NEWSLETTER| Azmi Rasheed Khan
In the wake of economic changes, Malaysians find themselves grappling with a series of impending hikes.
While we will witness an increase in electricity tariff and possible school bus fees this month, March is set to bring forth additional burdens that will undoubtedly strain the livelihood of the people.
Come March 1, the service tax is poised to rise from 6% to 8% as announced by Prime Minister Anwar Ibrahim during the 2024 budget presentation.
Although Anwar gave assurances that the increase would exclude essential services such as food, beverages and telecommunications, the broadening of the tax’s scope to include the logistics, brokerage and insurance sectors will inevitably have indirect repercussions on the prices of nearly all goods.
Even the once-exempted traditional medicine sector will now bear the brunt of increased operational costs due to the hike. Business owners, facing higher taxes, are likely to pass on these additional costs to consumers, adding to the strains on their household budgets.
Economic experts warn that the sales and service tax regime would have a cascading effect on prices, leading to higher costs for industries.
This, in turn, would result in an inevitable spike in the cost of living, a cycle that will particularly impact the B40 and M40 groups, pushing them further into the vicious cycle of financial strains.
Reports suggest that traders may exploit the digital service tax (DST) increase of 2% to inflate the prices of digital goods, equipment and services.
This, coupled with the broader service tax, paints a grim picture of escalating costs across the board.
We must question whether these tax increases are solely focused on generating an additional RM3 billion in government revenue this year, or if the well-being of the people has become a secondary consideration.
The government’s optimism about the added revenue should not overshadow the potential adverse effects the hikes have on its citizens.
It is crucial for the government to address the concerns of the people before implementing policies that exacerbate their hardships.
The lack of tangible relief or a downward trend in prices since the current government took office over a year ago, contradicts its promises and raises doubts about its ability to manage economic challenges effectively.
As Malaysians grapple with the impending surge in prices due to the service tax hikes and the broader economic implications, the difficulties faced by citizens are multifaceted.
The increase in the cost of goods and services, driven by the higher taxes imposed on various sectors, directly impacts household budgets.
For the B40 and M40 groups, who already navigate financial constraints, this escalation adds an extra layer of strain on their ability to meet basic needs.
The rising prices extend beyond immediate consumables, affecting essential services and commodities. From daily groceries to healthcare, education and transport, the augmented costs permeate various aspects of daily life.
Families find themselves re-evaluating their spending priorities, making tough choices between necessities and discretionary expenses.
The burden of these choices falls disproportionately on those already facing economic challenges, amplifying existing inequalities.
Moreover, the surge in prices has a domino effect on the overall economy. Consumer spending, a key driver of economic growth, is likely to contract as households tighten their belts.
This, in turn, could lead to reduced demand for goods and services, potentially impacting businesses across sectors.
As Malaysians confront these economic hardships, there is a growing urgency for the government to reassess its policies and consider measures that could alleviate the burden of the people for a more sustainable and inclusive economic environment.
Measures like more tax cuts and rebates that could return money to consumers and boost spending and deregulation to relax the rules imposed on businesses, must be introduced.
Businesses must be allowed to operate more efficiently while plans that could create economic growth and resources, be outlined for the benefit of all.
A foreign economist has painted a grim outlook for Malaysia’s economic growth under the leadership of the present prime minister.
Gareth Leather, a senior analyst with London-based economic and financial consultancy, Capital Economic, also forecasts a slowdown in growth and slim prospects of reforms.
The government must take this as a challenge and do its utmost best to stop this deteriorating demographic outlook and slowdown.
The writer is the chief operating officer at Institut Masa Depan Malaysia