Let’s say at it’s divided equally among all its state citizen, with a population of about 2.5 million from the last Sarawak census done in 2010, each will reap about RM2428 for a year. Think of it like a BR1M, only this time it’s to all Sarawakians. Two questions arise, one, is this a sustainable way of wealth distribution or nation growing for that matter? And secondly, how long can RM 2428 be able to sustain a family?
So how broad is the government’s tax base today, both as individual income taxes and corporate taxes (including oil and gas tax/royalty).
As of November last year, only 2.27 million Malaysians were individual income taxpayers from a population of 14.9 million employed. Only approximately 15% of the working population pays some form of income tax.
As for corporate taxes, approximately only 170,000 companies pay taxes out of 1.2 million companies registered in Companies Commission of Malaysia. With such a narrow individual and corporate tax base, how else can the government fund its social enterprise?
For one, it relies on Petroleum Income Tax that is imposed at a rate of 38% in malaysia. But with low oil prices, can the Malaysian government rely on Petronas or other oil operators for sustainable tax revenue to cover a big chunk of their expenditure? With the abolishment of GST which was a broad based consumption tax, of which I thought was good, the government could at least wean off the petroleum boys revenue to line their coffers. But alas that will not be the case. The key word here is sustainability, because if we relate this to finite resources (think oil or gas that will have a finite lifespan), there needs to be continuous replenishments. Therefore, if the government were to distribute all monies derived from Petroleum resources, what is there other things?
Can things be done differently then you may ask? Let’s just say we start building universities, and taking a sample from Xiamen University, the entire campus would cost RM1.3bil. Using the proceeds of Sarawak as an example from the above, RM6bil could build you roughly 4-5 university campuses or even skills based training centers like polytechnics.
So let’s say we build 1 university and 1 polytechnic and to make things simple, both cost the same at RM1.3billion. If they produce a combined 1000 graduates a year and they start contributing to individual income tax, wouldn’t that be a more sustainable way to line up government coffers? Malaysians are already blessed with multilingual capabilities and coupled with skills acquired through either tertiary or vocational education, they will be able to earn better income. This is music to the taxman’s ears.
Investments into education can also broaden and enhance the skills of our workforce today. If we looked at the data of median income of Malaysian employees, there is a substantial gap between those who've completed their tertiary education compared those who didn't.
On average those who completed tertiary education (32%) earn a median of RM3,274, whereby those who only completed secondary school earn half of that at RM1,600.
Will there be debates on the efficiency on the execution of building these education centers? Sure. But we as a country really need to think of how to build a sustainable revenue generation model to the country’s future. By short term subsidies and handouts, while it may ease the pain in the short term, is not a viable long term solution for the country in the long run. While targeted subsidy like BR1M for the B40 would help alleviate their burden for the year, but honestly how far can RM2,500 take a family for a year? With the rising inflation, the purchasing power of these handouts will diminish year-on-year.
I look forward to sharing with you next on our country’s economic export and our dependence on the oil and gas sector. Most Malaysians may feel that we are very reliant on our oil and gas sector for our exports. That may not be entirely true.
*John Huo began his career with Shell Exploration & Production, building offshore oil and gas facilities. After 10 years with Shell’s upstream business, he joined data driven Investment platform company, EquitiesTracker of which he is the Chief Operating Officer currently.
**The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the position of Astro AWANI.