The year 1959 saw a strong and sustained improvement in the economic and financial circumstances of the Federation of Malay States
pic source UTUSAN MALAYSIA
THE 1960 budget was the earliest recorded budget in Malaysia (back when it was only Malaya) and it was tabled by the then-Finance Minister Tun Tan Siew Sin who held the position until 1974. It was the minister’s maiden budget.
He was later succeeded by Tun Hussein Onn, who later became Malaysia’s third prime minister.
The year 1959 saw a strong and sustained improvement in the economic and financial circumstances of the Federation of Malay States.
This is all thanks to the US economy’s upturn as well as other industrial countries at the end of 1958 which increased the demand for primary products where Malaya’s rubber and tin industry has led to a considerable improvement in price.
“This improvement in the rubber and tin industries on which the economy of the Federation depends so heavily has resulted in a material improvement in the Federation’s balance of trade.
“During the first nine months of 1959 (9M59), exports totalled M$1,745 million compared to M$1,882 million for the whole of 1958,” the late Tan elaborated in his speech.
He also forecasted that Malaya’s economic outlook in 1960 will be favourable due to the expansionary phase of trade cycles in industrialised economies due to better demand for rubber and tins.
In fact, the Federation of Malaya’s bank savings for 9M59 has increased by M$11 million while deposits in the Post Office Savings Bank increased by M$7 million.
The 1960 federal budget included an ordinary expenditure of M$888 million and a M$874 million revenue, resulting in a deficit of M$14 million.
Tan said he needed to increase the revenue to boost the savings and avoid wastage or excessive spending.
He even proposed to review the tender system to ensure the public received good value for its money, both in goods and services.
The government’s expenditure had increased nearly 260% over the last 10 years compared to only a 197% rise in revenue.
Personal allowance for taxpayers has been cut while the percentage of tax payable on chargeable income at the top level (45% on incomes in excess of M$55,000).
“While the government takes no pleasure in increasing taxation, we are convinced these changes…will not cause hardship, and that we can rightly expect the people to accept them as a part of the responsibilities which the independent status of this country and its present circumstances impose upon them,” Tan said.
Understanding that tax evasion causes a serious loss of revenue, the late minister vows to go after these evaders.
Meanwhile, to boost the government revenue, the 1960 budget also introduced new duties as well as increased existing duties on various goods whereas heavy duties were imposed on luxury manufacturing.
“There will be some who, while urging an increase in social services, would also like to reduce both the incidence and the rates of taxation.
“One cannot, of course, have it both ways and whatever is done by the government has to be paid for by the people of this country in some form or another,” Tan said.
Tan also explained the subject of public debt in Malaysia which consisted of M$730 million in respect of local loans and £26 million in sterling (RM126.1 million [current value]) loans.
Moreover, the Federation has also borrowed long-term loans from the UK and the Singaporean governments with a total of M$106 million, which makes the total debt M$1,049 million.
The late finance minister’s budget was devoid of political showboating.
Flash forward to the present, the last budget tabled was the biggest in Malaysia’s history.
The total allocation for Budget 2022 was RM332.1 billion where RM233.5 billion would be for operating expenditure and the rest of the RM23 billion was meant for the Covid-19 Fund.
Still, experts warned that the budget posed some issues.
Universiti Tun Razak economic professor Prof Emer Dr Barjoyai Bardai explained that there were not many benefits for the middle 40% (M40) income group although they are mainly the taxpayers in the country.
During the Covid-19 pandemic, 10% from the M40 slipped into the bottom 40% income group category.
Moreover, Khazanah Research Institute senior research associate Yin Shao Loong felt that it may not be effective for small businesses who struggled.
As of Sept 28 last year, over 37,000 businesses shut down during the third Movement Control Order, which began in May.
Despite being able to provide aid in the short-term, experts such as the Research for Social Advancement pointed out that it is not effective in the long term.
The Covid-19 pandemic has caused major damage to Malaysia’s economy.
Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed updated that Budget 2023 will also focus on strengthening Malaysia’s economic recovery and generating sustainable growth in the long term.
One can hope that the budget this year will not be politically motivated and will help the citizens in the long run.
- This article first appeared in The Malaysian Reserve weekly print edition.