Some Hit and Some Misses in the 2010 Budget

Business Times Singapore did a feature on Najib's 2010 budget. It encapsulates the shadow of an intended fiscal management feature within the budget bringing chiefly revenue from two additional sources. These are: the return of the real property gains tax and a new tax on credit card holders. If administered properly,it will help to quell a potential property bubble from occurring as well as check credit card abuse.

Let us read the report. I have paraphrased where necessary for brevity.

" The main thrust of Malaysian Prime Minister Datuk Seri Najib Razak’s maiden Budget last Friday appears to contain the fiscal deficit.

Courageous cuts were made in both operating and development spending. Najib, currently also Finance minister, cut operating expenditure by almost 14 per cent and development expenditure by over 4 per cent. The cuts will bring the deficit down from 7.4 per cent of GDP this year to 5.6 per cent in 2010.

Taking cognizance that the prospects for global economic recovery are still uncertain, it is only prudent that Malaysia slows down the pace of its pump priming. The budget envisaged that private sector will take up the slack of the reduced government spending by export expansion— at least 3-4 per cent in 2010. Private consumption is also expected to be almost 5 per cent more.

Malaysia estimates real GDP growth for 2010 to come in at 2-3 per cent. If the government is serious on hewing off further fat from its operating expenditure,it can administer transparency and accountability modes in tenders and contracts.

An unconventional feature of the 2010 Budget is the proposal that people residing and working in the Iskandar region in Johor be taxed only at a flat rate of 15 per cent. This is apparently design to kick start the region’s development. But in the Malaysian context, such a low tax rate could create problems. Najib’s proposed cut is a whopping 11 percentage points off Malaysia’s current minimum income tax rate of 26 per cent and could entice a lot of less-than-bona-fide companies and individuals to the area.Administering two separate tax zones in a single country is a difficult proposition and enforcement could be tricky. This is not the same thing as a free trade zone or a duty free area, which the Income Tax Board has long experience in dealing with.[That is an area where MACC should start looking from now onwards.]

The Budget also proposed the restoration of the real property gains tax at a flat 5 per cent on all such assets, irrespective of the tenure of holding. This appears to be a rollback of a liberalisation by former prime minister Tun Abdullah Ahmad Badawi in 2007 — although Tun Abdullah had only suspended the tax rather than abolish it.

Originally the tax was 30 per cent of the disposal gain if the seller had kept the asset for less than six years. Thereafter, the tax got progressively less until it reached zero, depending on the tenure. In short, it was to deter land and property speculation. On the other hand, sadly PM Najib’s proposal would appear to penalise those who were never speculators.

Finally, Najib proposed a RM50 charge on each credit and charge card and a RM25 fee for each supplementary card. The rationale is to curb the aggressive growth of credit card debt. Malaysia, with an estimated working population of about 14 million, has a staggering 11 million cards in circulation. Najib may be right to assume that that is several million too many. [However, many an individual holds more than one card.As such, many will be returning all their unnecessary cards, so bank incomes will take in dip in this aspect.]

[Curtailing expenditure using credit card may also work against the current government efforts to promote consumption that drives the recovery of the economy.]

A Decapitating Move!

Who would believe Budget 2008 could have such adverse effects on most of us?

Us-here means those who are holders of numerous credit cards.

Over the years, we have been accumulating these credit cards particularly Platinum Credit cards. We were quietly happy that our credit rating has improved and that we can quickly access a lot of cash even though at a higher cost. No need to go to the bank, filling out forms and getting guarantors.

However, PM Najib as Finance Minister has put paid to our financial comfort zone. For every principal card, a government tax of RM50 will be automatically levied from January 2010. Supplementary card holder will pay RM25.For many who depend on credit cards for cash flow,PM Najib has indeed wounded the golden goose.

I know of many small businessmen that thrives of credit card loans to offset cash flow problems. I guess they can still keep the cards if they want to but pay unnecessary taxes for it now.

For many banks intending to go on aggressive roadshows to promote credit cards,it has rung the death knell as well. Once someone has a credit card, he may want to upgrade. But if he is already a Platinum card holder,it will be downright difficult to ensnare him to carry an additional card.No one wants to pay the government.Why should they?


I expect many to cancel their cards posthaste before January 2010. Just today, I went to two banks to cancel three of my cards. I will be canceling more cards in the days to come. Finally, I guess I will only end up with about four to five cards which are 'relevant' to me.

Anyway,there is a silver lining for me in all this. My so-called assumed 'indebtedness' on record at Bank Negara will now slowly evaporate.....

But Just Who are You Kidding?

Tan Sri Amrin Buang, The Auditor-General

The Head Honcho of the Malaysian Public Services Department (JPA)says all ministry secretaries-general and directors-general will be made accountable for the abuses, negligence, mismanagement and excesses conducted by and within their respective ministries and departments. What a joke!

Who is he kidding?

We all know finger pointing will commence and the most junior officers down the pecking order will be made to pay after a laborious witch-hunt. I do not believe the rakyat's money will ever be recovered. It will just be a rap on the knuckles and the 'big buffons' will once again escaped this "wool over the eyes" dragnet.

Director-General of Public Services Tan Sri Ismail Adam said all those implicated in the 2008 Auditor-General’s Report will be penalised.

Let us look at some of the excesses mentioned in the 2008 Auditor-General's Report quoted by Ismail.

"For example, if the actual cost of the item is only RM1 but the ministry paid RM600 for it, then the individual who approved it will have to repay the ministry or Treasury RM599." Since most are officer recommendations and committee approvals by representatives from even the Treasury itself sitting on these interdepartmental approving committees, how is blame going to be equitably apportioned?

Fancy this.

Among the observations of this year’s A-G’s report which raised eyebrows is Kolej Kemahiran Tinggi Mara Balik Pulau’s purchase of two laptops for RM42,320 each, when the market price is only between RM5,350 and RM6,500.

Ismail said that at times it may be hard to put the blame of questionable purchases on one individual who may claim he was only following orders.

"But if we have enough evidence, he will have to pay back the money as he put the ministry or department at a financial disadvantage," he said. [Another interesting loophole has been identified.]

He said the repayment could be deducted from their salaries or from their gratuity or even pension.

Ismail said that since 2008, the A-G’s report had become part of the criterion of Key Performance Index (KPI) for all 38 secretaries-general and their directors-general.

"If their ministry or department is mentioned unfavourably in the A-G’s report, then it will affect their overall performance score of the KSU (secretaries-general) or D-G and can affect promotions and increments," he said.

"Even if the mistake is done by the despatch boy, as the heads (of the ministry or department), the buck stops with them and they must be held accountable."

He said such actions were taken against several officials last year following the 2007 A-G’s report, where they ended up being "pulled" or in layman’s terms "cold-storaged" or passed over for promotion.

Ismail, however, declined to pinpoint the individuals, saying it was sufficient that those in the service knew who they were.

"But the public must also know that we are not sitting idly by when reports of mismanagement of public money are exposed," he said, adding that just like last year, anti-corruption investigators will be brought in to probe all ministries and departments implicated in the 2008 A-G’s report.

He also said none of them had been or would be transferred as has been the public perception.

"We keep them there and rehabilitate them if we can, otherwise you are only transplanting the problem," he said.

The Malaysian Anti-Corruption Commission (MACC) said in a statement that, as a matter of course, they go through the A-G’s report thoroughly to identify elements of corruption, misappropriation or abuse of power in the management of public funds, and appropriate action is taken against those responsible.

MACC, why are we always waiting?

Woman of Tomorrow-Short, Fat and Pregnant too?

This is just not good at all for beauty pageant organizers,film casting personnel and fashion houses!

According to a world leading university,the future woman will not have the shapes of Cindy Crawford, Eva Longoria or Heidi Klum.

So, what will the woman of the future be like?

Scientists predict that she will be shorter, fatter and have babies earlier.

Yale University researchers have traced the effects of natural selection among two generations of women and predict that their descendents will be slightly shorter and chubbier.

They will also have lower cholesterol and blood pressure and have their first child earlier in life.

The results show the medical value of evolutionary biology principles, 150 years after Darwin published The Origin of the Species.

Are you crying?

Now see Eva Longoria in the buff!

So, what do you know?

Eva Longoria has taken one step further to better Eva Mendes.

In the latest fashion campaign for magazine, London Fog, she went on the offensive to be in the buff,baring almost everything, together with her San Antonio Spurs basketball star husband, Tony Parker.

It must be eye-popping good to be able to see this sexy Latino siren exposed.

I am sure you would agree especially for those who have been teased to death almost every week by cheeky Eva in Desperate Housewives.

Has anyone seen the pics?

Fait Accompli?

It is certainly believable. Things corporations do as well as those that do predictions on corporate results. Are they hand in glove?

Let us look at the current scenario.

More than 80 percent of major companies reporting third-quarter results this month have beaten Wall Street expectations. So is business that good? No. Are companies gaming the system? Yes.

Corporate America has a habit of low-balling the earnings forecasts used by analysts to determine their estimates. That way, the bar is lower, and companies can easily jump over when the quarter's results are announced — even if profits and revenues have fallen off a cliff.

"Over the last decade, there's been a distinctive tendency for companies to underpromise and overdeliver," says Dirk van Dijk, chief equity strategist of Zacks Investment Research. "Lately companies are being even more cautious. They realize investors can very harshly punish any company that disappoints."

Beating expectations generally gives share prices a quick lift, but the news can mislead investors about the real state of the business — and just how far this economic recovery has to go. In fact, of the companies reporting third-quarter results so far, 60 percent have posted lower net income compared with a year ago.

Still, the recession has, if anything, accelerated the flow of positive earnings "surprises" as companies play it safe and issue more conservative earnings forecasts. Over the past two years, 65 percent of earnings reports have beaten estimates. Even after last fall's financial crisis, the following two quarters produced nearly twice as many beats as misses.

And this quarter, 81 percent of the first 199 companies listed on the Standard & Poor's 500 index that reported earnings came in above expectations.

The expectations game works like this.

Corporation X announces weeks or months ahead of time that it expects to earn, say, 55 to 60 cents per share. Analysts look at various measures of the company's financial and operating performance while compiling forecasts, but rely heavily on guidance from management. The resulting consensus forecast might be around 57 cents a share.

Portrait of the First Family

This is the first Afro-African First Family of the USA. Barrack Obama made history by winning the American Presidential Elections last year and assume power on 20 January 2008.