A wait-and-see budget

By P Gunasegaram, The Star

IT’S really a simple, straightforward budget. There were tax cuts and breaks but none too much. More important was the stage that the budget was setting for the future, the push towards higher income for all and getting more income for the Government.

That’s the challenging part. It’s heartening to note that a number of measures are being aimed in this direction and that there is the recognition that such things cannot be done merely by taxing and providing incentives.

There are some solid proposals on improving education and the welfare of the public. These are the things, together with the restructuring of sales taxes and subsidies and cutting of expenditures which will make the difference.

First, let’s get the tax measures out of the way. The income tax cut by one percentage point to 26% is welcome but the one that will help more people is raising the personal relief by RM1,000 to RM9,000.

What is surprising is the mere 15% tax rate for income earned in the Iskandar development region in Johor. Is there really justification for that? I doubt it. Expect people to take advantage of this through dubious means if they can’t work there.

Apart from this, tax measures are likely to be pretty much neutral for most people.

Internet users have been rewarded with a RM500 exemption for broadband fees paid but what will be more useful is for broadband speeds to be faster. The budget promise is that we will get 10 megabytes per second in Kuala Lumpur and Selangor by end-March next year and other selected areas by 2010 and 2012. We wait with bated breath.

A RM50 fee on credit cards and RM25 service tax on supplementary cards is pretty difficult to understand, especially when many of us get the cards free from the banks. Why tax something which is given free? For me, and I suspect a lot of us, this will more than offset the savings from broadband fee exemptions.

The introduction soon of a “fuel subsidy management system” whereby subsidies will be aimed at target groups instead of broadly to everyone is likely to enhance government revenue. So will an impending measure to introduce a goods and services tax.

The target to double per capita income in 10 years as part of the moves to shift to a higher income country is laudable but not easy to achieve. Average per capita income has to rise by at least 7% a year. With population growing over 2% a year, the national income needs to rise at least 9% a year for that to happen – no easy task.

Much will depend on what we do in other areas, especially education, in terms of moving up the income ladder. Without trained manpower, it will be impossible to move up into the ranks of high income.

That there are measures in this direction is undeniable and I am particularly heartened by one which puts power and accountability in the hands of headmasters and head teachers. The HMs will agree on their KPIs or key performance indicators.

If they meet them, they and the school will be rewarded both monetarily and otherwise and they will get autonomy as well. If you don’t meet the targets two years running, well there is trouble ahead. Unspecified action will be taken.

That’s a quantum leap in the education world but I am afraid that even if this were implemented well and fully in the spirit of the intention with which it was proposed, it will take some time to get the desired results. But it’s good to make a start.

In all, it’s almost an interim budget – wait and see what comes out of it eventually.

l Most of us, including managing editor P Gunasegaram, knows that it takes more than a single budget to do the trick.