Govt wants subsidy to rakyat reduced but what about ‘Corporate Subsidy’?

Federal Government intended to reduce some of the annual subsidies of RM 74 billion to Malaysians annually, for fear if the subsidies continue on the increasing trend growth of 12% per annum would make the nation bankrupt by 2019. This was announced by Performance and Management Delivery Unit (PEMANDU) CEO Dato’ Seri Idris Jala last week.

The blunt statement obviously caused a lot of roar.

Never the less, the scare did catch a lot of attention. The concept of savings achieved from reduced or withdrawn subsidies is good and generally well received. 60% of the respondents recorded by PEMANDU so far gave thumbs up for the idea. In five years, the amount of subsidies saved would amount RM 1o3 billion. The reduction would reduce national debt to a more manageable level, where the Federal Government annual budget deficit would be reduced and gap narrowed. Lessons learnt from Greece very recently is sending shivers to many macro economists all over the world.

However, bold and courageous steps the Federal Government willing to take does not come without adverse opinion. Skeptics are concerned how it will affect majority of the rakyat, who are still very reliant on subsidy. Even subsidies on basic food such as rice, flour, sugar and cooking oil will affect most households.

Then again, many would want the subsidies to businesses be withdrawn. Some of them believed that businesses make money and thus should subsidise their services instead of the Government giving them subsidies for the rakyat. Top of the list are direct subsidies such as gas subsidy and contract purchase of power from IPPs. Other subsidies include deferred toll hike increase to tolled highway concessionaires. Other form of subsidies include tax allowances, incentives and breaks.

One of the tax allowance issued today is for AirAsia. Bernama.com has the story:

Published: 2010/06/02

AirAsia gets tax break extension

AIRASIA Bhd has been granted a further five year extension of an investment allowance, which entitles it to claim an income tax exemption of 60 per cent on qualifying capital expenditure.

This must be incurred between July 1 2010 and June 30 2014.

The amount can be set off against 70 per cent of statutory income for each year of assessment.

The approval is subject to the condition that the capex will exclude any aircraft not based in Malaysia; and should any aircraft be sold or leased within five years.

In such a case, there will be a clawback of the investment allowance used on the aircraft.

Read more: AirAsia gets tax break extension http://www.btimes.com.my/Current_News/BTIMES/articles/20100601235459/Article/#ixzz0pidlNU3R

*****************

On Monday, AirAsia announced a Q1 profit of  quarter billion Ringgit. This subsidy should not be allowed since AirAsia is making a lot of money from its operations and the shareholders are enjoying the profits derived. Then again, air travel is not essential for the rakyat of Malaysia. The consumers should pay for the travel. More over, millions of tourists enjoy lower airfare with this tax allowance that has been extended to AirAsia.

What is the point of AirAsia being the most successful and profitable low cost carrier in Asia when they enjoy subsidies? They already have been known for deferring payments to Malaysia Airports for the use of facilities all over Malaysia despite pocketing the money meant for the charge collected from passengers paying ahead before using the services.

Subsidies to money making businesses such as AirAsia should stop, at the expense of the Malaysian rakyat and detriment to the His Majesty’s Treasury. Subsidy is meant to alleviate the charge or reduce burden of the rakyat, for social development purposes. This is what PEMANDU should really look into, before lifting the subsidies on rice, sugar, flour and even charges to outpatients at Government Hospitals, proposed to be increased from RM 1.00 to RM 3,00.

Published in: on June 3, 2010 at 01:16  Comments (13)  

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13 CommentsLeave a comment

  1. BigDog,

    Yes! Spot On BigDog!!

    It’s easier to hit the poor rakyat rather than the Well Connected GLCs and Other Govt Sponsored Companies…

    We DARE Pemandu to Relook into the Subsidy Affair in the Light of Issues Raised by Big Dog….

    We also Dare Pemandu to look into the various leaks as a result of Corruption (at least 40% of Govt Servants) and Mismanagement…

    THESE are what will Bankrupt the Country

    ONLY THEN can we talk of Cutting Subsidies!!

  2. Ade menteri yg tak reti nak buat kerja supaya rakyat lebih senang jadi kenape mereka masih menteri ?

    Agaknya lebih baik dilantik ex-President Petronas jadi menteri.
    Agaknya lebih baik jika Tun Mahathir jadi penasihat kepada PM.

    Atau pun agaknya PM akan jadi PM satu penggal je !!!

    ALLAH KNOWS BEST

  3. Sekira orang yang mempunyai kereta viva dapat subsidi minyak (say) bernilai RM10 untuk setangki penuh minyak, berapa pula nilai subsidi minyak seorang billionaire dapat apabila dia isi setangki penuh minyak kereta 6,000c.c. (say Mercedes) beliau?

    FAIR & SQUARE

  4. Bro,
    Why is AirAsia so special? How the hell did the Co. managed to acquire so much preferences within such a short time after its inception?

    • Yes, a very pertinent question. I dont know how much proton is paying for this guy venture into the F1.

      mohamed

  5. I am extremely unhappy with the tax discounts given to Air Asia some time late last year. The travelers paid airport taxes which were supposed to be channeled to the relevant airport authority. However, Air Asia ended up getting discounts to settle their arrears.

    This makes no sense.

    Also, PEMANDU should not ask the public if Malaysia reduces subsidies, should it be done in 1 year, 3 years or 5 years.

    Which Malaysian won’t want to pay RM 1.80 per litre of fuel for the longest duration possible as opposed to perhaps RM 2.80 per litre ?

    The “decision of the people” might not be best for the nation’s economy, especially after the CEO of PEMANDU sensationalized our Government’s financial standings

    • I didn’t know that AirAsia got discount to settle the airport taxes arrears that we PAID IN FULL and sometimes close to 1 year IN ADVANCE. Shame on you AirAsia !!

      I wonder, is there ANY Malaysian company that are successful WITHOUT Government help? Survive and florish with EXISTING tax law & business regulations instead of getting SPECIAL help i.e extension, monopoly in permits etc etc

  6. I definitely think corporate subsidies is something the government should look into as well. But as of now, let’s do what we can to improve the situation for the purpose of a better future. We can’t just continue depending on subsidies.

  7. BD,
    Air Asia getting tax breaks while we going to pay more? If then, let just leave Air Asia alone. Let’s use other means of transportation. There’s always a substitute to air travel.. (macam selama ni hidup kita bergantung kat kapal terbang je)

    Now everyone can travel other than Air Asia…

    ~ OnDaStreet

  8. […] This post was mentioned on Twitter by azeeza, Tun Faisal. Tun Faisal said: Govt wants subsidy to rakyat reduced but what about ‘Corporate Subsidy’? http://bit.ly/dkoyPh […]

  9. 1) y cut the subsidy to the rakyat in needs?
    2) y not fight the corruption first which cost much more than the subsidy

    govt can say what they want. they can spin gud news about the subsidy cut…

    at the end I will vote for opposition coz this is the only way for me to voice my opinion. PM Najib might be only one term PM coz he thinks rakyat is stupid.

  10. it may be unfair to say rich and undeserving people when it comes to subsidies.

    two types of rich people, legal and illegal business owner and workers. for those legals, they pay tax, and very high tax.

    for many people, non-rich, they don’t pay tax because income not reach the taxable range. they get goodies indirectly because some other people pay tax.

    the rich play a part indirectly in community development and the non-rich play a part in a stable community.

    it is an ideology, in its simplest form means win-win, everybody get what they want.

    so, rich or non-rich, getting subsidies should not be an issues.

    it is the obligation for the government to manage the country well and in one and only form to directly relate to every citizen, not just few groups of citizen, is to deliver subsidies.

    a country is not a company, where a country’s government has obligations to its citizen, and a company’s management has no obligations to its employees.

    when a company’s management has cash flow problems, they will cut the obstacles, and as we can see usually, layoffs. the company need not care about whether its employees have family to take care of or any personal reasons because the company interests are above all.

    can a government treat its citizen as a company treat its employee? isn’t it a government is selected in the first place because of its citizen needs?

    when a government can’t see their responsibility to its citizen, what else can be expected from it?

    of course when a government is working honestly and has tried all it can to manage the country but still fail because of uncontrollable circumstances, i believe its citizen will be more willing to do what they can to take part in saving the country.

    but don’t expect anything from the citizen when its government spend money like their own money, run the government like their family business and think they own the country.

  11. […] We are talking about ‘corporate subsidies’. Money making corporations are still being given tax holidays and even exemptions. Of course they would have economic excuse to rationalize these ‘corporate subsidies’ allowed. One of the corporation which is enjoying this is AirAsia. Almost a year ago, it was announced that Air Asia would be getting 5 years tax break. […]


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