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Anwar's budget big on slogans but no real benefit to country, says think tank

The Center for Market Education says the narrative in the budget is populist without any strategy on meaningful tax reforms.

Staff Writers
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Prime Minister Anwar Ibrahim, flanked by his deputy finance ministers Ahmad Maslan and Steven Sim, at Parliament for the retabling of Budget 2023 in Kuala Lumpur, Feb 24.
Prime Minister Anwar Ibrahim, flanked by his deputy finance ministers Ahmad Maslan and Steven Sim, at Parliament for the retabling of Budget 2023 in Kuala Lumpur, Feb 24.

An economic think tank has criticised the 2023 budget re-tabled by Anwar Ibrahim on Friday, saying it has attractive sound bites on taxes but lacks any comprehensive strategy for tax reforms.

The Center for Market Education (CME) said the narrative by the government to "tax the rich" by increasing tax rates as well as taxing luxury goods might be good for political consensus but would not give any "real benefit for the country".

It also warned that the government was transferring the burden of reducing debt to firms and individuals "with new and questionable taxes".

"We wish to stress that, without government fiscal discipline, the country is unlikely to make a move in the direction of a sustainable growth path; furthermore, new 'anti-rich' or 'anti-business' taxes will only undermine the local investment ecosystem," said CME's Carmelo Ferlito.

CME also questioned Anwar's announcement of a RM500 injection into Employees Provident Fund accounts with less than RM10,000, which could involve some RM1 billion.

"While being an overall cost for the government, it does not produce any real benefit for the people. A measure with a populist flavour," it said.

In his budget speech, Anwar among others introduced a new tax on luxury goods, as well as announced a hike in income tax from 0.5% to 2% for those in the income bracket of more than RM100,000 to RM1 million.

Ferlito however said the tax increases might not produce any real effect other than to show that the government expects some groups of taxpayers to contribute to revenue when "the government itself doing nothing to cut expenditure".

He also questioned the timing of a capital gains tax, saying it will affect efforts to make Malaysia an attractive investment destination in the face of competition from neighbours.

Ferlito described the luxury goods tax as going against an equitable tax system.

"No true effort is made to extend the tax base with better enforcement or effective measures such as the goods and services tax," he said, referring to the 6% consumer tax abolished by the previous Pakatan Harapan government in 2018.

He added that there was nothing in terms of targeted subsidies despite the discussion on the topic. 

"Rather, the amount of subsidies and handouts increases, showing that the government has no intention to move toward fiscal discipline and balanced budgets, shifting the burden of reducing debt to firms and individuals."

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