9 2012 Allocations
9.1 Auctioning APs, enhancing collections and higher oil prices will grow revenue
Pakatan Rakyat notes that prospective economic turbulence may reduce revenues from existing sources. However, Pakatan Rakyat also recognises that the ineffectiveness of the Barisan Nasional government provides headroom for revenues to be raised without further increasing the burden on honest, tax-paying citizens. For example:
The full value of government concessions and permits is not always extracted. These are instead offered at low valuations or prices to favoured parties who then reap super-normal and rent-seeking profits;
High levels of illicit activity are tolerated. For example, it is estimated that nearly 4 out of 10 packets of cigarettes consumed in Malaysia are illicit43 – taxes have not been paid. This illicit trade has soared by 67% in the 7 years between 2003-10. Illicit trade results in direct opportunity losses to the government from revenue foregone. In addition, it also impedes private enterprise and employment opportunities as legitimate tax-paying businesses grapple against the illicit traders.
Even in the absence of specific new tax measures but with amplifications from improvements in tax administration, Pakatan Rakyat expects total government revenue to grow by 9% in 2012 to RM181 billion. Key points:
An additional RM1.2 billion of revenue will be raised by auctioning Open APs. These APs are currently issued at RM10,000 each by the Barisan Nasional government. The main recipients are influential cronies. It has been reported that these can subsequently be resold for RM40,000-50,000 each44. If, in auction, the issue price is RM30,000 instead of RM10,000, an additional RM1.2b of revenue45 will be earned by the government;
Higher oil prices (US$103, based on the IMF forecast) are expected to lead to higher profits at Petronas. The Pakatan Rakyat government will continue to take the agreed share as per the Petroleum Income Tax (PITA). However, in the matter of dividends, Pakatan Rakyat will take less than the amount in 2009 following oil at US$97.
Pakatan Rakyat does not intend to increase sin taxes on cigarettes and alcohol as it is ineffective in curbing unhealthy habits. Instead, public awareness and education would be a better alternative.
Pakatan Rakyat will reintroduce the import tax for the 200 luxury items that were exempted by the Prime Minister in the last budget.
Pakatan Rakyat proposes a total RM220 billion expenditure billion budget for 2012. This will mean a deficit equivalent to 4.4% of GDP, which is a substantial narrowing from the estimated 6% in 2011 under the tutelage of the Barisan National government (2010: 5.6%, 2009: 7.4%).
Table 4: Federal Government Revenue (RM million)
2008 2009 2010 2011F 2012F growth Direct taxes 82,138 78,375 76,156 83,983 96,490 14.9% Comments : Up on higher oil prices and more intensive collection efforts Companies 37,741 30,199 33,248 36,210 39,686 9.6% Comments : Slightly slower than 10.0% pa average growth from 2009-11 Petroleum Income Tax (PITA) 24,191 27,231 18,286 21,786 28,322 30.0% Comments : Based on oil at US$103 (IMF forecast). Contribution should be higher than in 2009 following US$97 oil. Individual 20,206 20,945 24,622 25,987 28,482 9.6% Comments : Slower than 12.0% pa average growth from 2009-11 Direct tax (ex. PITA) 57,947 51,144 57,870 62,197 68,168 9.6% Comments : Overall slower than the 10.8% average growth from 2009-11 Indirect taxes 30,760 28,129 30,936 31,518 33,283 5.6% Comments : Slightly slower than the 6.0% average growth between 2009-11 Excise duties 10,068 10,068 11,832 12,026 12,699 5.6% Comments : More intensive collections will help off-set economic slowdown Sales and other indirect taxes 20,692 18,061 19,104 19,492 20,584 5.6% Comments : E.g greater efforts to reduce illicit cigarettes and alcohol Non-tax revenue 46,896 52,135 55,039 50,324 51,565 2.5% Comments : Licences/permits 11,101 10,686 10,239 10,012 11,314 13.0% Comments : Auctioning of APs at market prices expected to raise at least RM1.2 billion more Investment income 32,271 37,394 39,458 33,174 32,828 -1.0% Comments : Primarily dividends from Petronas. Pakatan Rakyat will not take all expected proceeds from higher oil prices Others 3,524 4,055 5,342 7,138 7,424 4.0% Comments : Assume modest growth Total Government Revenue 159,794 158,639 162,131 165,825 181,338 9.4% Comments : Historical average not a good guide – volatile due to oil prices
Sources: Historical data from Economic Reports and other government publications. 2012 based on Pakatan Rakyat estimates.
9.2 Pakatan Rakyat Expenditure Allocations
Table 5: Pakatan Rakyat 2012 Budget Allocations (RMm)
2007 2008 2009 2010 2011 2012 Pakatan Change National & International Affairs 38,359 40,245 44,797 50,252 57,616 45,947 (11,669) Comments: Prime Minister’s Department will taken back to the 2008 level of RM5b from RM16b in 2011. Economics & Finance 46,158 47,291 43,150 29,696 32,295 34,879 2,584 Comments: Reducing wastage and corruption should lead to at least 20% more in benefits. Includes Facilitation Fund. Security 20,071 23,597 22,798 18,919 23,361 23,828 467 Comments: Expenditure will be spent on improving service conditions for personnel; not over-priced procurement. Education, Talent & Employment 36,450 43,710 48,841 44,802 49,400 54,340 4,940 Comments: Teachers allowance, Vocational training. Agriculture & Regional Development 7,260 10,355 12,499 12,910 17,025 18,728 1,703 Comments: Measures for agriculture including farmers. Infrastructure, Resource Management & Environment 13,478 14,695 12,951 11,334 9,013 9,914 901 Comments: Allocations for energy efficiency and green energy. Community Wellbeing 18,674 21,388 23,120 23,586 25,277 32,860 7,583 Comments: Senior Malaysian Bonus, Homemakers, Child Care, Hard Core Poor support, public housing and public transport. Unexplained - - - 30,087 - - - Comments: BN showed a total RM221.6b allocated spend for 2010, but the individual Ministries totals added up to only RM191.5b, leaving this huge unexplained sum. 180,450 201,281 208,156 221,586 213,987 220,496 6,509 A deficit of 4.4% of GDP. Down from expected 6% in 2011. % Growth/(Contraction) 11.5% 3.4% 6.5% -3.4% 3.0%
Note: See next table for breakdown by Ministries
Sources: AnggaranPerbelanjaan Persekutuan and Pakatan Rakyat estimates
Pakatan Rakyat presents its spending allocations as per its framework for Budgetary Committees as described above. The key thrusts are:
Prosperity through higher skills and incomes;
The special teaching allowance and minimum wage will cost an additional RM4.4 billion per year, of which RM2.2 billion will go to teachers.
RM2.0 billion will be allocated to a special Facilitation Fund to help entrepreneurs, SMEs and small firms retool, mechanise and adjust their operations to create new jobs. This will be managed by the MITI and the Ministry of Domestic Trade, Cooperatives and Consumerism, under our Economics & Finance umbrella.
RM1.6 billion will be set aside to expand technical and vocational training to upgrade the skill base of the workforce. This will be managed by the Ministries of Education, Higher Education and Human Resources under our Education, Talent & Employment umbrella.
RM1.6 billion for the RM700 child care allowance for children aged 12 years and below in households earning less than RM1,500 per month46. This will be managed by the Ministry of Women, Family and Community Development under our Community Wellbeing umbrella.
RM1.7 billion additional expenditure to be placed directly under the purview of the Ministries or Rural and Regional Development, Agriculture and Agrobased Industry and Plantation Industries and Commodities under our Agricultural and Regional Development.
More than RM10 billion will be reallocated from the purview of the Prime Minister’s Department (National & International Affairs) back to respective ministries better placed to oversee such activities.
Immediate measures to help Malaysians
RM1.7 billion for the Senior Malaysian Bonus for the elderly.
RM2.0 billion for Support for Homemakers.
RM200m for top-up payments for the hard-core poor.
The above payments will be managed by the Ministry of Women, Family and Community Development under our Community Wellbeing umbrella.
RM1 billion for public housing. This will be placed under the Ministry of Housing and Local Government under our Community Wellbeing umbrella.
RM30 million for state and local authorities to begin producing public transport masterplans and RM20 million to create a web and mobile-based public transport information system including journey planners for major urban areas and information and route maps at bus stops. This will b
Table 6: Federal Government Expenditure 2007-11 (RMm)
|National & International Affairs||38,359||40,245||44,797||50,252||57,616|
|Prime Minister’s Department||6,877||6,899||10,187||12,194||15,856|
|Ministry of Foreign Affairs||614||656||656||579||683|
|Ministry of Information, Communication, and Culture||1,187||1,135||2,244||2,509||2,588|
|Ministry of Federal Territories and Urban Wellbeing||646||512||567||973||585|
|Others – Mainly debt service and pensions||29,035||26,881||29,381||33,997||37,904|
|Ministry of Entrepreneur and Coop Dev (Abolished 2009)||-||3,322||1,529||-||-|
|Ministry Of Unity, Culture, Arts, Heritage (Abolished 2009)||-||840||233||-||-|
|Economics & Finance||46,158||47,291||43,150||29,696||32,295|
|Ministry of Finance||43,991||44,598||38,718||25,550||29,198|
|Ministry of International Trade and Industry||911||1,016||2,912||2,819||1,206|
|Ministry of Domestic Trade, Coop and Consumerism||379||664||503||428||1,047|
|Ministry of Tourism||877||1,013||1,017||899||844|
|Ministry of Defence||13,629||14,693||13,611||11,014||13,824|
|Ministry of Home Affairs||6,442||8,904||9,187||7,905||9,537|
|Education, Talent & Employment||36,450||43,710||48,841||44,802||49,400|
|Ministry of Education||25,481||31,949||33,960||30,519||35,763|
|Ministry of Higher Education||10,077||10,798||13,982||13,023||12,607|
|Ministry of Human Resources||892||963||899||1,260||1,030|
|Agriculture & Regional Development||7,260||10,355||12,499||12,910||17,025|
|Ministry of Agriculture and Agro-based Industry||3,667||6,200||6,333||4,614||3,380|
|Ministry of Plantation Industries and Commodities||349||785||477||1,081||1,289|
|Ministry of Rural and Regional Development||3,244||3,370||5,689||7,215||12,356|
|Infrastructure, Resource Mgmt& Environment||13,478||14,695||12,951||11,334||9,013|
|Ministry of Works 6,644||6,576||4,915||3,520||4,106|
|Ministry of Natural Resources and Environment||2,157||3,115||3,481||3,555||2,330|
|Ministry of Energy, Green Technology and Water||2,717||2,991||2,274||2,448||1,335|
|Ministry of Science, Technology and Innovation||1,960||2,013||2,281||1,811||1,242|
|Ministry of Transport||3,522||4,296||4,082||3,094||5,072|
|Ministry of Housing and Local Government||2,540||2,319||2,258||3,714||3,006|
|Ministry of Health||11,243||13,036||14,713||14,763||15,223|
|Ministry of Women, Family and Community Dev||718||826||1,045||1,178||1,246|
|Ministry of Youth and Sports||651||911||1,022||837||730|
|Total as calculated from individual Ministries||180,450||201,281||208,156||191,499||213,987|
|Total given in Anggaran Perbelanjaan Persekutuan||202,641||208,155||221,586||213,987|
|Note the huge unexplained gap in 2010||-30,087|
Source: Anggaraan Perbelanjaan Persekutuan
43Tobacco: Tough environment but defensive. Maybank Investment Bank Research, 30 Sept 2011.
44Mixed views on RM10,000 fee for open APs. The Star 28 Oct 2009.
45Assuming 60,000 Open APs are issued. This is equivalent to 10% of motor vehicle sales as per existing policy.
46Based on 40% of 5.6m children.
[Pakatan Rakyat Budget 2012 released by Datuk Seri Anwar Ibrahim on behalf of PR in Kuala Lumpur on 4th October 2011. Part 10 of 10]
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