Update - DAP unveils alternative budget

Update DAP unveils alternative budget

Written by Yong Min Wei & Siti Sakinah Abdul Latif

Wednesday, 07 October 2009 12:37

PETALING JAYA: DAP has unveiled an alternative national Budget 2010 with an operating expenditure of RM127.3 billion and proposes enactment of an Unfair Public Contracts Act that could see the expropriation of highway toll concessions and Independent Power Producers (IPPs).

The alternative budget by the federal opposition party also involves capping Petroliam Nasional Bhd's (Petronas) contribution to the federal government, the establishment of a National Stimulus Fund, personal tax cuts, fair wage programme as well as enhancing competitiveness of small and medium enterprises (SMEs) through taxation policy and financial assistance.

In the proposed DAP budget unveiled today by secretary-general Lim Guan Eng, the operating expenditure would be cut by 17.4% from RM154.2 billion in 2009 to RM127.3 billion next year while development expenditure would rise by 8.2% to RM54.6 billion from RM50.5 billion previously.

The alternative budget presents a total of RM182 billion of government expenditure, resulting in a RM38 billion budget deficit that is equivalent to a reduced 5.66% of gross domestic product (GDP).

Lim Guan Eng (fourth from left) and other DAP leaders at the launch of the party's alternative Budget 2010 in Petaling Jaya. Photo by Chu Juck Seng.

Lim Guan Eng (fourth from left) and other DAP leaders at the launch of the party's alternative Budget 2010 in Petaling Jaya. Photo by Chu Juck Seng.

At a press conference, Lim said: "Barisan Nasional's (BN) reckless management of the country's wealth and windfall blessing has resulted in a structurally weaker Malaysian economy compared to many of our peers."

He cited data from Bank Negara Malaysia, which states the federal government's total debt stood at RM317 billion, a 60% increase from 2005.

Lim said it was necessary for the government to find new sources of income to limit its over-reliance on the oil and gas sector (44% of budget 2009), suggesting that approved permits (APs) be auctioned off to the highest bidder.

"Based on an estimated market price of RM25,000 per AP, the auction will provide an additional RM1.75 billion to the government coffers," he said. DAP will be presenting the budget to its allies in the Pakatan Rakyat (PR) on Oct 19.

Asked if the DAP would submit the alternative budget as a proposal to the ministry of finance for the upcoming budget 2010, Lim said the party would send the budget through the PR machinery.

Themed Malaysian Economic Democratisation, the opposition party proposes an Unfair Public Contracts Act to form a Public Contracts Commission to review lopsided concessions deemed to be against the public interest, adding that many highway toll and IPP concessions are unduly lucrative at the public's expense and should be restructured to an equitable position for all Malaysians.

Besides wanting to review all the terms and conditions of national electricity company Tenaga Nasional Bhd's power purchase agreements (PPAs) with IPPs, DAP would seek to expropriate IPPs that were not amenable towards both reducing the electricity rates specified in the agreements and unwilling to share the risk of fuel price fluctuation.

"For the purpose of expropriating highway concessions which are generating extraordinary profits at the expense of commuters, the DAP-proposed Budget 2010 will allocate RM10 billion for the exercises," it said.

However, it said the fund for the exercise would be raised via government bonds pledged against the cash flow from the highways which have been expropriated and hence would not add any further stress on the government's budget.

It pointed out that an off-budget RM25 billion is allocated to buy back PLUS Expressways as well as other highway toll concessionaires with abnormal levels of profitability which do not commensurate with the risk and capital invested.

The DAP budget also proposes that the Employees Provident Fund (EPF) be the manager and custodian of a newly established National Stimulus Fund that would drive fiscal spending and to provide financial assistance to all Malaysians during economic downturns when the GDP grows at levels below 2%.

"Based on the estimated revenue projections from Petronas, at least RM4 billion will be deposited into the National Stimulus Fund in 2010 based on the DAP Alternative Budget," DAP notes.

In tackling over-reliance on oil and gas revenue, DAP also proposes that Petronas set the target to pay not more than 50% of the group profit before tax, duties and royalties to the federal government from 2012.

However, given current challenging economic climate in Malaysia, the DAP proposed that Petronas channel 60% instead of 50% of group profit before tax, duties and royalties to the federal government.

DAP points out that the cap would not only reverse the trend of over-reliance on exhaustible oil and gas resources, hence fuelling the growth of other productive sectors of the economy, but also enable Petronas to boost its reinvestment growth.

On personal income tax cuts, it proposes that for year of assessment (YA) 2010), the first RM15,000 chargeable income be tax exempt while the subsequent RM15,000 be taxed at 7% instead, to assist Malaysians cope with the increase in living expenses, especially in urban areas.

Currently, the first RM2,500 is tax exempt while the next RM2,500 is taxed at 1%.

According to its proposal, a married worker with a monthly pay of RM3,000 with a full time housewife who looks after two young children will pay no tax. It also proposes that the top tier income tax bracket be raised from RM150,000 chargeable income currently to RM300,000 while maintaining the top tax rate of 27%.

In enhancing the competitiveness of SMEs, the opposition party proposes the preferential tax rate for SMEs on the first RM500,000 chargeable income be reduced by two percentage points to 18% for YA 2010, adding that a new partial tax exemption threshold be set at RM200,000 at a rate of 12%, effective from YA 2011.

DAP also proposes that new SME start-ups enjoy full tax exemption on the first RM200,000 chargeable income for each of their first three years of assessment.

It also wants to streamline the current Special Government Fund schemes and shorten the approval and disbursement time for financing such financing to eligible SMEs, adding that it is proposing a RM250 million fund be set aside for seed funding driven by the private sector for these enterprises.

"DAP proposes to budget RM100 million in streamlining bureaucratic procedure and minimising administration burdens and compliance cost for our SMEs."

Touching on its low-income and fair wage initiative, DAP is proposing to raise the employer EPF contribution rate to 15% of total wages from 12% currently, while in an effort to increase take-home pay, DAP believes workers with pay below RM900 per month should be waived from employee contribution to EPF.

As for employees earning not more than RM1,400 per month, it said the employee's contribution to EPF should be reduced from the present 11% to 5%.

DAP is proposing that the government give workers a fair wage income supplement to boost their income. It proposes that workers aged above 45 who earn less than RM900 a month be given an annual income supplement of RM2,400.

For those aged above 35 who are earning less than RM1,400 per month, they would receive RM1,600 annual supplement per annum.

Of the supplement, DAP said a quarter would be in cash while the balance would be channelled into the EPF accounts of the workers in an effort to help them save for the future.

On responsibility for public transport, DAP is proposing it be devolved to states with every city having a transport authority under the oversight of the city council while smaller towns and suburbs be grouped together under the state-wide transport authority.

In the Klang Valley which is too inter-connected for transport management to be left to a local council, the alternative budget proposes the setting up of a Klang Valley Transport Authority (KVTA).

"Under this system of devolved transport expenditure, RM13 billion is budgeted for public transport in 2010 and will be distributed to the individual states based on population and vehicle industry," it said.

DAP is also proposing RM750 million in 2010 to eradicate hardcore poverty in the country within five years, RM500 million for social safety net for those living below the higher and revised poverty line, RM500 million for development of human capital of poor families and RM3 billion for the development of basic amenities in rural areas and in Sabah and Sarawak.

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Last Updated on Wednesday, 07 October 2009 21:20

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