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Pakatan Rakyat Budget 2012 (Part 10 of 10)

9 2012 Allocations

9.1 Auctioning APs, enhancing collections and higher oil prices will grow revenue

Pakatan Rakyat notes that prospective economic turbulence may reduce revenues from existing sources. However, Pakatan Rakyat also recognises that the ineffectiveness of the Barisan Nasional government provides headroom for revenues to be raised without further increasing the burden on honest, tax-paying citizens. For example:

  • The full value of government concessions and permits is not always extracted. These are instead offered at low valuations or prices to favoured parties who then reap super-normal and rent-seeking profits;

  • High levels of illicit activity are tolerated. For example, it is estimated that nearly 4 out of 10 packets of cigarettes consumed in Malaysia are illicit43 – taxes have not been paid. This illicit trade has soared by 67% in the 7 years between 2003-10. Illicit trade results in direct opportunity losses to the government from revenue foregone. In addition, it also impedes private enterprise and employment opportunities as legitimate tax-paying businesses grapple against the illicit traders.

Even in the absence of specific new tax measures but with amplifications from improvements in tax administration, Pakatan Rakyat expects total government revenue to grow by 9% in 2012 to RM181 billion. Key points:

  • An additional RM1.2 billion of revenue will be raised by auctioning Open APs. These APs are currently issued at RM10,000 each by the Barisan Nasional government. The main recipients are influential cronies. It has been reported that these can subsequently be resold for RM40,000-50,000 each44. If, in auction, the issue price is RM30,000 instead of RM10,000, an additional RM1.2b of revenue45 will be earned by the government;

  • Higher oil prices (US$103, based on the IMF forecast) are expected to lead to higher profits at Petronas. The Pakatan Rakyat government will continue to take the agreed share as per the Petroleum Income Tax (PITA). However, in the matter of dividends, Pakatan Rakyat will take less than the amount in 2009 following oil at US$97.

  • Pakatan Rakyat does not intend to increase sin taxes on cigarettes and alcohol as it is ineffective in curbing unhealthy habits. Instead, public awareness and education would be a better alternative.

  • Pakatan Rakyat will reintroduce the import tax for the 200 luxury items that were exempted by the Prime Minister in the last budget.

    Pakatan Rakyat proposes a total RM220 billion expenditure billion budget for 2012. This will mean a deficit equivalent to 4.4% of GDP, which is a substantial narrowing from the estimated 6% in 2011 under the tutelage of the Barisan National government (2010: 5.6%, 2009: 7.4%).

    Table 4: Federal Government Revenue (RM million)

    2008 2009 2010 2011F 2012F growth
    Direct taxes 82,138 78,375 76,156 83,983 96,490 14.9%
    Comments : Up on higher oil prices and more intensive collection efforts
    Companies 37,741 30,199 33,248 36,210 39,686 9.6%
    Comments : Slightly slower than 10.0% pa average growth from 2009-11
    Petroleum Income Tax (PITA) 24,191 27,231 18,286 21,786 28,322 30.0%
    Comments : Based on oil at US$103 (IMF forecast). Contribution should be higher than in 2009 following US$97 oil.
    Individual 20,206 20,945 24,622 25,987 28,482 9.6%
    Comments : Slower than 12.0% pa average growth from 2009-11
    Direct tax (ex. PITA) 57,947 51,144 57,870 62,197 68,168 9.6%
    Comments : Overall slower than the 10.8% average growth from 2009-11
    Indirect taxes 30,760 28,129 30,936 31,518 33,283 5.6%
    Comments : Slightly slower than the 6.0% average growth between 2009-11
    Excise duties 10,068 10,068 11,832 12,026 12,699 5.6%
    Comments : More intensive collections will help off-set economic slowdown
    Sales and other indirect taxes 20,692 18,061 19,104 19,492 20,584 5.6%
    Comments : E.g greater efforts to reduce illicit cigarettes and alcohol
    Non-tax revenue 46,896 52,135 55,039 50,324 51,565 2.5%
    Comments :
    Licences/permits 11,101 10,686 10,239 10,012 11,314 13.0%
    Comments : Auctioning of APs at market prices expected to raise at least RM1.2 billion more
    Investment income 32,271 37,394 39,458 33,174 32,828 -1.0%
    Comments : Primarily dividends from Petronas. Pakatan Rakyat will not take all expected proceeds from higher oil prices
    Others 3,524 4,055 5,342 7,138 7,424 4.0%
    Comments : Assume modest growth
    Total Government Revenue 159,794 158,639 162,131 165,825 181,338 9.4%
    Comments : Historical average not a good guide – volatile due to oil prices

    Sources: Historical data from Economic Reports and other government publications. 2012 based on Pakatan Rakyat estimates.

    9.2 Pakatan Rakyat Expenditure Allocations
    Table 5: Pakatan Rakyat 2012 Budget Allocations (RMm)

    2007 2008 2009 2010 2011 2012 Pakatan Change
    National & International Affairs 38,359 40,245 44,797 50,252 57,616 45,947 (11,669)
    Comments: Prime Minister’s Department will taken back to the 2008 level of RM5b from RM16b in 2011.
    Economics & Finance 46,158 47,291 43,150 29,696 32,295 34,879 2,584
    Comments: Reducing wastage and corruption should lead to at least 20% more in benefits. Includes Facilitation Fund.
    Security 20,071 23,597 22,798 18,919 23,361 23,828 467
    Comments: Expenditure will be spent on improving service conditions for personnel; not over-priced procurement.
    Education, Talent & Employment 36,450 43,710 48,841 44,802 49,400 54,340 4,940
    Comments: Teachers allowance, Vocational training.
    Agriculture & Regional Development 7,260 10,355 12,499 12,910 17,025 18,728 1,703
    Comments: Measures for agriculture including farmers.
    Infrastructure, Resource Management & Environment 13,478 14,695 12,951 11,334 9,013 9,914 901
    Comments: Allocations for energy efficiency and green energy.
    Community Wellbeing 18,674 21,388 23,120 23,586 25,277 32,860 7,583
    Comments: Senior Malaysian Bonus, Homemakers, Child Care, Hard Core Poor support, public housing and public transport.
    Unexplained – – – 30,087 – – –
    Comments: BN showed a total RM221.6b allocated spend for 2010, but the individual Ministries totals added up to only RM191.5b, leaving this huge unexplained sum.
    180,450 201,281 208,156 221,586 213,987 220,496 6,509
    A deficit of 4.4% of GDP. Down from expected 6% in 2011.
    % Growth/(Contraction) 11.5% 3.4% 6.5% -3.4% 3.0%

    Note: See next table for breakdown by Ministries
    Sources: AnggaranPerbelanjaan Persekutuan and Pakatan Rakyat estimates

    Pakatan Rakyat presents its spending allocations as per its framework for Budgetary Committees as described above. The key thrusts are:

    1. Prosperity through higher skills and incomes;

      • The special teaching allowance and minimum wage will cost an additional RM4.4 billion per year, of which RM2.2 billion will go to teachers.

      • RM2.0 billion will be allocated to a special Facilitation Fund to help entrepreneurs, SMEs and small firms retool, mechanise and adjust their operations to create new jobs. This will be managed by the MITI and the Ministry of Domestic Trade, Cooperatives and Consumerism, under our Economics & Finance umbrella.

      • RM1.6 billion will be set aside to expand technical and vocational training to upgrade the skill base of the workforce. This will be managed by the Ministries of Education, Higher Education and Human Resources under our Education, Talent & Employment umbrella.

      • RM1.6 billion for the RM700 child care allowance for children aged 12 years and below in households earning less than RM1,500 per month46. This will be managed by the Ministry of Women, Family and Community Development under our Community Wellbeing umbrella.

      • RM1.7 billion additional expenditure to be placed directly under the purview of the Ministries or Rural and Regional Development, Agriculture and Agrobased Industry and Plantation Industries and Commodities under our Agricultural and Regional Development.

      • More than RM10 billion will be reallocated from the purview of the Prime Minister’s Department (National & International Affairs) back to respective ministries better placed to oversee such activities.

    2. Immediate measures to help Malaysians

      • RM1.7 billion for the Senior Malaysian Bonus for the elderly.

      • RM2.0 billion for Support for Homemakers.

      • RM200m for top-up payments for the hard-core poor.

      • The above payments will be managed by the Ministry of Women, Family and Community Development under our Community Wellbeing umbrella.

    3. Sustainability

      • RM1 billion for public housing. This will be placed under the Ministry of Housing and Local Government under our Community Wellbeing umbrella.

      • RM30 million for state and local authorities to begin producing public transport masterplans and RM20 million to create a web and mobile-based public transport information system including journey planners for major urban areas and information and route maps at bus stops. This will b

    Table 6: Federal Government Expenditure 2007-11 (RMm)

    2007A 2008A 2009A 2010E 2011F
    National & International Affairs 38,359 40,245 44,797 50,252 57,616
    Prime Minister’s Department 6,877 6,899 10,187 12,194 15,856
    Ministry of Foreign Affairs 614 656 656 579 683
    Ministry of Information, Communication, and Culture 1,187 1,135 2,244 2,509 2,588
    Ministry of Federal Territories and Urban Wellbeing 646 512 567 973 585
    Others – Mainly debt service and pensions 29,035 26,881 29,381 33,997 37,904
    Ministry of Entrepreneur and Coop Dev (Abolished 2009) – 3,322 1,529 – –
    Ministry Of Unity, Culture, Arts, Heritage (Abolished 2009) – 840 233 – –
    Economics & Finance 46,158 47,291 43,150 29,696 32,295
    Ministry of Finance 43,991 44,598 38,718 25,550 29,198
    Ministry of International Trade and Industry 911 1,016 2,912 2,819 1,206
    Ministry of Domestic Trade, Coop and Consumerism 379 664 503 428 1,047
    Ministry of Tourism 877 1,013 1,017 899 844
    Security 20,071 23,597 22,798 18,919 23,361
    Ministry of Defence 13,629 14,693 13,611 11,014 13,824
    Ministry of Home Affairs 6,442 8,904 9,187 7,905 9,537
    Education, Talent & Employment 36,450 43,710 48,841 44,802 49,400
    Ministry of Education 25,481 31,949 33,960 30,519 35,763
    Ministry of Higher Education 10,077 10,798 13,982 13,023 12,607
    Ministry of Human Resources 892 963 899 1,260 1,030
    Agriculture & Regional Development 7,260 10,355 12,499 12,910 17,025
    Ministry of Agriculture and Agro-based Industry 3,667 6,200 6,333 4,614 3,380
    Ministry of Plantation Industries and Commodities 349 785 477 1,081 1,289
    Ministry of Rural and Regional Development 3,244 3,370 5,689 7,215 12,356
    Infrastructure, Resource Mgmt& Environment 13,478 14,695 12,951 11,334 9,013
    Ministry of Works 6,644

    		6,576 4,915 3,520 4,106
    Ministry of Natural Resources and Environment 2,157 3,115 3,481 3,555 2,330
    Ministry of Energy, Green Technology and Water 2,717 2,991 2,274 2,448 1,335
    Ministry of Science, Technology and Innovation 1,960 2,013 2,281 1,811 1,242
    Community Wellbeing 18,674 21,388 23,120 23,586 25,277
    Ministry of Transport 3,522 4,296 4,082 3,094 5,072
    Ministry of Housing and Local Government 2,540 2,319 2,258 3,714 3,006
    Ministry of Health 11,243 13,036 14,713 14,763 15,223
    Ministry of Women, Family and Community Dev 718 826 1,045 1,178 1,246
    Ministry of Youth and Sports 651 911 1,022 837 730
    Total as calculated from individual Ministries 180,450 201,281 208,156 191,499 213,987
    Total given in Anggaran Perbelanjaan Persekutuan 202,641 208,155 221,586 213,987
    Note the huge unexplained gap in 2010 -30,087

    Source: Anggaraan Perbelanjaan Persekutuan

    ________
    43Tobacco: Tough environment but defensive. Maybank Investment Bank Research, 30 Sept 2011.
    44Mixed views on RM10,000 fee for open APs. The Star 28 Oct 2009.
    45Assuming 60,000 Open APs are issued. This is equivalent to 10% of motor vehicle sales as per existing policy.
    46Based on 40% of 5.6m children.

    [Pakatan Rakyat Budget 2012 released by Datuk Seri Anwar Ibrahim on behalf of PR in Kuala Lumpur on 4th October 2011. Part 10 of 10]

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7 Replies to “Pakatan Rakyat Budget 2012 (Part 10 of 10)”

  2. All I notice is since Chua Soi Lek became MCA President..the female members re getting prettier and sexier.
    PR’s Malaysian but..is a budget that cares for all Malaysians….without corruptions….so much so..it needs Mahathir to talk nonsense again.

  3. Overall, the Pakatan Rakyat budget 2012 is fair and is a great improvement over the budget that they presented for 2011.

    Key highlights in this budget are not on spending allocations, rather on structural reforms that have hindered our economic growth all these years. The structural reforms include subsidy framework, civil service, parliamentary committees, decentralization of government, legal reforms to empower people, GLCs and housing scheme. Notwithstanding these, I have some comments as follow:

    The budget is disappointing as it does not include measures to overhaul the tax system. The corporate tax system should be stream-lined and aligned to global best practice. Obama in his speech noted the challenges posed to business due to complex tax system and is committed to overhauling the system to make it business-friendly and a more attractive place for investments. Pakatan Rakyat should do the same and also look into tax rate differences with regional countries. The budget states that GST system will not be implemented until Malaysia is out of middle income trap. The statement is not clear as to the definition of middle income trap and given the vast benefits of GST system; PR should reconsider its stance and consider measures to help the poors affected by the system once implemented.

    With regards to budget marked for Sarawak and Sabah, more measures should be detailed to spur economic development and creating job opportunities in Sarawak and Sabah. For example, providing tax breaks in key development areas, incentives for hiring locals.

    For budget marked for youth development, focus should be in inter-racial interaction and communication among the youths. Besides, the budget should also include actions to address low turn-out rates for students in the rural areas.

  4. I once helped a friend’s son to buy a Japanese Car brought in by AP. The car price tag was $151,750.00. The Customs declaration price was $12,350.00 with duty at 180%; if one add up all these costs, including shipping and insurance the total cost was hardly $50K; so the margin was $100,000 K for no outlay but a piece of paper called AP! The duty was paid only when the buyer offered to purchase the car! Remember, this was a Japanese car; for a European model, twice that profit could be possible. So just average out and see how much csah had been taken out by such scheme! In reality the revenue from APs as applied currently should bring in much more than the estimates shown here!

  6. Muhyiddin said some months ago that he was thinking of bringing back the 1 sen coins to combat rising prices and that he will speak to the central bank about it. Just wondering what happened. These days even 5 sen coins are of no use as prices rise by 10, 20 sen at a go but usually by even more.

    Many mamak shops have raised their prices even though their association said they will maintain their prices.

    If the 1Malaysia shops say they can sell at up to 70% less than the other retailers and hypermarkets, then the latter must be making exorbitant margins which may not be justified even after allowing for expenses.

    When you can get a decent meal down under at the little red dot for S$3 but have to pay RM 4 – 5 here, then you know the government here is not able to control prices but to let the merchants make their bundle.

    I can get a decent meal of mutton briyani for S$3 at Serangoon Road but can you get it for RM 3 in Bolehland? Tea with milk is S$1 while it can be RM 1.70 in Bolehland where the cost of living is supposed to be lower. Oh yes they employ a lot of Indian Indians, Nepalese and Banglas too. Curry rice is S$3 at Raffles Place but mixed rice in KL is at least RM 4.00.

    Overall, food down at the heartlands in Singapore are very much cheaper than the developing country called 1Malaysia.

    It is time Najib and Co do something about rising costs. Setting up 1Malaysia shops and the like are mere cosmetic work and patch-up jobs and opportunities for some to make more money.

    PR, when it takes our the Putra place, should address the issue of rising costs and profiteering, and not do plaster jobs.

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