Saturday, July 28, 2012

Why Would Anyone Object to a Tax Cut?

Answer: Those who stand to lose.

Recently an opposition lawmaker made an outrageous promise. He promised should the opposition take over the next government it will slash import and excise duties of vehicles. That is sweet music to sane Malaysians who are or have paid exorbitant duties to the government every time they buy a new vehicle. As a rough estimate, half of the price paid is duty so why shouldn't everyone rejoice? Yesterday two groups came forward with their reasoning why this tax cut is bad. The first group, a business council with a particular political bias, claimed this tax cut will surely be balanced by a tax increase somewhere so tax payers should not jump for joy. The opposition leader said the loss in duties collection will be about RM8 billion per annum. It is a mind boggling sum for salary earners but if you have been following the news on how the government, or rather the prime minister, is dishing out cash incentives to woo voters, which are unbudgetted and hence not authorized by parliament, and in my interpretation illegal use of public funds for political purposes, you will realize RM8 billion can be easily 'recovered' by not frivolously spending irresponsibly. And more importantly, plugging corruption money will more than cover this tax reduction. I therefore disagree and don't expect new taxes to 'balance' the promised tax cut.

Another group is even more incredulous. It claimed, and I agree, that making cars cheaper will drive the Proton national car out of business as Malaysians prefer foreign made cars. I raise both my hands to this logic, but why defend an inefficient and loss making project? Why continue to defend and support mediocrity? Where is the competitive spirit to make Proton a world class vehicle instead of a laughing stock? Ask around, most buyers are taxi companies and lower income group families. They buy because it is cheap but not necessarily cheap to maintain but that is another story. The argument that Proton employees will be out of job should make you either sob your heart out for their well being or say it isn't my problem you never grow out of your 27 years babyhood but continue to suckle the government's breasts. Do you pamper a dying company or push them to be independent? A buyout may actually do good. Forget about national pride. It won't feed the family. So I won't subcribe to this line of logic at all. I am a fervent supporter of meritocracy not mediocrity although they can be confused by their almost similar pronunciation.

Instead I'll go for economic boost as reported HERE. It makes sense. If I pay RM100,000 now to buy a new car but under the new government pay say RM60,000 I save by not spending or taking a RM40,000 loan. The banks won't be happy as they suddenly lose a huge borrower pool. The insurance companies won't like it since premium collections will be drastically reduced which translate to lower profits. Used car dealers will be shocked as they suffer huge losses from stocks of old cars they hold. But car owners suddenly have cash they can spend elsewhere. So what is bad news for one business sector is good news for others. More money for education, for better family life, even upping personal insurance covers. To some they will save more for old age. Overall cutting tax, be it on cars or on consumption, will make Malaysians richer by keeping more cash at home. So this blows the high income nation promise by the prime minister. The answer is to keep income growing at a steady rate so as not to blow the industry that drives the nation economic health but shave taxes and plug leakages to enable the average Malaysian their right to better manage their income and expenditures.

I believe the tax cut on motor vehicles is the beginning of other forms of good stewardship to make Malaysians proud to be one, and also make those working overseas to rethink about staying away.

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