Defer everything- The Malaysian Insider
September 18, 2011 — Transparency and integrity in government decision-making seems more distant an objective than ever before. Individual businesses or categories of businesses in favour with the powers that be seem to get tremendous concessions while the not so fortunate are at a competitive disadvantage.
The jury is still out on the Khazanah-Air Asia deal on MAS and as to whether it will actually benefit either the airline or the exchequer. Already there is a whiff of conflict of interest when mere weeks after the deal, MAS is forced to engage in a sponsorship deal worth RM18 million with a football club owned by its erstwhile rival, Tony Fernandes.
Bailouts of certain corporations are approved at a huge cost to the exchequer. After a RM200 million bailout of Indah Water in 2000, there are talks of another proposed deal for the entity with 1 MDB. The much talked about PKFZ scandal involves an alleged government bailout to the tune of a whopping RM4.6 billion.
On the other hand, the government flouts its own rules to meddle in the pricing policies of certain sectors at its whim and additional cost to the exchequer. Every time a toll operator is asked to defer a scheduled toll hike, it is compensated by the government. Every time MAHB has to defer a hike in airport taxes, it is compensated by the government. Now there is talk that in exchange for telcos deferring passing on service taxes to its prepaid customers, they will be given incentives by the government in exchange.
Complicating the scenario is the fact that in many instances, the beneficiaries of this ad hoc largesse are government linked companies (GLC’s). Patently mismanaged companies can rest secure in the knowledge that even if worst comes to worst they will be bailed out as the government cannot afford to let the market take its own course in the case of GLCs like MAS, for fear of a popular backlash.
So either through bailouts or through compensation, the government loses revenue. When the government forgoes tax revenue from one or multiple sectors, how does it balance its budget? Either by raising other taxes or by borrowing more. The net impact on the consumer who saves RM10 on his next international flight is likely to be more than offset by higher income taxes or higher interest rates on loans. Therefore the argument that as a caring government, it does not want to burden the common man holds no water.
In addition, it projects the government as fickle and inconsistent. If certain lobbies can extract tax waivers or compensation while others cannot, it creates the perception of an uneven playing field. This lack of transparency and consistency can give rise to an impression of Malaysian fiscal and economic policy being dominated by prescriptions based on who you know rather than what you know.
The role of government is to prescribe, implement and monitor macroeconomic policy, not meddle in individual business decisions. The more exceptions that are made, the lower the international standing of the government.
If disproportionate profits are the issue, especially in the case of utilities such as water, telecommunications and electricity, price controls by regulating authorities are a more practical solution than tax deferments that distort competitive mechanics.
In the ultimate analysis if there is a likelihood of the government negatively impacting individual corporate strategies, either to help companies owned by it or ostensibly to lessen the burden of the common man, Malaysia will continue to slide in its attractiveness as an investment destination.
And if deferments are here to stay, why not defer the service tax on everything?
The jury is still out on the Khazanah-Air Asia deal on MAS and as to whether it will actually benefit either the airline or the exchequer. Already there is a whiff of conflict of interest when mere weeks after the deal, MAS is forced to engage in a sponsorship deal worth RM18 million with a football club owned by its erstwhile rival, Tony Fernandes.
Bailouts of certain corporations are approved at a huge cost to the exchequer. After a RM200 million bailout of Indah Water in 2000, there are talks of another proposed deal for the entity with 1 MDB. The much talked about PKFZ scandal involves an alleged government bailout to the tune of a whopping RM4.6 billion.
On the other hand, the government flouts its own rules to meddle in the pricing policies of certain sectors at its whim and additional cost to the exchequer. Every time a toll operator is asked to defer a scheduled toll hike, it is compensated by the government. Every time MAHB has to defer a hike in airport taxes, it is compensated by the government. Now there is talk that in exchange for telcos deferring passing on service taxes to its prepaid customers, they will be given incentives by the government in exchange.
Complicating the scenario is the fact that in many instances, the beneficiaries of this ad hoc largesse are government linked companies (GLC’s). Patently mismanaged companies can rest secure in the knowledge that even if worst comes to worst they will be bailed out as the government cannot afford to let the market take its own course in the case of GLCs like MAS, for fear of a popular backlash.
So either through bailouts or through compensation, the government loses revenue. When the government forgoes tax revenue from one or multiple sectors, how does it balance its budget? Either by raising other taxes or by borrowing more. The net impact on the consumer who saves RM10 on his next international flight is likely to be more than offset by higher income taxes or higher interest rates on loans. Therefore the argument that as a caring government, it does not want to burden the common man holds no water.
In addition, it projects the government as fickle and inconsistent. If certain lobbies can extract tax waivers or compensation while others cannot, it creates the perception of an uneven playing field. This lack of transparency and consistency can give rise to an impression of Malaysian fiscal and economic policy being dominated by prescriptions based on who you know rather than what you know.
The role of government is to prescribe, implement and monitor macroeconomic policy, not meddle in individual business decisions. The more exceptions that are made, the lower the international standing of the government.
If disproportionate profits are the issue, especially in the case of utilities such as water, telecommunications and electricity, price controls by regulating authorities are a more practical solution than tax deferments that distort competitive mechanics.
In the ultimate analysis if there is a likelihood of the government negatively impacting individual corporate strategies, either to help companies owned by it or ostensibly to lessen the burden of the common man, Malaysia will continue to slide in its attractiveness as an investment destination.
And if deferments are here to stay, why not defer the service tax on everything?
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