Budget 2021 – Some Thoughts!

Budget 2021 is to be presented in November 2020 by the Finance Minister. The problem is by which Government – PN, PH plus, or UMNO plus?

Politics aside, there are several initiatives that may come to mind. But very few will suggest the revenue side – because that means taxes or sale of assets (privatisation?). Let me venture on four possibilities:

·       Higher taxes (30%) for top 5% individuals/corporates;

·       Transaction tax (0.01%) on foreign exchange, money market;

·       Capital gains tax on large transactions (above RM5 million); and

·       “Super-profit” tax on those industries that enjoy exceptional profit from an economic windfall like glove manufacturers.

 

https://www.theedgemarkets.com/

 

Taxation is anathema for followers of Friedman/Reagan. In fact, “supply-side” economists gained traction with Laffer curves which are now discredited. One thing is for sure, we need new revenue streams to bring down our fiscal deficit. And courage is required to bring in new taxation. There is no point in moving back to GST from SST. These are “regressive” taxes that hit the poor more than the rich.

On the policy initiative side, there are several suggestions made. These may include: projects with high multipliers to those that resuscitate sectors impacted by Covid-19; fund transfers to the B40; new skills fund; raising digitalisation and e-commerce and many more. But in all this, funding is required. Pray tell me where will this come from?

 

Reference:

Budget 2021: Measured fiscal booster needed, Lee Heng Guie, Starbiz, 14 October 2020