(Extracts from DAP Alternative Budget 2010 launched on 7th October 2009)

9. Thrust II: Rakyat First – Restructuring and Reallocation

9.3 Unfair Public Contracts
The Malaysian economic landscape is littered with many one-sided contracts and concessions under which private entrepreneurs reap supernormal profits while the government or government-linked companies continue to bear considerable business risk. Major privatisation exercises were conducted and concessions granted in manners that were not open, accountable and transparent through public tenders.

An Unfair Public Contracts Act will be enacted and an independent public commission to be known as the Public Contracts Commission will be formed to review such lopsided concessions that are deemed to be against the public interest.

Constitutional and corporate lawyer Tommy Thomas if of the view that such an act will be constitutional as it will be similar in nature to the Land Acquisition Act 1960 which allows the government to take over any private land for public purpose, provided adequate compensation is paid.

Such legislation is not unique to Malaysia. Eminent domain (United of States of America), compulsory purchase (United Kingdom, New Zealand, Ireland), resumption/compulsory acquisition (Australia) and expropriation (South Africa and Canada’s common law system) are examples of the inherent power of the state to seize or expropriate private property without the owners’s consent provided, of course, Read the rest of this entry »

(Extracts from DAP Alternative Budget 2010 launched on 7th October 2009)

8. Thrust I: Economic Democratisation – Fiscal Decentralisation

8.2 Fiscal decentralisation policies

Other countries, such as Canada, Spain, and the UK have been moving in the opposite direction recently compared to Malaysia, by increasing decentralisation. Nearer to home, China and Indonesia have also successfully decentralised much of their financial and economic decision-making process. Even smaller countries such as Switzerland and Belgium have developed forms of fiscal federalism. To ensure that Malaysia is able to tap into the sizeable latent potential benefits arising from the political accountability, economic efficiency and economic growth, DAP proposes that states are granted greater control over their finances.

8.2.1 Tax revenue sharing agreements
It is proposed that the federal government enter into tax revenue sharing agreements with states so that there is a stronger link between a state’s performance and its revenue share. 20% of individual and corporate income taxes collected in a state, as determined by the residence of the taxpayer and location of the establishment, will become the state’s entitlement. Income taxes will continue to be collected by the federal government using the existing infrastructure, but the states’ portion will be distributed back to the states for each financial year. This is the system which has been adopted by Germany.
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(Extracts from DAP Alternative Budget 2010 launched on 7th October 2009)

8. Thrust I: Economic Democratisation – Fiscal Decentralisation

8.1 Greater economic efficiency and political accountability

Many countries have pursued fiscal federalism and have devolved or are devolving more power to state and local governments. China and Indonesia’s recent economic success has also been linked with the decentralisation of economic decision-making. In the UK, the Calman Commission has recommended that Scotland be given greater tax-varying powers in order to further improve their devolution process. This is largely because of the economic efficiency and accountability arguments.

Certain areas of expenditure responsibilities should be decentralised because states and local governments are better placed to tailor their programmes to local needs. For example, state governments are more likely than the central government to know their region’s comparative advantage and hence promote investment initiatives accordingly. In order to decentralise expenditure, revenue must also be shared with states. Instead of being dependent on the federal government spending directly in the states, states would be able to implement their own programmes encouraging tourism, SMEs and industry. In this case, when the 13 states are unshackled in their courting of investment projects with their tailored policies, it is very likely that more and better investments will be attracted and made.
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(Extracts from DAP Alternative Budget 2010 launched on 7th October 2009)

5. Key Policy Highlights

Based on the 3 key thrusts outlined above to achieve greater economic democratisation via fiscal decentralisation, to place rakyat first with restructuring and reallocation, and to empower Malaysians through economic capacity building, the key policy measures proposed include:

1. Tax revenue sharing agreements where 20% of individual and corporate income taxes collected in a state will become the state’s entitlement. For Selangor and Penang, this revenue sharing agreement would entitle them to approximately RM 3.2 billion and RM 500 million respectively. An equalisation and development grants formula based on a function of population, poverty, area development, cost, human development and gross revenue per capita indices will also be given to ensure that poorer states do not lose out.

2. States will be given the rights to borrow up to a maximum of 50% of their annual ownsource revenue, which is revenue raised directly by the state governments.

3. We will set up a fund of RM 400 million to provide grants to state governments to reinstate local council elections, conduct delineation studies, hold trainings and promote awareness via publicity and education campaigns after amending the Housing & Local Government Act.

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