By Alang Bendahara
SHAH ALAM, Feb 10 — The Federal government has to implement fiscal decentralisation to ensure the revenue gained from all the states is distributed back fairly.
Selangor Investment, Industry and Trade, Small and Medium Industries Committee chairman Dato’ Teng Chang Khim said compared to Indonesia, Malaysia should have fared better yet but in reality, the country is left far behind in terms of allocating its revenue fairly to each of its states.
“Selangor contributed 24.2 per cent to the national GDP (Gross Domestic Product) due to our high productivity…in 2020, Malaysia’s revenue was RM227.3 billion, so around RM55 billion of it came from Selangor.
“Yet under the Federal Constitution, the Selangor government is allocated only RM75 million… another RM746 million is given through the MARRIS (Malaysian Road Record Information System) and RM1.64 billion is allocated for development in the state. So all of this amounts to around RM2.4 billion which was the total cost of the Selangor Budget in 2020.
“This amount (RM2.4 billion) is just 4 per cent out of what Selangor had contributed to the country. So is this fair?,” said Teng during a webinar series on Zoom last night titled ‘Income Tax Revenue for States Too: Can Malaysia Learn from Indonesia?’.
The webinar organised by Wisdom Foundation was moderated by its executive chairman Datuk Seri Wilfred Madius Tangau and joined by panellists Penang Chief Minister Chow Kon Yeow, Institute for Democracy and Economic Affairs (Ideas) chief executive officer Tricia Yeoh and its Public Finance Unit manager Sri Murniati.
Teng said Selangor’s population stood at around 6.2 million compared to Malaysia’s total population of 32 million, which means that 20 per cent of the country’s population are residing in the state.
“Yet in terms of income tax and corporate tax, 100 per cent of it goes to the Federal government. Each year, Selangor contributed RM1.1 billion of stamp duties with two per cent tax from total cost of land transaction to the Federal government.
“Imagine the land is in Selangor, yet the state only gets a few hundred ringgit and the rest goes to the Federal, so again we cannot see the fairness in this,” he said.
Teng said that during the pandemic many of the state’s workforce, enforcement and assets were used, so the state’s revenue should have been allocated back to Selangor so that they can manage the pandemic more efficiently.
“Also, in Selangor, we have set aside many lands to build schools however, the Federal government could not develop it and gave excuses that they do not have the adequate allocation for it.
“So if the Federal government with all the contribution given by Selangor cannot provide this, let the state administration handle education and health, return the authority including the financial power back to the state so that we can better manage it effectively,” he said.
Teng added that even in the case of pollution cases that occurred in the state, the Department of Environment (DOE), which is under the Federal government, does not have the funding to do the cleanup and in the end, the Selangor government had to do it.
“So it makes sense for Selangor to get a higher percentage of revenue from the high contribution the state gave to the country, this is more fair as the state has more capability to administer and manage,” he said.
In his conclusion, Teng had urged the powers-that-be in the Federal government to change their mindset and embark on a paradigm shift from thinking only they have the capacity to administer because the state government still lacks the skills.
“This Federal mindset is still rooted in the 1950s during the time when Malaysia has just gained its independence when there are not many highly educated people with the skills to administer. So during that time, the Constitution in all states was drafted so that the administration such as the State Secretary, State Financial Officer and State Legal Officer need to come from the Federal.
“But nowadays we have so many highly educated and highly skilled people to be in the state administration. So this needs to be changed, so it is fair for powers including financial power to be given back to the state who really does all the work in serving the people,” he added.