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Malaysians ShoppingIncreased prices of fuel, food and property, impending issues of the GST implementation and other questions looming over the 2014 Budget are being closely monitored by Malaysians today. More than others, lower income groups are increasingly feeling the pinch as affordability stands in the way of their personal development, especially in the areas of education, family maintenance and day-to-day survival. But the certainty that remains for this group is that help is not far away as the government’s subsidies and the Bantuan Rakyat 1Malaysia (BR1M) scheme that was introduced two Budgets ago are in place to cushion the blow of increasing prices. As for high income earners, it’s safe to say that the increased costs and subsidy cuts may only make a fraction of a difference to their high-flying lifestyles. So what then, of the middle income earners? What will the 2014 Budget hold for them? In Malaysia’s competitive working environment, be it in the public or private sectors, the middle-income earner is constantly juggling monthly wages between travel expenses, property purchase, loan interest rates, education debt and family support. It’s these factors that have raised much debate over the group being caught in a middle income trap, whereby wages are not rising in tandem with other price increases and government subsidy cuts raise the question of who benefits the most from it. Stagnant monthly wages and lack of support from the government can neither allow them to splurge to keep up with the demands of the working world, nor qualify them for help a kin to the BR1M incentive.What should middle-income earners get?When the government announced fuel subsidy cuts in September, which increased petrol prices by 20 sen, it was made known that the RM3.3 billion savings from that reduction would be channelled to more BR1M incentives and infrastructure projects. The move was deemed by Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar as a holistic approach to manage fiscal deficit and distribute subsidies to targeted groups. While some understood that the move would cut subsidies to those who do not need it—like high-income earners and foreigners—it also held repercussions to middle-income earners who not only endure the price hikes, but can’t claim incentives in the form of hand outs. According to PKR think tank Institut Rakyat, Barisan Nasional recognises something needs to be done to alleviate the inflationary impact for the middle-classes, as this group has dealt with stagnant wages for over a decade. But it explains that housing and food prices have been increasing in the last few years so the 10% increase in fuel price will be a squeeze on their consumption. “Despite the government’s warning to traders to not raise their prices by more than 1%, it is likely that an inflated cost will be passed through to consumers. Rather than increasing prices by 1 or 2 sen, traders may go for a tenfold increase in the order of 10 to 20 sen as they have done in the past,” Institut Rakyat explained. PKR strategic director Rafizi Ramli—in recognising middle-income earners will lose out the most with the fuel hike—challenged the government to in turn reduce car prices in line with global prices if it is serious about following the current oil market prices. Rafizi explained that the average household income of RM5,000 and below, which is what 70% of Malaysian households earn, means Malaysians pay more in taxes and toll compared with the fuel subsidy they benefited from. “On average, a household uses about 300 litres of petrol a month. With the subsidy of 63 sen per litre, this means that a household receives a fuel subsidy of RM189 a month. But if the household has a vehicle worth RM60,000 being paid off in instalments for seven years, the excise duty and interest payments work out to RM3,565 annually,” he said. “This works out to about RM300 a month. This means that Barisan Nasional is taxing the Malaysian people in the form of vehicle excise duty to the sum of RM300 a month when the fuel subsidy is only RM189 a month, on average.” Subsidy cuts and fuel increases aside, ownership of property by most middle-income earners has become less affordable over the years as well. Many have to resort to renting out homes or search for accommodation in the outskirts of urban areas, which will only take a toll on travelling expenses. But in 2012, the government introduced Perumahan Rakyat 1Malaysia (PR1MA), established to plan develop, construct and maintain affordable housing for middle-income households in key urban centres. Those targeted were families with a collective household income of between RM2,500 to RM7,500. Through this scheme, property in and around urban areas cost between RM100,000 to RM400,000, making them at least 20% lower than the market rate, according to Prime Minister Dato Seri Najib Tun Razak. But, was that good news for the group? PKR vice-president and Lembah Pantai MP Nurul Izzah Anwar doesn’t think so. She explained that PR1MA does not address that group per se and the government’s attempt to aid housing woes through the My First Home Loan Scheme is also flawed. The latter, announced in 2011’s Budget, allows individuals earning RM5,000 and below per month to forgo the standard 10% down payment for a house and take up a 100% bank loan. She said only few who are eligible for the scheme would be able to afford the monthly repayment of almost RM2,000 for a house priced at RM400,000 (the average cost of an urban home). On lowering housing costs and building cheaper houses through these schemes, Nurul Izzah said that it will take a very long time to achieve this as Malaysians are subservient to private developers because the government relies on them for land. This in turn means that we are forced to eventually pay the price being offered by private developers, whose purpose is to maximise profits.Managing middle-income woesAlthough arguments persist on the government’s short comings with protecting middle-income earners, reps have repeatedly backed their promise of a better future for this group. In multiple statements released by the Ministry of Finance, it ensured that this year’s Budget will focus more than ever on this group, however it has kept mum on any solid details till the 2014 Budget is tabled. According to Deputy Finance Minister Datuk Ahmad Maslan, the coming Budget may include a tax exemption for the middle income earner, this being just one of the measures being considered to ease their burden. Datuk Ahmad Maslan also said that the bigger aid package for the middle-income group includes education aid, as well as the five to seven other subsidised items like petrol, cooking oil, flour, sugar, cooking gas and rice, all of which are said to be worth more than the RM500 BR1M incentive. Finance Minister II Datuk Seri Ahmad Husni Hanadzlah then said that help will be channelled towards those of household earnings between RM4,000 to RM5,000, but it may or may not be in the form of money. Datuk Seri Ahmad also explained that the Government would be saving RM24 billion by reducing petrol, diesel and gas subsidies, which were basically enjoyed by the middle-income group as well as higher-income groups. He added that the money saved can be allocated for the development of the country, especially with the government focusing on affordable housing schemes. On the property front, although scepticisms follow any possibility of middle-income earners owning their own homes under PR1MA, president of the Chartered Tax Institute of Taxation of Malaysia and senior executive director of PwC S. M. Thanneermalai believes the government is helping the group through it but said the burden of increasing supply of such housing should not only fall on the government, as that will add to the budget deficit problem. He said private property developers should contribute to the nation by building more low and medium cost houses priced less than RM250,000. On tackling healthcare and education amongst those earning below RM10,000, he said that allowances should be increased substantially to sustain these requirements. Malaysians will soon know the fate of their livelihood this 25 October, when Prime Minister Dato Seri Najib Tun Razak is scheduled to table Budget 2014.

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