Corruption cited by analyst as the reason for inequitable income distribution
PETALING JAYA: Eradicating corruption and introducing a targeted tax system were cited as the best ways to reduce income inequalities in Malaysia.
According to think tank Emir Research, head of social law, law and human rights, Jason Loh, corruption has become systemic, structural and deeply rooted in the country.
“Those who engage in corrupt practices enrich themselves at the expense of the rakyat by siphoning money intended for the people, leading to illicit capital outflows,” he told The Sun.
“Corruption is the main cause of our problems. It is the “organizing principle” that aggravates the inequality resulting from economic factors.
He said cronyism and other such practices also lead to an inequitable distribution of wealth.
Loh was commenting on data which shows income inequality in Malaysia has widened even as median household income has increased.
In its 2019 household income and basic equipment survey report, the Statistics Department indicated that the gross income inequality based on the Gini coefficient fell from 0.389 in 2016 to 0.398 in 2019 in the centers. in urban and rural areas, it fell from 0.364 to 0.367 (the higher the number, the greater the gap).
For disposable income, it fell from 0.380 to 0.385 in urban areas, but fell from 0.365 to 0.361 in rural areas.
In addition to fighting corruption, Loh said the government should also increase revenue through targeted taxes aimed at specific sectors.
He said the revenue from these taxes should then only be used for specific areas and programs under the mortgage tax system.
A mortgaged tax is a tax whose income is only to be used for a specific purpose.
Loh said this would demonstrate both in principle and in practice the government’s commitment to closing and closing the income gap.
“The strategy is not to broaden the tax base. It is still premature within the framework of the 12th Malaysian plan ”, he declared.
Loh also rejected the idea that the goods and services tax should be reinstated.
“It does not make sense as more and more people, including those in the M40 group, are already seeing their purchasing power eroded,” he said.
He said “an impressive number” of 580,000 households have already moved from the M40 group to the B40 category, adding that 639,800 households have been classified as “poor” as of 2020.
In addition, around 2.1 million people are now considered underemployed.
“All of this means that the purchasing power of Malaysians has been severely affected and will remain so in the long run,” he said.
Loh said the heavy reliance on migrant labor has also resulted in lower wages.
He added that the government should do more to create jobs by working with the private sector on public-private partnership programs.
“We also need to have a job guarantee program to help the poor make the transition to the private sector and train entrepreneurs who can then create more jobs. “
Dr Rajah Rasiah, professor of economics at the University of Malaysia, Datuk, said the widening of the income gap could have resulted from the abolition of the 1Malaysia People’s Aid program, since it is based more on the threshold of poverty.
He proposed that more welfare-based strategies, such as social safety nets, be introduced to support the poor.
“The B40 and M40 groups became poorer after the Covid-19 epidemic. Their incomes have declined due to the economic downturn. The lockdown has also stifled their ability to continue their economic activities, ”he told The Sun.
Rajah believes that the 12th Malaysian plan “seems insufficient” in terms of its ability to achieve the goals set.
“The distribution of wealth was discussed in the Shared Prosperity Vision master plan, but there are no concrete action plans. “
He said a more efficient way is to introduce capital gains taxes on stocks while increasing the same property tax.
“(These ideas) need to be complemented by efforts to attract participation of the poor. “