Minimum wage: A need for transparency — Moses Lee

MARCH 23, 2012

MARCH 23 — The debate on a minimum wage has been hotly discussed in the media and clarity of the issue has been drastically lacking. One of the reasons for the lack of clarity is the objective and outcome of this policy do not match the expectations of the market, particularly small business owners and labour-intensive industries.

I am a supporter of a minimum wage. History is a clear indicator that a price mechanism is an extremely powerful tool in obtaining a desired outcome. However, the government must not forget that good economic management and setting the right policy expectations by the market are equally, if not more, important than just implementing a policy.

Based on what’s reported in the media, the main purpose of a minimum wage is to increase welfare of the underpaid, create incentives to upgrade and move up the value-added chain. All these are extremely important for the progress of the country. However, what is the role of the government in maintaining good economic management and providing the right expectations?

My greatest concern is that this policy is implemented without the correct compensation to “losers” in the economy. It is obvious the main losers are all labour-intensive, relying on cheap labour. The overnight impact of a minimum wage will see profits dive and small businesses lose out. In fact, those working on small profit margins will have to shut down overnight.

These are painful truths of such price policies, i.e. minimum wage. However, they can be necessary to ensure that the overall country’s welfare is increased.

My concern is now to the government. How does the government intend to appropriately compensate the losers in this policy? In Australia, for example, it was clear from the outset that the GST or carbon tax will be good to the overall economy, but costly to many segments of the economy. This expectation was clearly laid out to all affected. Those who lost out were properly compensated, either through direct monetary transfers or reduced taxes, ensuring they did not suffer an economic loss. All these were extremely transparent, well managed and the policy objectives were well achieved.

The problem we have currently in Malaysia is the lack of transparency, both in the implementation and the management of such policies. It can become unclear to the market whether this lack of clarity is due to poor economic policy and management, or insecurity on the government’s behalf. This will undoubtedly create wrong expectations by all business sectors and households.

I would urge the government to provide a clear, transparent picture on this policy’s management and expected outcomes. It is important to note that once this policy is implemented, many will be affected and there is very little room for turning back.

* Moses Lee is an associate lecturer in economics at the Australian National University, Canberra, Australia.

* This is the personal opinion of the writer or publication. The Malaysian Insider does not endorse the view unless specified.

GST: Pengalaman Singapura

Dr. Rosli Yaakop,

23 Mac 2012

Di Singapura, cukai barangan dan perkhidmatan atau goods and services tax (GST) merupakan cukai nilai ditambah (value-added tax) berasas meluas (broad-based) dikenakan ke atas barangan import dan semua barangan dan perkhidmatan kecuali, pertama, jualan dan sewaan hartanah perumahan (tempat kediaman) dan kedua, perkhidmatan pembiayaan (financial services). Walau bagaimana pun, barangan yang dieksport dan perkhidmatan antarabangsa kadar cukainya sifar.

Ia adalah cukai berkadar rata (flat rate) berbanding cukai pendapatan yang kadarnya semakin tinggi bila pendaptan semakin tinggi.

Kerana ia cukai ke atas penggunaan, maka dikatakan ia menggalakkan tabungan.

GST dilaksanakan di Singapura serentak dengan pelaksanaan “offset package” bertujuan meringankan kesan negatif GST ke atas isirumah, khasnya yang berpendapatan rendah.

GST diperkenalkan di Singapura pada 1 april 1994, iaitu, 18 tahun yang lalu. Kadar cukai yang dikenakan pada masa pelancaran ialah 3%. Kadar ini dikekalkan selama 9 tahun bersesuaian dengan janji kerajaan semasa pelancaran bahawa kadar itu tidak akan diubah sekurang-kurangnya selama 5 tahun.

Ia telah dinaikkan secara beransur-ansur selepas itu  - ke 4% pada 1 Januari 2003, 5% pada 1 Januari 2004 dan 7% pada 1 Julai 2007.

Sebelum tahun 1986, kadar cukai pendapatan korporat ialah 40%. Begitu juga kadar cukai pendapatan perseoragan – ianya berkadar menaik dan bagi lingkungan pendapatan individu tertinggi (top marginal rate) kadarnya ialah 40%.

Kadar ini didapati tidak berdayasaing. Jawatankuasa Ekonomi tahun 1986 telah mencadangkan supaya Singapura mengubah dasar percukaiannya daripada pergantungan besar ke atas cukai langsung kepada cukai tidak langsung jika ia mahu menambahbaik dayasaing antarabangsanya bagi menarik pelaburan, melastarikan pertumbuhan ekonomi dan mewujudkan gunatenaga berpendaptan tinggi.

GST adalah cukai tidak langsung berasas meluas. Dengan penduduk tua semakin besar bilangannya di Singapura, asas cukai (tax base), di negara itu dijangka mengecil. Oleh itu GST perlu diperkenalkan bagi mengimbangi asas cukai langsung (direct tax base) yang semakin mengecil (golongan tua tidak membayar cukai langsung) dengan cukai tidak langsung.

GST membolehkan beban cukai diagihkan kepada lebih ramai penduduk. Pengenaan cukai tidak langsung (indirect taxes) melebarkan asas cukai sekaligus membolehkan cukai dipungut dari lebih ramai penduduk.

Kerana GST pada asasnya adalah cukai ke atas penggunaan bukai ke atas pendapatan, maka sesiapa yang menggunakan barangan dan perkhidmatan, mereka kesemuanya – tidak kira pendapatan rendah, sederhana atau tinggi, kaya atau miskin – masuk di dalam jaringan cukai ini. Itu sebabnya, GST kadangkala dikatakan sebagai “pukat harimau” – semua ikan, kecil atau besar, terperangkap dalam jaring.

Di dalam sistem cukai langsung (cukai korporat dan cukai pendaptan individu), hanya segolongan tertentu penduduk membayar cukai tetapi di bawah GST, tiada siapa boleh mengelak dan terkecuali daripada membayar cukai.  Ini menyebabkan pengkritik GST melihat GST sebagai regresif – orang miskin, sebagai nisbah kepada pendapatan mereka, membayar lebih cukai berbanding orang kaya. Penyokong GST, tanpa menafikan isu regresiviti ini, mencadangkan jalan pembetulan, iaitu, memastikan agihan cukai yang dipungut dilakanakan dalam cara yang boleh mengurangkan beban cukai ke atas golongan berpendaptan rendah.

Is Pakatan a viable alternative to BN? — Angeline Loh

MARCH 22, 2012

MARCH 22 — Rumours of an imminent general election in Malaysia have been flying around since 2011. The current BN government seems to be going all out in its election campaign, pulling out all stops for itself while attempting to hinder Pakatan Rakyat’s campaigning efforts in meeting the March 2013 deadline.

As far as most veteran voters can recall, we used to have elections every five years, then it seemed to imperceptibly change to once in four years and it may even have been shortened to every three years — except for the obvious fact that the BN was not ready to face the rakyat because of their unpopularity. However, another election will not change the capabilities of current or potential governments.

The experienced electorate have become increasingly familiar with the bluffs political parties pull and the reality that they live in. Even youth have become more openly critical of political parties in bluntly requesting them not to come round visiting at the eleventh hour before a general election loaded with potentially empty promises.

Politicians have not yet learned that the electorate mean what they say. It seems typical that in every run-up to a general election we will see, hear and read of sudden budget allocations for social needs such as education e.g. the handing out of scholarships, study loans and school building funds; promises for improvements to public transport; subsidies for basic necessities; discounts for saving utilities like electricity…blah,blah, blah. Not to forget, the glamorised promotion of nuclear energy and economic enhancements that foreign rare earths processing companies will bring to Malaysia.

Since the end of last year right into 2012, we have been wooed and lured by the RM500 BR1M (Bantuan Rakyat 1 Malaysia) payments, Kedai 1 Malaysia, loans to purchase “affordable” homes for breadwinners earning less than RM3,000 from the EPF, etc.