Injecting Equity Into Our Tax System

Posted by Natalie Shobana Ambrose /
By Natalie Shobana Ambrose
theSun, Malaysia (page 14)
August 25th, 2011


“Stop coddling the super rich", billionaire Warren E. Buffett's Op-ed piece last week hit a few raw nerves especially its timing after a tug-of-war for an increased US debt approval that has made many nervous.

Buffett who is estimated to be worth US$47 billion is of the opinion that he and his super rich friends should pay more taxes as their taxable income is half of what the average middle-class wage earner pays. That is because most of Buffett's taxable income goes through the capital gains tax sieve which is at a much lower rate than what typical wage earners are taxed.

If Buffett was Malaysian he'd have paid next to nothing as our capital gains tax is 0% for equities and 5% for real property gains. What does all this mean to the layperson? Clearly, those with a disposable income surplus have the luxury of dabbling in capital gains activities and even when they do make a profit no matter how big or small, no Malaysian is taxed.

Now to naively put it, the more loose change you have, the more you've got to play with, and so potentially, the more you're going to make (or lose).

Come April when tax forms are due, you'd have made more money in a year than the wage earner who is dependent on a salary, yet you will not be taxed for any of the money you made at the stock market even if you made a million bucks.

Now we take that un-taxable profit and invest part of it in a few condos, and a few friends do the same which then causes the prices of property to sky rocket like it has. Some already own houses and investments and yet get a discount on all the newly-acquired property including luxury homes.

It doesn't matter that this discount was put in place to balance out socio-economic disparity many years ago, but has now translated into assisting lavish lifestyles inevitably raising the cost of living for those paying more taxes and living from hand to mouth.

If you were to sell any one of these newly acquired property within five years of purchase, you pay a 5% real property gains tax on what you made and still get a RM10,000 discount.

However if you decide to hold on to the property (noting that prices generally appreciate) and sell it after five years, you make a clean profit – that's right, not taxable.

Now compare that to what your friends made – some still made more thanks to the 5%-7% discount. What if the profit was RM100,000 or RM1 million?

We may not have Buffet magnitude billionaires just yet but according to the Malaysian Business we have companies paying RM455.6 million in a board payout with one director being paid RM106 million making all the other high earners look like paupers with RM12 million payouts. Imagine if they invested their bonus in equities without having to pay tax or bought multiple property at a discount.

Our tax systems need to focus on narrowing budget deficits and looking out for the wellbeing of every Malaysian citizen not just a select few.

Our country's affirmative action needs to evolve. Instead of a quota system based on race, it needs to be based on alleviating poverty and income levels. This does not mean wealth is being taken away – it means that wealth can now be distributed equally.

In the long run, looking after the wellbeing of those that need help will benefit everyone. Having a layer of super rich, does not translate into a community of high earners. It just means a select few are growing their wealth faster by taking advantage of a lopsided tax system and other biased mechanisms.

In order to have a united Malaysia, we need reforms that view citizens as Malaysians first, promoting equality across the board. We can start with revamping our tax system and include good governance in that equation. Maybe then we can truly say we are headed towards a 1Malaysia.

Natalie thinks that our tax system needs to be revamped into a progressive tax system.

** Note: 
This article has been heavily edited and does not accurately reflect the original work submitted.

The Haves & Have-Nots

Posted by Natalie Shobana Ambrose /
By Natalie Shobana Ambrose
theSun, Malaysia (page 12)
August 11th, 2011
http://www.thesundaily.my/news/108243

Unrest in the Middle East, protests in Europe and now London burns. The global climate is in unrest with most parts of the world experiencing some sort of chaos – riots, plunging stock markets, famine, natural and man-made disasters.
Groups of people are unhappy about something – totalitarian rule, austerity measures, targeted police brutality, empty pockets, unclean elections – all pertinent issues that have been ignored for too long and now the people have reached their tipping point and are doing something about it.
Too many are tired of being marginalised and as a last resort taken to the streets to demand a change in their situation. Of course not all who are marginalised have the luxury of going to the streets though.
No one really thought about Egypt’s political situation until the Egyptians started massing in Tahrir Square. Then the world took notice and their Mubarak who once ruled with an iron fist is now bed-ridden and seen wheeled into a holding cage at trial. Their situation changed drastically – perhaps not yet for the better but a revolution is now progressing in that country.
There is a saying that “when people fear the government there is tyranny and when the government fear the people there is liberty”. One can only hope the new leaders of Egypt, realise how strong their people are and rule justly.
In London, however, there is no excuse for such mindless thuggery destroying the city, though one has to wonder who these multiracial looters are and what is their cause? Have they been marginalised, have they been treated with respect, do they have jobs, do they feel like they are part of society or is all this carnage dedicated to Mark Duggan?
As history points out Tottenham in the 80’s experienced Broadwater Farm riots so is this the second wave of such horror or is this the doing of those who are “trapped in the system”, utterly bored opportunists?
Whatever the cause, what we have seen is how socially excluded groups of people have taken to the streets and for that suddenly been given the time of day by the media, those in authority and the world is paying attention – willingly or unwillingly.
Such political and social activism stems from a frustration and hunger for more. Not all activism is justified in the case of London but in other parts of the world people want change and are not just hungry for change but for food and basic necessities. A common factor in the different unrest experienced around the world is the fact that there is a great disparity between the haves and the have-nots. Income disparity that is so wide ends up becoming a major point of contention for the masses.
Looking at our country, the NKRA’s and GTP’s have been put in place to show that the government is doing something to improve living standards – it even added a 7th NKRA –to tackle living costs. Though with every glowing report, we are told that things are getting better – without it translating to my bank account or community.
Yes, food prices are high, yes we should let go of subsidies, yes we need to “tighten” our belts – but there’s nothing left to tighten and nothing left but debt. According to Mercer’s 2011 Cost of Living survey, our cost of living has overtaken cities such as Washington DC, Boston and San Francisco – surely this is a telling tale. Yet, money is easily dispersed and getting a government contract causes one to upgrade from middle income to instant tycoon.
What happens to those trapped in the middle income bracket? Those in charge of pay scales need to start being realistic. Some employers have the audacity to not pay proportionally because the presumption is that the employee being local will have lower living costs staying with their parents.
Clearly, many Malaysian employers no matter how highly educated have not graduated from the mentality that employees are not slaves to own and need to be treated with dignity. Large generations of Malaysian young adults enter the workforce with a heavy load of debt for basic needs and are unable to buy homes and cars without their parents help.
What will then happen to the next few generations? Will they have to pay off a generational debt? These are factors that caused people to walk the streets of other countries. A widening income disparity has never benefited any economy or government.
When people are hungry for basic necessities, have worked hard and still do not make enough to live, it is only a matter of time before they reach their tipping point – and then what?
Natalie is not an advocate of violence but knows of the reality that people are capable of anything when they have nothing to lose.