Pakatan Rakyat Budget 2012 (Part 10 of 10)

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:

  1. 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.

Sustainability

• 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)

	2007A	2008A	2009A	2010E	2011F
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
Security	20,071	23,597	22,798	18,919	23,361
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
Community Wellbeing	18,674	21,388	23,120	23,586	25,277
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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