When rampant inflation sets in, everybody is under siege - it is as if smog has descended and blanket the whole scenery and we all cannot see clearly.
The government, just like everybody else, now has problems trying to balance its budget. Higher prices and costs mean that the same money now buy fewer things - or that if the government wants to do the same number of things with the same number of people as before, then it needs more money. Worse, there is further escalation in costs as the workers working for the government and elsewhere in the economy also want to have more money to maintain the same standard of living as before - failing which they will have to live with less, and those on the margin will have to suffer physically.
It is no surprise that the first tenet in economics is to control inflation. It is a cardinal sin of the policy makers today, especially monetary authorities to have abrogated their duties and go with the flow for the sake of political expediency. This sin has created a new problem - of whether to continue with the circus or to bring down the tent. There appears to be no halfway house - and keeping up with the act may be yet again the most expedient way to go forward; the show must go on.
The government cannot use this budget to raise revenue to make up for its shortfall - the deficit cannot be closed in the foreseeable future. The internal problem of the government's finance department must be how the government can continue to maintain its market rating so that its borrowing does not before unduly more expensive. But the real problem of the government is that it cannot make sure that its deficit-funded projects will be productive and multiplier-expansive - there has been a far greater emphasis on creating big immediate impact rather than consistent and permanent impacts over the immediate and longer run. The disciples have not understood the words of the master well enough.
If the government's aim is to spend so that the people can benefit but that it does not now know to do it properly, it is then better that the government reduces its imposition on the poor people who have to pay tax even though the people are struggling to make ends meet. The government should introduce tax measures that will unburden. One way of unburdening itself from the people is for the government to reduce its tax on the ordinary individual taxpayers by an increase in their tax allowances as well as adjusting its tax brackets for inflation.
Since prices have at least doubled for many things that ordinary households use, the most simplest thing that the government can do in the budget for the people is to double its tax allowances: tax allowance for self and dependent from RM9,000 to RM18,000, books etc from RM1,000 to RM2,000, children from RM1,000 and RM4,000 to RM3,000 and RM8,000, medical for parents from RM5,000 to RM10,000, for example.
The new tax schedule is proposed as follows:
Taxable income (RM)
First 50,000 - 0%
Next 50,000 - 5%
Next 50,000 - 7%
Next 50,000 - 9%
Next 50,000 - 11%
Next 50,000 - 13%
Exceeding 300,000 - 15%.
An important impact of unburdening the ordinary professional worker is that you do not want the worker who has supposedly a decent job with a decent training and a decent family to be scrounging around for deals and outside projects just because of rampant inflation which has hit his or her family's daily household expenses and pushed his or her income into the higher bracket.
It is fair to say that 5,000 a month in KL is insufficient and 10,000 a month may just allow one to live without undue financial worries and without undue luxury as well. For now, I think this is where everything starts. If the government wants to think about GST after the elections, it is not to early in this budget to prepare the background for a fair taxation system for the individual taxpayers. The government has squandered its tax resources on foreign companies which have used our precious scarce natural resources for their global profits. It is time that our government makes the local environment conducive for home-grown players of the economic game in a serious and significant fashion.