PM Anwar Robin Hood Budget is populist but no game changer for Malaysia economy

KUALA LUMPUR Theres a story going around that Malaysian Prime Minister Anwar Ibrahim eschews wearing a necktie because he adheres to the view that its a symbol of subjugation to the wealthy aristocratic class.

The storys probably apocryphal, but it is in keeping with the messaging so far from his three-month-old government. The revised Budget 2023 he tabled on Friday further enforced this stance, containing measures to tax and redistribute the wealth of the super-rich.

Datuk Seri Anwar, who is also finance minister, announced an income tax cut for middle-income earners which would provide additional disposable income of up to RM1,300 (S$396) each for 2.4 million taxpayers.

But the tax rate was increased for another 150,000 people about 1 per cent of the labour force who earn a taxable income upwards of about RM20,000 monthly.

The Budget proposed taxes on luxury goods, a capital gains tax on unlisted shares from 2024, and a levy on e-cigarettes and vapes, which would be channelled to the stretched public healthcare service. Mr Anwar also announced measures to help rebuild the savings of the poor in state-controlled retirement and investment funds which were drawn down during the Covid-19 pandemic.

This comes on top of maintaining RM8 billion in cash aid to the poorest 60 per cent of society, as well as RM64 billion in subsidies that could be further targeted to ensure they benefit the poor more than the rich.

According to Universiti Malaya Centre for Democracy and Elections sociopolitics lecturer Awang Azman Awang Pawi, the premier has sought to be seen as pro-lower and middle classes since he first got involved in activism and politics.

Professor Awang Azman also noted Mr Anwars reference during his Budget speech to the Pandora Papers, which in 2021 leaked details of secret offshore accounts, and the governments plan to go after wealthy tax evaders.

The sum to be returned to the public could finance projects and national coffers without taxing the poor, the professor added.

Some observers were reminded of the English legend of Robin Hood, an outlaw who stole from and scorned the rich to give to the poor.

This image is reinforced by Mr Anwars earlier popular moves such as cancelling the purchase of a RM2.3 million Mercedes-Benz meant for his use, not taking a ministerial salary while the rest of his Cabinet took a 20 per cent pay cut and forcing tycoon Syed Mokhtar Albukhary to share the profits from his rice monopoly with farmers.

The Budget was in line with his Madani concept of a humane civilisation, risk consultancy KRA Groups strategy director, Mr Amir Fareed Rahim, told The Sunday Times.

Social justice will be the main narrative thrust, where Anwar will target the better off to convince the wider public that his government will ensure the pain is shared.

But like other analysts, he noted that while the premier lashed out at corruption and the concentration of wealth among an ultra-rich elite, the big picture fiscal and economic measures were safe and populist with no real game changers despite earlier hype about elevating the economy to the next level.

The Budget tilts towards populism, with a large share of subsidy and social assistance, while increasing tax collections from wealthier segments. The government said the country was not implementing a broad-based consumption tax or goods and services tax for now, given the cost of living issue, said UOBs economics team.

Higher prices hit everyone, and with inflation expected to continue at an elevated level within range of 2022s 3.3 per cent instead of the decades average of below 2 per cent the measures against the rich will please the poor but hardly result in any belt-tightening for the well-off.

Based on the finance ministrys calculations, a person with RM250,000 per annum taxable income which would already put a single-income household in the top 4 per cent of Malaysias richest families will end up paying just RM200 more to the government. More On This Topic Malaysias expanded Budget ahead of state polls to aid poor, tax wealthy and narrow deficit Revenue targets crucial for PM Anwars maiden Budget The speech was Robin Hood in spirit, BowerGroupAsia political analyst Adib Zalkapli said. But the measures were more populist as it put more cash into peoples hands than it took from the rich. Its a Budget clearly with the state elections in mind.

The legislatures of six states, including two of the richest Selangor and Penang controlled by the premiers Pakatan Harapan coalition, are set to elect new assemblymen in July.

With about half of Malaysias electorate casting their vote, the results will have a huge impact on the stability of the Anwar administration, especially if its political partner Umno does not improve on its dismal showing at last years national polls.

Mr Anwars so-called unity government was cobbled together after the general election resulted in Malaysias first hung Parliament. The administrations stability rests heavily on Umno, which provides legitimacy among the Malay majority, as well as 30 parliamentary seats via its Barisan Nasional coalition.

A further loss of support among Malays, or worse, a revolt against Deputy Premier and Umno president Zahid Hamidis leadership due to a poor performance at the state polls would be a stern test of the governments longevity. More On This Topic Malaysia to focus on living costs, raising wages as growth slows ahead of looming state polls What Anwar needs to do to tackle Malaysia's rising cost of living