PETALING JAYA: While billions could be saved from the subsidy rationalisation plan, there could be backlash from the top income groups, say experts.

Malaysian Institute of Economic Research executive director Dr Anthony Dass said the total annual spending on fuel subsidies, including petrol and diesel, was estimated at RM50.8bil in recent years.

“Around 35% of these subsidies, or roughly RM17.8bil, is enjoyed by the T20 group, which includes the T15.

“This rationalisation could lead to annual savings of about RM10bil to RM12bil from the T15 segment alone,” he said when contacted.

While the move would allow the government to save money spent on subsidies, Anthony said there could be adverse effects on the affected income groups.

“Fuel subsidies have long been a sensitive issue. While the government targets higher-income earners, there may still be dissatisfaction or public backlash from the T15 group, who may feel they are being unfairly targeted, especially if the cost of living continues to rise without clear benefits from the reallocation of subsidies,” he added.

Prof Dr Barjoyai Bardai said the government should step up border authorities to curb the outflow of the subsidies, which would greatly help in reducing losses.

“We can save a lot of money if we can put a plug on subsidies abused by foreigners such as in the north and south of the country.

“It would be greater than the savings we could get from taking away the subsidies from all Malaysians,” he said, adding that Malaysia has always been known as a nation that highly subsidises its people.

Prof Barjoyai feels that this is not necessarily bad as it has been the country’s trademark of caring for its people, pointing out that this is in line with the Madani economic framework.

According to the Statistics Department, the B40 group, or 40% of households nationwide, has a net income of below RM4,850 per month while the M40 group, representing another 40% of households, have a net income of between RM4,851 and RM10,960 monthly.

The remaining group of 20% of Malaysian households, or T20, has an income of above RM10,960 monthly.

When unveiling Budget 2025 last Friday, Prime Minister Datuk Seri Anwar Ibrahim said there will not be any more education subsidies for members of the T15 community who enrol in fully residential schools and public institutions of higher education.

The T15 group, he said, will face a “slight” hike in fees while education subsidies will be gradually reduced for them.

Meanwhile, Institut Masa Depan senior fellow Prof Datuk Dr Madeline Berma said disposable income, location and total dependants are the main criteria that should be taken into account when defining income brackets.

All this information, she added, can be accurately obtained by the government through real-time data collection, which the Central Database Hub (Padu) aims to do, as opposed to periodical surveys such as a census.

“If the income classification is done using only gross income, people will feel that it is unfair because they have other financial commitments too.

“When disposable income becomes one of the key metrics, it will provide a better picture of one’s financial situation,” she said.

The economist also said she does not expect the government to totally reinvent the current mechanism of classifying income brackets as that would take an even longer time.

“However, we know that not everyone wants to register on Padu due to reasons including data security concerns.

“Therefore, the government needs to prove to the public that it can safeguard our data so that more people would feel comfortable sharing sensitive financial information,” she said.

Prof Madeline advocates using Padu as she noted that it will provide a highly accurate targeting when the proposed subsidy rationalisation is implemented.

https://www.thestar.com.my/news/nation/2024/10/22/high-earners-may-feel-it-is-unfair