“YB Rafizi has lost multiple court-cases for “fitnah” over the past 2 years and his credibility is suspect. However, his latest sotong-goreng of tax figures to mislead the people had actually back-fired on him”
Dato’ Eric See-To
Rafizi Ramli’s tax collections accusation is yet another “sotong goreng” to mislead
1. In a recent quarrel, a PKR colleague of YB Rafizi Ramli accused the Pandan MP that he lied about figures and will continue to do so.
I concur with this senior central leadership council member of his party.
2. There is little doubt that YB Rafizi is a master of using figures to mislead but all too frequently his conclusions do not hold up to scrutiny but is just designed to incite without telling the truth.
3. Yesterday, Rafizi made the observation that tax collections in Malaysia had outpaced GDP growth by stating that in 2010, the tax collection was RM60.3 billion and RM112.3 billion for this year.
4. Rafizi said that tax collections had grown at an average of 11% per year – faster than our average GDP growth of 5%. He said this is a bad thing and he compared this to Australia’s tax collection average growth of 5.3% during the same period.
5. However, Rafizi does not state that the GDP growth of Australia is just 2.7% during that period, meaning that tax collections had also outpaced economic growth there – a fact which completely destroys Rafizi’s own argument.
6. Australia’s example show that income tax collections outpacing economic growth is not unusual.
7. There are 3 possible scenarios where tax collections can outpace economic growth.
8. The first scenario is the increased profitability of companies, rising income levels and increasing numbers of tax-payers.
9. There is little doubt that many companies have seen increased profitability since tax was collected in 2010.
For example, the top two largest companies in Malaysia are Tenaga and Maybank. Tenaga’s profit before tax increased from RM1.5 billion in 2009 to RM8.1 billion in 2016 while Maybank’s pre-tax profits increased from RM1.7 billion to RM8.5 billion in the same period.
10. The income levels of Malaysians had also increased substantially during this period leading leading to higher tax collections.
Department of Statistics had stated that the Median monthly Household income in Malaysia had increased from RM2,841 in 2009 to RM4,585 in 2014.
11. Additionally, rising income levels have seen those whose salaries were previously below the minimum taxable threshold level rise to surpass that level and become honest tax-payers.
12. The second scenario is increased tax compliance. There is no doubt that one of the problems that Malaysia had faced in the past was tax evasion, tax avoidance and the underground economy.
More stringent enforcement and the implementation of the GST had also encouraged companies that had previously not registered with LHDN to come clean and pay their fair share of taxes and report more truthful sales figures.
13. The last scenario is that income tax and corporate tax rates have increased. However, the reverse is correct.
14. Despite Rafizi’s false accusation that the government had not reduced taxes when implementing GST, Rafizi should note that since Dato Sri Najib Razak became Finance Minister in 2008, the highest corporate tax rates have dropped from 27% in 2007 to 24% while the tax for SMEs is now 18%.
15. Personal income tax rates for those in the RM100,000 per year and below tax brackets have also substantially fallen from 28% to 21% during the same period.
16. When GST was implemented in 2015, changes to our income tax system also meant that 300,000 families earning RM4,000 per month no longer had to pay any income tax.
17. Malaysia is not considered a country that heavily taxes its citizens. Taxes as a percentage of our GDP is just 14.5% for Malaysia compared to 17% for Thailand, 25.8% for Australia, 26.8% for South Korea and 34.4% for the United Kingdom.
18. In fact, Govt revenues as a percentage of our economy, which indicates how much money the government collects from the economy had dropped from 20% in 2010 to 17.7% in 2016 .
19. YB Rafizi has lost multiple court-cases for “fitnah” over the past 2 years and his credibility is suspect. However, his latest sotong-goreng of tax figures to mislead the people had actually back-fired on him.
20. Instead, YB Rafizi had just highlighted the success of the government to grow the economy, increase income levels, fight tax evasion and deal with the underground economy.
Dato’ Eric See-To is the deputy director of Barisan Nasional’s Strategic Communications (BNSC) team