Taxation

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4.0 Corruption

Corruption is define as the misuse of power, wealth and status for private gain such as by the elected politician or appointed civil servant, government and etc. (TI , 2016). On tax revenue, corruption has a negative impact on it. It affect the country in many way including the downfall of GDP ratio, reduce investors confident which reduce investment, misrepresenting tax structure and affect economic and national development. Complications such as weak tax administration, improper tax evasion and exemptions will occur because of corruption. In Malaysia, the issue of 1MDB scandal is a corruption and it is still affecting the country and the economic.

- 1MDB

1 Malaysia Development Berhad which is a state investment fund, is one of the largest corruption. 1MDB known as 1 Malaysia Development Bhd was primary set-up by our current prime minister Datuk Sri Najib Tun Razak back in 2009. 1MDB was initially meant for the development of Kuala Lumpur into a Financial Hub and improve economy through strategic investment. However, in 2015, it begun to attract negative attention due to the missed payment which owed to the banks and bondholders. Currently, 1MDB borrowing increase over 50 billion ringgit as of January 2016 (Adam , 2016).

4.1.1 The effect of 1MDB on the country.

Currently, the 1MDB scandal is affecting the economy of Malaysia which has resulted in investors pulling-out their short term investment due to the fear of 1MDB fails to settle its debt and uncertainty (Habib, 2015). Other than that, this has reduce the confident of investors investing in Malaysia despite the fact that Malaysia’s currency has depreciate. (Chen , 2016).

5.0 Social Welfare

Social Welfare is a social service provided by the government to its citizen to improve their living standard or well-being including education, healthcare, housing and etc. The relationship between taxation and social welfare plays an important role in the society. The government uses tax revenue to improve and develop the country.

Since the country braces an infrequent inflation because of the implementation of GST and the removal of petrol subsidiary in 2015, the consequences of lacking financial assistance could be immense and with all this implementation lower income group are suffering. So, 1 Malaysia concept is introduced where there are few welfare program provided by the government to ease Malaysian citizen lives which includes 1 Malaysia People’s Welfare Program (KAR1SMA), 1 Malaysia People’s Shop (KR1M), 1 Malaysia Clinic, 1 Malaysia People’s aid (BR1M) and etc. (1 Malaysia, 2016).

5.1 1 Malaysia People’s Shop (KR1M) and 1 Malaysia Clinic (K1M)

To provide basic medical care for the urban poor group, Klinik 1 Malaysia (K1M) was launched in 2010 by the government. For Malaysian whom are in need of basic medical needs, this initiative provides an immediate healthcare with qualified nurses and medical assistance with at least five years of experience. As for medical fee, Malaysian citizen are able to get treatment for just RM 1 per visit and senior citizen are exempted from any payment. (Hassan , 2015)

Lower income earners has access to cheaper groceries with the existence of 1 Malaysia shops and KR1M certainly reduce the burden of average Malaysian. Contrasting from the items sold in other stores and hypermarkets in Malaysia, KR1M goods are sold at 30 per cent to 50 per cent cheaper in comparison. In other words, the product services are cheaper than market rates. Besides, it acts as a medium for the government to control basic necessities prices and allow to reduce the monopolization of products by the multinational manufacturer.

- 1 Malaysia People’s aid (BRIM)

BRIM is also known as the Bantuan Rakyat 1 Malaysia program started in 2012 and devised by Prime Minister of Malaysia Datuk Seri Najib Tun Razak. It was implemented as a part of the government’s effort to reduce the burden of lower income group due to the high cost of living where Barisan National has allocate and disbursed large amount of money for the welfare system. To be eligible for BRIM, individual need to apply for it and the household income of receiver need to be lower than RM4, 000 (BRIM, 2015). *refer to appendix table 3 for allocation of BR1M.

Plus, BRIM is a targeted subsidiary where the inflation can be managed appropriately without free market forces being stifle. However, the implementation of BRIM brings some financial relief to the society without harming the country (Sensible , 2014).

6.0 Conclusion

As all the issues from National development, national debt, corruption and social welfare has been discussed, the advantages and disadvantages of tax are clear on how tax is impacted. To summarize, consumer, business, investors, government are all affected due to tax whether it increase or decrease. Despite the advantages it bring including higher tax revenue that’s allow the government to reduce debts and improve the economics. However, it is hard for users to adopt to changes and it can cause a lot of dissatisfaction; and hard for them to ignore the disadvantages causes including reduction in purchasing power where lower income group are suffering from the high prices.

8.0 References

Journals:

- Ilias , A., & Abdul Mansor, N. (2013). Goods and Services Tax (GST): A New TAx Reform in Malaysia . International Journal of Economics Business and Management Studies.

- Palil, M., & Ibrahim, M. (2011). The impact of Goods and Services Tax (GST) on middle Income Earners in Malaysia. World Review of Business Research

- Shire, D., & Clarke, M. (2016). An Introduction to Malaysian GST. An Introduction to Malaysian GST

- Suhaimi, M. N. (2013). THE EFFECTS OF TAX RATES ON ITS REVENUE AND GROWTH: A CASE STUDY OF MALAYSIA. Journal of Global Business and economics

- Yusof, Z. A., & Bhattasali, D. (2008). Economic Growth and Economic Growth and. Commission on Growth and Development, 76.

Websites:

- 1 Malaysia. (2016). 1 Malaysia Products . Retrieved from http://1malaysia.com.my/en/1malaysia-products-1#n66

- Adam , S. (2016, February 2). Bloomberg. Retrieved from Timeline: Malaysia's Spiraling 1MDB State Fund Controversy: http://www.bloomberg.com/news/articles/2016-02-02/timeline-malaysia-s-spiraling-1mdb-state-fund-controversy

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