Taxes and Subsidies focused in Budget 2013

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Written by Max Koh of theedgemalaysia.com

Friday, 20 September 2012 09:21

http://www.theedgemalaysia.com/highlights/221519-budget-focus-on-taxes-subsidies-.html

Taxes and Subsides focused in Budget 2013

There was good news for most Malaysians in Budget 2013, with Datuk Seri Najib Razak unveiling various incentives and goodies. Budget 2013 highlights focus more on taxes and subsidies. Taxes is a compulsory contribution to state revenue, levied by government on workers’ income and business profits or added cost of some goods, services and transactions. Whereas subsidies is a sum of money granted by the government or a public body to assist an industry or so that the price of a commodity or service may remain low or competitive.

According to an article from the Edge on “Budget Focus on Taxes and Subsidies” by Koh, Friday 28 

September, http://www.theedgemalaysia.com/highlights/221519-budget-focus-on-taxes-subsidies-.html  ,  which regards to Budget 2013 focus on taxes and subsidies to benefit the lower and middle income groups. The article discusses the current main problems that are faced by the Malaysians together with the new ways to tackle the problems that the lower and middle class income groups are facing. This is of course being done with the act of intervention by the government using taxes and subsidies.

Firstly, the article discusses the government’s plan on reducing the personal taxation that is imposed on Malaysians and to increase the child tax relief to help reduce the burden on families. This is a good move because the current standard of living in our country Malaysia is high and people are struggling to cope up with the high prices of goods and service that is due to the level of taxes imposed. A loaf of bread that was once priced at RM 1.50 is now priced at RM 2.50. That is an increase of price over 66%. If the price of a loaf of bread has increased in such a way, what more the prices of other goods and services? Reducing personal taxation and increasing child tax relief might not take the burden off the shoulders of the people who are troubled by this, but it will definitely reduce the burden they are faced with.

Another way that the government is using to tackle this issue is through the ‘Bantuan Rakyat 1 Malaysia’ (BR1M). ‘Bantuan Rakyat 1Malaysia’ is for the citizens of Malaysia who have gross incomes of RM3000 and below. For an example, in 2012, people who fit the qualifications are entitled to a one-off RM500 cash aid. In the Budget 2013, this is still being continued as of Budget 2012. With this being done, BR1M is most definitely proved to be a popular move with those in the lower income groups. A continuous action will improve the standard of living of Malaysians.

Apart from that, another issue that was discussed in the article that is relatively just as important and the main issue facing young adults in the current generation is the ability to take up loans to buy properties. Nowadays, the prices of properties are sky high and are a heavy burden for the young adults who have plans on investing and buying properties. For an example, the price of a double story-link house in Subang Jaya is currently priced high at RM650, 000 a unit. In reality, it is not just impossible for the young adults to buy properties at these prices, but in some cases it is also impossible for some adults who have been working for a few years to buy properties too.

In the Budget 2013, the government is taking an incentive to help those who are facing this problem by increasing the eligibility for My First Home Scheme for those who are earning less than RM3000 gross income per month to RM 5000.  Besides that, our Primes Minister, Datuk Seri Najib Razak also announced that a subsidy of RM 1.9 million will be allocated to build 123, 000 affordable homes around the country. This subsidy got attention from many people who are very pleased and satisfied with the new planning by the government to tackle this problem.

The diagram explains the effect that arises from the introduction of subsidy. When the government subsidises production of the affordable houses, the supply curve moves to the right from S1, to S2. This will result in an increase of supply.

With the allocation of the RM1.9 million to build 123, 000 affordable houses, the price range of these houses will be reasonable and affordable for the lower income groups to buy. This may range from the young adults who have just started working to those who do not earn much.

Moreover, the article also discusses about the palm oil and steel industry getting benefits from the Budget 2013. The steel industry asked for protection from the government before in protecting their sector as foreigners are dumping cheap steels, disrupting their business. This in other words, is called black market. The emergence of black market happens when prices are priced too high, with low protectionisms, letting in illegal sellers and this case; it’s the foreigners dumping cheap steels. This can be solved government interventions. For an example, banning the foreigners from selling the cheap steels or imposing high taxes on them. This will drive them towards ending their illegal business. This can be monitored by the demand and supply of the steel industry.

Taxations and subsidies are both ways that the government uses to intervene in the economy of the country. These ways are used to successfully tackle the economical problems, such as what is said earlier, to reduce the burden on families regarding the prices of goods and services, to help young adults to be able to take up loans to buy properties, and to intervene the emergence of black market in the steel industry. The government are cutting down personal taxes, and giving out subsidies, such as what is mentioned earlier, RM 1.9 Mil to build affordable homes around the country. On the other hand, to solve problems regarding the emergence of black market in the industry, the government could intervene by imposing high taxes, and also through the act of banning.

In conclusion, it is proven to say that Malaysia’s Budget 2013 focus on taxations and subsidies. This, as discussed earlier is to help the lower income, and the middle income groups. With the act of imposing taxations for certain cases, and giving out subsidies to those who need them, will help to reduce the burden that families face in our country.