Sunday, October 17, 2010

Middle class want more cheer

Malaysia's Tax Budget 2011

ON THE BEAT WITH WONG CHUN WAI

Middle income group hopes spillover effects, especially from tourism and construction sectors, could help.

LET’S face it – many of us expected more from Budget 2011 than what has been delivered. Probably because of wishful thinking, the result of inaccurate media speculation and the belief that it would be a pre-election budget, we expected, or more precisely we hoped for, better tax reliefs in individual income taxes.

But that didn’t happen, so many of us in the middle income group are frowning.

Most of us who work and live in the city eat out a lot. Living in the Klang Valley, we work late, so eating in restaurants is a necessity rather than an option.

The increase in service tax won’t be welcomed. Having to pay more to the govern­ment for my Astro isn’t amusing either, especially when the free-to-air TV stations have not lived up to our expectations.

Sure, we grumble a lot over Astro’s repeats and most of us have had enough of monster fishes and reptiles. But we still need the satellite station for our weekend football matches.

Luckily, the urban middle class who also enjoy going to drinking spots in Bangsar have been spared another round of hikes on excise duty for beers and stouts. It is already the second most expensive in the world after Norway.

The setting up of the National Wage Consultation Council with representation from all stakeholders is important. We can’t talk about wanting to be a high income nation when there is no minimum wage in Malaysia. Certainly the council will be entrusted with making recommendations on minimum wage as well as other measures.

Many in lower and middle management are caught in situations where they are not entitled to overtime claims because they are not in the unionised category but they have heavier responsibilities and work longer hours than their subordinates.

In many cases, this group of middle class executives and managers end up earning less than those working below them.

However, many Malaysians would be happy to hear that they will get a 50% stamp duty exemption on instruments of transfers for buying houses worth less than RM350,000 if they are first-time buyers.

Still, many city folks will be hard-pressed to look for homes within this range. In Kuala Lumpur and Petaling Jaya, many link houses are priced at over RM1mil; semi-detached homes are more than RM2mil; and apartments are priced from RM400,000 to over RM2mil.

There’s some small comfort, though. The abolition of import duties on 300 items is welcomed. It’s not just for handbags and lingerie, as the list includes cotton T-shirts and even Christmas decorations.

So, let’s give credit when credit is due. After hotel bills, shopping is the second highest spending item for tourists so it is a big deal for the tourism sector, which is the country’s second revenue earner after manufacturing. In 2007, Malaysians and tourists spent RM67bil on shopping.

It has been reported that Malaysians have RM200bil as savings in the bank. Spending, or consumption as the economists prefer to call it, is essential to make the economy move.

In the United States, Australia and parts of Europe, there are factory outlets where one can buy branded items. There is none in Malaysia. It is our biggest disadvantage because tourists like to buy branded items at good discounted prices in a central area.

In the absence of such a facility, the removal of duties on these 300 items, especially branded goods, would help boost the tourism sector. There will be spillover effects because promoters who work in shopping outlets would benefit from bigger sales. So, it is inaccurate to suggest that the men in the street would not benefit. From hoteliers to taxi drivers and restaurant owners, tourism is helping them in a big way.

The Petronas Twin Towers, which have become a tourist attraction, will be dwarfed by the proposed 100-storey building under the Wawasan Merdeka mega project.

Like the KLCC, which was developed on an expensive piece of land once used for horse racing, the proposed tower will also be built on prime land that is currently idle.

The 88-storey Twin Towers project was heavily criticised when it was first mooted by Tun Dr Mahathir Mohamad.

Judging from the comments in blogs and Twitter, the proposed tower must be the most unpopular item from the Budget.

Many Malaysians have expressed doubt over the viability of the project and fear that the tall building would have occupancy problems as there is already a glut of office space in KL. Others are asking how this mega project would benefit Malaysians.

These are genuine concerns and obviously Permodalan National Bhd will need to explain its plans for the building. At 100 storeys, it will be one level short of the 101 Taiwan. The tallest building in the world, Burj Khalifa in Dubai, has 108 storeys.

So, if the Wawasan Merdeka building isn’t going to be a world beater, what are we going to achieve with this mega project?

Being prime land, we surely do not expect PNB to put up a 10-storey building there, so it will be good for them to share the benefits of the project to enable Malaysians to appreciate it better.

Hopefully, its construction would have multiplier effects, bringing in economic benefits for other sectors

We hope the project is part of an integrated push for KL to take the next leap forward. No one would argue with the need for the Mass Rail Transit (MRT), which will make travelling in the city much easier. No decent capital city in the world can do without it.

The push to make KL a financial centre under the RM26bil KL International Financial District plan would help strengthen our position as a reputable international Islamic banking. Talk is that Jalan Imbi has been identified for the project. The property market in KL will surely be the beneficiary if this takes off.

From a middle class perspective, the hope is that there will be spillover effects from this slew of projects which will be taken up by the private sector with input from the government. When buildings are put up, the construction sector will be the main beneficiary.

See the related earlier post::
 A painless, facilitative budget



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