Tag Archives: KJ

In Defense of TNB

Malaysians are together in complaining about electricity price hikes announced by the government. With due respect to their justified grouses, Malaysians must accept prices to increase over time. It is not possible for prices to remain fixed over long periods of time.

It is not because the government doesn’t care or renegade its election promises but simply because the price has increased. When energy subsidy was introduced long times ago, the price for one barrel of oil was only US$30. At that time, the subsidy was not too big. It is now US$100. To keep the same price would mean to increase the amount of subsidy to make up the difference.

Why can’t we borrow some money to offset the difference? Because borrowing money to pay for the increasing cost of subsidy is not the answer. Any good and responsible government must ensure servicing loans is sustainable. If not, we are going bankrupt.

Therefore the government is right to embark the subsidy rationalisation program. If we continue with the present level of subsidy (already more than RM70 billion per annum) and we cannot pay our debts, we will certainly not be able to arrest the slide. Remember about the fate of Greece whose borrowings exceeded its GDP thus making the country bankrupt.

To pay our debts we must cut back on spending, Electricity is one of the items that need to be restructured.

What’s wrong with the present model of energy subsidy? The blanket approach based on consumption where everyone is entitled to cheap electricity is very costly and benefits the riches and corporate more as they consumed more than rest.

If so, why doesn’t the Government only raise the tariff for the riches and corporate? The answer is, it’s had to differentiate supply for individual and corporate. It is difficult to regulate subsidies so that only certain deserving people or industries enjoy it. We see what happened when subsidized diesel for fishermen were smuggled to other countries due to lack of enforcement. Therefore the monitoring cost is very expensive if we follow this approach.

Most people said- TNB has made billions of profit every year. Can’t we take 1 or 2 billion to offset the increase? We can’t. We must understand that TNB as an energy company is a very capital intensive. This is not a business where you can only make profit for a few millions. It involves multi-billion projects. Profitability is important if they want to retain investor among international fund managers. Or are we suggesting TNB has to borrow just to ensure everyone enjoys one of the cheapest household electricity tariffs in the world?

In defense of TNB, when the power industry experienced gas shortages in 2011, TNB had to buy it from Singapore’s YTL Power Seraya and TNB had to take the costly option to use distillates for power generation that cost TNB RM5 billion in fuel cost alone.

Not only that, since many of TNB’s power plants are old and inefficient, it had allocated a capital expenditure (Capex) of RM7 billion to increase TNB’s diversification of its fuel mix for power generation.

Therefore, it is very perplexing to hear from one popular youth minister that said TNB is only thinking of profits. Actually they are not.

Apart from the proposal is made by the Suruhanjaya Tenaga and the 70% of the consumer is not going to be affected, ‘the increased tariffs will contribute nothing to TNB’s profits. Of the 4.99 sen increase, only 0.90 sen (18%) will go to TNB for capital and operational expenditure to do system improvement for the next four years. The rest goes to Petronas (3.92 sen or 79%) and coal 0.17 sen or 3.4%).’ TNB profit? Zero.

Actually TNB should be applauded for their efforts. Being a highly profitable GLC like Maybank, CIMB means more contribution to government’s coffer considering our income tax revenue is low and our society is highly subsidized.

Not only that, TNB is one of blue-chip counters in Bursa Malaysia. Thus, TNB’s performance can affect bursa performance in general. It is due to their hefty profits that make them a blue chip counter.

This is the part where people are not aware of. As a public listed company, TNB is operated under very transparent manner- you can read their annual report, strategic plans,etc on their website

To be fair to TNB, how many times we heard any major scandal involving this utility giant like some of the big player in Malaysia? If you really have the energy and time to be ‘popular’ in attacking GLC, please directed it to loss-making GLC’s since there is no genuine excuse for their losses.

Isn’t it better to have a highly profitable GLC like TNB than having loss-making GLC’s?

Tagged , , , , ,

WHY GST IS NOT A REGRESSIVE TAX- In response to DS Anwar Ibrahim

Our opposition leader, DS Anwar Ibrahim has said GST is a regressive tax in which will make poor become poorer and the rich will become richer. He further claimed that the budget is ‘to punish the people’

I wonder whether his assertion is based on his astute knowledge on finance or simply because he wants to be portrayed as the robin hood of Malaysia.

When analysing the tax regime on the people; a regressive tax system means that the poor will pay more and the rich will pay less. It is no doubt in a pure GST regime that it is regressive. But slight modification has been made. More than 200 basic needs have been exempted from the GST. As the Robin Hood of Malaysia, DS Anwar should know  these are the items that mostly consumed by lower and middle income group. Clearly, under the revised GST, the poor and middle income groups have been protected.

Secondly, GST is a consumption tax. It is based on your spending. You spend more, you will be taxed more. Low and middle income earners are unlikely to spend more on non-basic items that are not GST-exempted. Even if they did, the volume is not as high as the wealthy people as their purchasing power is limited. It is usually the wealthy people who spend more on luxuries. The opposition leader should have known this since as a rich leader; he also likes to spend more on luxuries such as Omega watch, flying with private jet and numerous oversea trips.

Thirdly, the net increment of the GST to the government’s coffer is only about RM3 billion per year. The rest of the money generated from GST will go to the people and also to offset the loss from reduced personal and company taxes. The cash handouts and all the 1Malaysia initiatives are intended to help the low and middle income groups. Again, these safety nets are meant to protect the low and middle income earners rather than the riches. How could this be regressive then?

Next, the GST is not a regressive tax as it will make more people pay less income tax. It is announced those who earn less than RM4000 now will pay no income tax. This group as far as I know is not the wealthy people.

The opposition under DS Anwar Ibrahim always like to criticise the government for being too reliance on Petronas’ money. They argued government’s revenue should be expanded because sooner or later the oil money will be decreasing. Well, isn’t what exactly the government is doing? To be less dependence on Petronas’ money is a progressive move. To stick with the status quo is actually a regressive act.

So progressive GST is that it will ensure that errant business operators pay their dues. Has DS Anwar ever noticed that all the collection tax under the current SST may not actually end up in the government’s coffers? It is reported Malaysia has large capital outflows which usually happened from transfer pricing where companies transfer costs to various centres around the world to minimize the tax. In other words, government is financially bleeding. Once GST is implemented, it will make life harder for them to do so as they have to be complete record at every stage of transaction.

Those who is evading taxes can also be traced. Isn’t that progressive?

Lastly, GST has an inherent advantage. If a citizen consumes, he is taxed. If he does not and saves, the government can tap the savings for development purposes.

Clearly, GST is not a regressive tax.

Meanwhile, where is our self-proclaimed progressive Youth Leader to defend this progressive tax?

MatRodi

Tagged , , , , , ,