November 14, 2012
Malaysia needs to step up tax and subsidy reforms, says IMF Chief
http://www.themalaysianinsider.com
Malaysia needs a faster overhaul of its tax and subsidy regimes to sustain economic growth, said Christine Lagarde, Managing Director, The International Monetary Fund (IMF).
Lagarde said in an interview with The Edge that the Malaysian government not only needed to broaden its revenue base by introducing the goods and services tax (GST) but also needed to confine subsidies to the truly needy as well as eliminate tax incentives that were unproductive.
“The allocation of public resources could also be improved by the streamlining of untargeted subsidies and wasteful tax incentives and replacing them with targeted assistance to the truly needy,” she told The Edge.
Malaysia’s finances are regarded as among the weakest in Asia due to its high debt-to-revenue ratio and reliance on petroleum to finance its budget. Approximately one-third of federal government income is from oil and gas alone, and only one-third from taxes paid by companies and individuals.
A paltry 1.7 million out of 12.8 million working adults paid income tax last year and only 130,000 companies out of 700,000 paid taxes.The amount of taxes from individuals amounted to just RM14 billion last year while the total from companies came up to about RM40 billion.
Oil and gas, meanwhile, contributed about RM60 billion to government coffers. GST is expected to give the Federal Government a wider scope to collect taxes as it is based on consumption rather than income, thus spreading the tax burden more evenly.
The Najib Administration has said that the implementation of the GST will not happen until the public had been sufficiently educated on the new tax system and many observers expect GST to be introduced after the general election.
Lagarde, however, commended the Economic Transformation Programme (ETP), which aims to lift the country to high income status by 2020, but noted that such a goal would require that Malaysia rebalance its economy away from a largely export oriented economy to one that was more domestically driven.
She also said that the US needed to provide clarity on how it would avoid falling off the so-called “fiscal cliff” at the end of this year when spending cuts and tax increases are scheduled to take place.
Lagarde forecast a growth of six per cent for the Asian region next year and said that deeper integration and good management could set the path for Asian economic leadership and contribute to global growth.
Din Merican: the Malaysian DJ Blogger 
IMF might have smell that the financial earth quake is approching Malaysia.With the commoditied price like rubber,cocoa and palm oil had drop dratically,Our DFI not coming,our budget deficit widening,our expenditure on non productive sector increasing.
In US ,Obama is talking about fiscal cliff in Malaysia we are talking about financial earth quake with 9.8 ritcher.
Traders and Hypermarkets started to feel the drop in spending.Housing projects launch but no taker,cars sales drop.Crime rate increase drastically.the number of Atm mechines from stolen from bank on the increase,this is the clear sign we are heading for earth quake.
Yeah, GST is the way to go. We can do away with the burdensome sales and service tax which more often than not is archaic in scope and punitive in reach. The MinFin has already pegged down the rate at 4%, which sounds reasonable for a start. We are too dependent on exports and vulnerable to just about any regional financial crisis except that in Antarctica. Much less said about the Global environment.
I think the idiot politicians on both sides of the divide are shooting themselves in their cojones for not implementing it sooner, rather than delaying it until things look more ‘positive’ – whatever that is. Of course public education is mandatory on it’s aims and mechanism. And close monitoring is of prime importance during implementation, if this is not going to cause hyperinflation – due to greed, aka profiteering. The problem is that Jibs and his most vaunted PR machine is so full of useless propaganda – that it talks only to itself. Really dense, like a Pemandu that’s driving around in circles and not getting anywhere nor even able to change gears!
The Cave Man Principle of the typical Malaysian body politic always objects to change and these morons are not making things easier by pandering to that magical thinking. That’s why it’s always easier to parade a litany of pessimism than optimism, ‘cuz most people are denser than their bones – which makes the term ‘bonehead’ irrelevant. But then, there are so many things wrong, that structural change actually requires political-social-cultural-economic death. Only then can there be rebirth.
Truly, Jibs admin cannot do anything (good, bad or even neutral) without worrying about the political fall-out. So they sit with their thumbs stuck in their backsides, while promising heaven (and temples) on earth. Meanwhile, the Opposition flakes have this delayed ejaculatory response that says: ‘Wait until we clean the corruption, cronyism and nepotism, blah, blah, blah..’ As if they are miracle workers and so godly that a fly won’t escape their sacred ointment. But i agree, that things like the National Automotive Policy and Education Policy need to be addressed asap.
Malaysia doesn’t have the luxury of time for reform, much less transform. Whatever has to be done, has to be done Yesterday! Not too-morrow. Procrastination is Cowardice and pure Bull-shit.
I do agree with C.L that we should have got the GST started some time back,Najib got pretty scared of his voters reaction to it,he doesn’t mind that we are in deep shit thanks to our last 3 PM (Pukimak’s) siphoning whatever they can lay their hands on.If ever PR gets to Putrajaya,their first term would be to balance our debts and wouldn’t have time to do whatever they promised just like Obama,who’s now into his second term n still cleaning the shit left behind by Big Daddy n Little Bush.
Oouch!!!
Lifestyle of the President of Uruguay:
http://www.bbc.co.uk/news/magazine-20243493
He doesn’t need any subsidies.
And his wife does not need Birkin handbags
The IMF “experts” have always been blind and deaf. Persistently the same advice to the developing world, repeal subsidies and increase taxes without giving inkling on how corruption is in fact the real culprit of all social and economic woos especially in this apa pun bolih land. Well, ask the false Malay, Mamakkutir, he can give you the most perfect solution the world ever had!!!
Actually met her and knew even back then she was going to be IMF chief eventually..BUT she is French and a high level banker unfamiliar with Malaysia. By my calculation even if Anwar fufills his promise of social welfarism, the PR govt can be in surplus to the tune of in excess of RM100b within 1 term…If not for Anwar’ welfarism promise, it easily could be RM200b…
Certainly tax reform is necessary but only for the sake of creating national wealth funds as assets for the future…
Fair comments from Christine Lagarde on Malaysia’s financial situation.
Hussin, there is nothing fair about her comments. You are just parroting. This lady comments are warning. Warning to be taken seriously.
BN has run this country to the ground. Is this fair?
Sorry, vic, I say again that Christine Lagarde made fair comments on Malaysia’s financial situation. You are free to see it in a different manner as you choose.
GST is good because the governments needs to function. in our case the gov. apparatus is overbloated. the civil service is apparently a mass employment agency. add to it liberal pay and pension schemes of officials and ministers
to name a few. how to finance all this without tax increase?
do we have the Greek syndrome – taxophobia!
Mdm Lagarde knows what she is talking about but diplomacy halts her from saying directly what really ails Malaysia. she pointed to the fact that only half of the 130,000 registered companies are paying taxes (any logical reason?) and only one in six working adults is paying income tax.
anyway of changing this anomaly??
sorry I forgot: how to buy submarines, how to pay for NFC and how to finance the electioneering? how to pay all the election goodies and how to keep all the election promises without money?
money, money, money
What is this talk about GST. We have just become rich and are begiining to spend money and you want to impose GST to restrict spending. One Dato Bandar got his term reduced when he came up with the bright idea to have Congestion Cahrge. The same arguments was used . We just got enough money to buy cars and you want to restrict us from driving our cars into KL. So you see this talk about making Malaysia a High Income Nation shouild not only be talk. Action should have been taken 50 years ago. We will now have to pay the price for our Cheap Wage Policy. And we all know who is the master of that.
Widening the tax base is on thing, what one does with the collection is another. But above all, no one is talking any more about the outflow of illicit funds mentioned by the Washington-based Institute for Global Financial Integrity where hundreds of billions were siphoned-off by the financial and political elites of the country. And this was just the tip of the proverbial iceberg.
We have gotten used to all these scandals that we move on to the next expose’ and seemingly care less of what is needed to put a stop to this nonsense.
There are available experts and know-how to stop these leakages and to bring back the ill-gotten money stashed abroad but is there a political will?
Hussin, many Malaysians don’t get it. When troubles come calling they just made fair statement. I see Malaysians in denial that is what I see. So why not come out from your shell and kick butt? Yes, I am referring to you.
Why not let speculate? Are trying to do is protect your interest whatever they maybe? If you are real for Malaysia stop speaking up for the very people who runs this country down. Stop acting as Mr. Nice guy. Stop justifying with your “humble” posting. It makes me sick.
Politicians in Kroniland seem to favour cronies than the rakyat at large, they are afraid of their own cronies than the voters who vote at elections, strange but true….
So why all the talks about “wasting the taxpayers money this and that”..??
How many Malaysians really pay taxes?? Most don’t even bother to submit their income returns to the IRD, and many find ways to evade, especially those in business and yet they lamented so much about wasting taxpayers money when they don’t even pay taxes??
I am sorry vic, I have no cure for your sickness.