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Economists say targeted subsidies won’t affect high-income groups – T20 can afford it

Economists say targeted subsidies won't affect high-income groups – T20 can afford it

The government plans to phase out the current full subsidy and replace it with one targeted subsidies policy – will start with diesel engine And electricityAnd later expanded to RON 95 . gasoline – should not be viewed negatively by those in the higher income group, some economists say.

Like New Straits Times Reportedly, these academic experts say the move to prevent high earners from receiving subsidies should not be seen as a punishment for those in the upper class because they can afford it.

“I don’t think the government’s move is to punish the T20s. Instead, it is in the national interest to ensure a better distribution of wealth among the population and to ensure that government subsidies do not become the growing financial burden they are today. University of Kuala Lumpur business school professor Aimi Zulhazmi Abdul Rashid said. .

He added: “Targeted subsidies should be given to those who really need it and should not be abused, like what is happening now when subsidized diesel fuel is being smuggled in. to neighboring countries”.

However, he believes that the classification of T20, M40 and B40 to describe income groups is too broad and needs to be replaced by a more precise, practical and focused approach.

“Necessary income bracket” measure real net disposable income for all households to reflect more accurately. The classification of income groups must also be reconsidered because the difference in locations such as rural and urban areas has a high disparity in household income,” he explained, adding that the Subsidies removal approaches can lead to people in the high-income group not declaring their assets. income.

“T20 is the highest income generator for the national economy that will face real economic realities after all subsidies are withdrawn from them, which will result in income earners The highest income earners do not declare their income, as happened in Scandinavian countries. To a certain extent it will incentivize proxies, so better data collection in real time will be important to implement the changes that will be introduced by the government,” Aimi said.

Economists say targeted subsidies won't affect high-income groups – T20 can afford it

Meanwhile, Associate Professor Ahmed Razman Abdul Latif of Putra Business School said those in the T20 income bracket would not be severely affected if they no longer receive any benefits.

“T20s may experience higher costs of products and services if they are no longer eligible for subsidies as this group has recovered the fastest in income and wealth post-pandemic. The tax rate that applies to them is also considered low compared to other countries and so they can afford to eliminate such subsidies,” he said.

Razman agrees that the approach to removing subsidies from the high-income group is not a punitive action by the government. “It is not a punitive action (for the T20 income group), but rather to reduce income and wealth inequality between groups,” he told the publication.

Economists say targeted subsidies won't affect high-income groups – T20 can afford it

Economist Wong Chin Yoong of Tunku Abdul Rahman University shared the same view on the topic, but said the move to phase out subsidies should be done gradually and with support, as the adjustment would take time.

Like Aimi, Wong cautions that using T20 as a threshold is too specific and could be counterproductive. “Who can argue convincingly that an income of RM12,000 per month for a household with three more dependents can be considered to have a good life, if all allowances are removed. ? People should acknowledge the fact that the monetization of T1 and T2 is very different,” he said.

As determined by Statistics Malaysia, T20 represents the top households with a monthly income higher than RM10,959. This category is classified into two subgroups, T1 and T2, where T1 represents households with an average monthly income of RM 12,586, while T2 represents households with a median monthly income of RM12,586. monthly average is RM24,293.

Of course, it remains to be seen how the targeted policy will impact things and how the government will limit the impact of the inevitable, expected rise in the prices of goods and services. is certain to happen and affects all income groups, including M40 and B40. In any case, what do you think of the opinions of experts? Share your thoughts with us in the comments section.


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