Wednesday, 5 October 2011

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 revenue45will 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)
    2008200920102011F2012Fgrowth
    Direct taxes82,13878,37576,15683,98396,49014.9%
    Comments : Up on higher oil prices and more intensive collection efforts
    Companies37,74130,19933,24836,21039,6869.6%
    Comments : Slightly slower than 10.0% pa average growth from 2009-11
    Petroleum Income Tax (PITA)24,19127,23118,28621,78628,32230.0%
    Comments : Based on oil at US$103 (IMF forecast). Contribution should be higher than in 2009 following US$97 oil.
    Individual20,20620,94524,62225,98728,4829.6%
    Comments : Slower than 12.0% pa average growth from 2009-11
    Direct tax (ex. PITA)57,94751,14457,87062,19768,1689.6%
    Comments : Overall slower than the 10.8% average growth from 2009-11
    Indirect taxes30,76028,12930,93631,51833,2835.6%
    Comments : Slightly slower than the 6.0% average growth between 2009-11
    Excise duties10,06810,06811,83212,02612,6995.6%
    Comments : More intensive collections will help off-set economic slowdown
    Sales and other indirect taxes20,69218,06119,10419,49220,5845.6%
    Comments : E.g greater efforts to reduce illicit cigarettes and alcohol
    Non-tax revenue46,89652,13555,03950,32451,5652.5%
    Comments :
    Licences/permits11,10110,68610,23910,01211,31413.0%
    Comments : Auctioning of APs at market prices expected to raise at least RM1.2 billion more
    Investment income32,27137,39439,45833,17432,828-1.0%
    Comments : Primarily dividends from Petronas. Pakatan Rakyat will not take all expected proceeds from higher oil prices
    Others3,5244,0555,3427,1387,4244.0%
    Comments : Assume modest growth
    Total Government Revenue159,794158,639162,131165,825181,3389.4%
    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)
    200720082009201020112012 PakatanChange
    National & International Affairs38,35940,24544,79750,25257,61645,947(11,669)
    Comments: Prime Minister’s Department will taken back to the 2008 level of RM5b from RM16b in 2011.
    Economics & Finance46,15847,29143,15029,69632,29534,8792,584
    Comments: Reducing wastage and corruption should lead to at least 20% more in benefits. Includes Facilitation Fund.
    Security20,07123,59722,79818,91923,36123,828467
    Comments: Expenditure will be spent on improving service conditions for personnel; not over-priced procurement.
    Education, Talent & Employment36,45043,71048,84144,80249,40054,3404,940
    Comments: Teachers allowance, Vocational training.
    Agriculture & Regional Development7,26010,35512,49912,91017,02518,7281,703
    Comments: Measures for agriculture including farmers.
    Infrastructure, Resource Management & Environment13,47814,69512,95111,3349,0139,914901
    Comments: Allocations for energy efficiency and green energy.
    Community Wellbeing18,67421,38823,12023,58625,27732,8607,583
    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.
    180,450201,281208,156221,586213,987220,4966,509
    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.
    2. 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.
    3. 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)
    2007A2008A2009A2010E2011F
    National & International Affairs38,35940,24544,79750,25257,616
    Prime Minister’s Department6,8776,89910,18712,19415,856
    Ministry of Foreign Affairs614656656579683
    Ministry of Information, Communication, and Culture1,1871,1352,2442,5092,588
    Ministry of Federal Territories and Urban Wellbeing646512567973585
    Others – Mainly debt service and pensions29,03526,88129,38133,99737,904
    Ministry of Entrepreneur and Coop Dev (Abolished 2009)-3,3221,529--
    Ministry Of Unity, Culture, Arts, Heritage (Abolished 2009)-840233--
    Economics & Finance46,15847,29143,15029,69632,295
    Ministry of Finance43,99144,59838,71825,55029,198
    Ministry of International Trade and Industry9111,0162,9122,8191,206
    Ministry of Domestic Trade, Coop and Consumerism3796645034281,047
    Ministry of Tourism8771,0131,017899844
    Security20,07123,59722,79818,91923,361
    Ministry of Defence13,62914,69313,61111,01413,824
    Ministry of Home Affairs6,4428,9049,1877,9059,537
    Education, Talent & Employment36,45043,71048,84144,80249,400
    Ministry of Education25,48131,94933,96030,51935,763
    Ministry of Higher Education10,07710,79813,98213,02312,607
    Ministry of Human Resources8929638991,2601,030
    Agriculture & Regional Development7,26010,35512,49912,91017,025
    Ministry of Agriculture and Agro-based Industry3,6676,2006,3334,6143,380
    Ministry of Plantation Industries and Commodities3497854771,0811,289
    Ministry of Rural and Regional Development3,2443,3705,6897,21512,356
    Infrastructure, Resource Mgmt& Environment13,47814,69512,95111,3349,013
    Ministry of Works 6,6446,5764,9153,5204,106
    Ministry of Natural Resources and Environment2,1573,1153,4813,5552,330
    Ministry of Energy, Green Technology and Water2,7172,9912,2742,4481,335
    Ministry of Science, Technology and Innovation1,9602,0132,2811,8111,242
    Community Wellbeing18,67421,38823,12023,58625,277
    Ministry of Transport3,5224,2964,0823,0945,072
    Ministry of Housing and Local Government2,5402,3192,2583,7143,006
    Ministry of Health11,24313,03614,71314,76315,223
    Ministry of Women, Family and Community Dev7188261,0451,1781,246
    Ministry of Youth and Sports6519111,022837730
    Total as calculated from individual Ministries180,450201,281208,156191,499213,987
    Total given in Anggaran Perbelanjaan Persekutuan202,641208,155221,586213,987
    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]