KUALA LUMPUR, Oct 29 — When Malaysia starts a new consumption tax next year, some of its most privileged and wealthiest citizens will be spared, and lower-income households will get hand-outs to help them cope.
Other groups aren’t so lucky, as Prime Minister Datuk Seri Najib Razak seeks to curb wasteful spending and budget leaks to improve the fiscal deficit and propel the economy toward developed-nation status, while trying to prevent voter unhappiness.
Here’s a look at Najib’s balancing act.
The king, sultans and official rulers of 13 states won’t have to pay any duties save for those on petroleum, according to an order from the Attorney General’s Chambers.
Federal and state government departments are also exempt from the goods and services tax on most items, the gazette showed. Charities for those with disabilities won’t have to pay the levy for artificial limbs, wheelchairs or hearing aids.
Coffins and urns containing human remains are also excluded from the tax, which will begin in April at 6 per cent.
With a target of becoming a developed economy by 2020, Najib is facing the challenge of raising living standards for Malaysians without such costs going out of control.
The government plans to spend RM4.9 billion (US$1.5 billion) in 2015 on assistance for the poor to help them cope with rising prices, and officials are considering giving food stamps instead of cash, or disbursing money in instalments.
That’s to keep the aid from being misused for purchasing luxury items such as iPhones rather than essentials, the Malaysian Insider reported October 14, citing Deputy Finance Minister Ahmad Maslan.
Last year, Najib said tax evasion is treasonous as it may interfere with national development. Now, he’s warning student loan dodgers of the dangers to their soul.
“It is a sin to die without settling one’s debts, as the soul will not rest in peace,” Najib said this month of 174,000 borrowers who took student loans and haven’t made payments since 2010.
The government will employ new measures to recover outstanding loans, and is also pursuing those who have income- tax arrears and may prevent them from leaving the country. Paying taxes is patriotic, the New Straits Times reported Najib as saying last November.
For those making more than RM10,000 a month, their burden may just get heavier as the government studies plans to abolish petroleum subsidies for high-income earners from June. Najib raised fuel prices this month and said he will introduce a new mechanism for targeted subsidies and to prevent leakage and smuggling.
Malaysia’s mean monthly household income climbed to RM5,000 in 2012 from RM3,011 in 2002, according to the Economic Planning Unit. — Bloomberg