Budget 2015 tax cut favours the rich, Anwar says

Opposition Leader Datuk Seri Anwar Ibrahim said Budget 2015’s reduction of income tax would benefit the rich more than middle-income earners. — Picture by Yusof Mat Isa
Opposition Leader Datuk Seri Anwar Ibrahim said Budget 2015’s reduction of income tax would benefit the rich more than middle-income earners. — Picture by Yusof Mat Isa

KUALA LUMPUR, Oct 13 — The reduction of income tax rates at last week’s unveiling of Budget 2015 would bring more benefit to Malaysia’s rich than its middle-income earners, Opposition Leader Datuk Seri Anwar Ibrahim said today.

The Permatang Pauh MP said although he welcomed the announcement, the middle-income group would only see minimal savings as a result of the one to three percentage points cut in individual taxes, as opposed to the country’s higher income earners.

“The move by the prime minister to reduce income tax is welcomed.

“But this move to reduce the maximum income tax bracket of 26 per cent to 24 per cent, 24.5 per cent and 25 per cent while increasing the amount to RM400,000 from RM100,000 is seen as unable to bridge the income disparity that is widening,” Anwar said while debating the Budget 2015 Bill in the Dewan Rakyat here.

As an example, the former finance minister said the reduction of three percentage points for a household that ropes in a monthly RM4,000 or RM48,000 yearly would only result to an annual saving of RM100.

On the other hand, a chief executive who earns RM136 million a year could save up to RM3 million from the tax break, he added.

“This is clear proof that the Barisan Nasional (BN) government is a government that is rich-friendly and negligent of the majority,” the lawmaker told the House.

Anwar also pointed out that rich investors are still enjoying tax-free profits from their investments, thanks to Putrajaya’s refusal to implement a capital gains tax (CGT), a progressive tax system that he said could help boost government revenue and cut its chronic budget deficit.

The Najib administration prefers instead to milk money from the country’s lower and middle income earners by rolling out the controversial goods and services tax (GST) next year, despite concerns that the move would push inflation up, he said.

“The enthusiasm of the government to implement the regressive GST at a six per cent rate must be questioned.

“Regressive here means the burden of the GST is bigger on the lower and middle income group compared to the higher income group,” he said.

He said if the CGT was implemented, fewer people would be taxed but revenue could still amount up to an annual RM3 billion.

“So why is the government afraid of imposing the CGT? Why protect the rich?” Anwar said.

Najib has defended his government’s move to introduce the GST by April next year, saying the new tax system would generate more revenue for the country and in turn, could bolster public spending.

He also insisted that the lower and middle income group would not feel the pinch of the new tax system as many basic goods would be exempted, while goods taxed would only see an increase in prices of not more than 5.8 per cent.

Critics have disputed the figures, while some have pointed out that the median rise of household income — which stood at 4 per cent — are not commensurate with the rise in consumer price index, which is expected to shoot up to 5 per cent when the GST is in place.