and this tended to disregard the M40.
"The biggest expenditure portion for the M40 will be the payment of housing loans and rental," Aimi said, adding that house prices stood around RM200,000 in the rural areas and RM700,000 in urban areas.
"The increase in house prices has been faster than the growth in the household income, especially for the M40. The rise in construction materials after the pandemic compounded the situation severely.
"Tax cuts for the M40, which made the biggest group of taxpayers, will help to ease their tight cashflow, especially for those earning RM5,000 to RM10,000 monthly and living in big cities," he told the New Straits Times.
He added that the increase in income rate had been lacklustre for the last decade, as indicated by studies from the World Bank that revealed household debt was highly made of housing loans and rental payments.
Should Bank Negara Malaysia's Overnight Policy Rate be raised again, the government might need to provide targeted subsidies on the interest increment.
This could be offset through the banks' corporate taxes, he said, adding that it would ensure non-cash assistance on the government budget.
Former Transparency International president and veteran economist Tan Sri Ramon Navaratnam said the 2023 Budget priority should be given to the poor, namely the B40 segment.
However, he noted that allocations for the M40 and top 20 (T20) income groups that were listed in the 2023 Budget by the previous administration could be maintained and improved.
"The points allocated for them in the previous budget can be maintained but the implementations should be improved so that there is no wastage," he said.
Navaratnam, who is also former deputy secretary-general at the Finance Ministry, said if priorities were to be given to both B40 and M40 segments, the government needed to increase revenue and reduce wastage more efficiently.
"There must be some attempt at introducing the Goods and Services Tax or a modified version of the tax to be able to fulfill the objectives of debts and deficit reduction. Expenditures should be cut to the bone and if that cannot be done, there are limitations in the operating budget.
"Overall Prime Minister Datuk Seri Anwar Ibrahim may have to reduce the amount of development expenditure particularly for projects that have not been started," he added.
Meanwhile, Centre for Market Education chief executive officer Dr Carmelo Ferlito said the government must move in the direction with more fiscal discipline, given that the previous budget contained too many cash handouts.
"I think we do not have to place too many expectations in the budget, which is an allocation resource tool, not a tool for reforms or for tackling structural issues. Most probably, this will be close to the previous one," he added.
The M40 received some goodies under the original 2023 Budget tabled on Oct 7 last year by the former government.
This included the reduction in income tax for the chargeable income band of between RM50,001 to RM100,000 by two percentage points for the year of assessment 2023, from 13 per cent to 11 per cent for the RM50,001-RM70,000 band, and from 21 per cent to 19 per cent for the RM70,001-RM100,000 band.
Former prime minister Datuk Seri Ismail Sabri Yaakob's administration also raised the tax for those in the chargeable income bracket of between RM250,001 and RM400,000 from 24.5 per cent to 25 per cent.
Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim, who succeeded Ismail following the 15th general election last Nov 19, will present a revised national budget on Friday.
