This shot was taken from Observatory Hill in Sydney.
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Author: Hafiz Noor Shams
For more about me, please read this.
Through these hectic times, I have not got much time to say too much.
But let me say just this: I endorse the Tories.
Holding all else constant, I do not like tax. I do not think, too many people actually like paying tax.
I only rationalize the need for paying tax by holding on to classical rationale for the need of the state: that there is externality. The state is there to protect individual liberty which, generally, cannot be guaranteed in anarchic environment. I say generally because I am still reading Nozick’s Anarchy, State and Utopia and he has some idea how that maybe false. Yes, I am still reading it. But I am digressing.
Like I have mentioned earlier, I do not like tax. And some taxes are worse than others. One of the worst that can exist is tax on savings in one form or another. In Australia, much to my dismay, savings is taxed. More precisely, they tax interest gained on savings.
Tax on savings has its purposes. For one, it encourages spending to promote economic activities. Or allegedly. Islamic economics for one has this goal imbued in it due to its objection to the concept of time value of money, a concept which necessarily brings in the concept of interest. Without interest, there are less reasons to save for tomorrow and more reasons to spend it all today. Tax on interest earned on savings does that albeit to a lesser degree.
Whether that purpose is good or bad is a normative question that cannot be answered with the end set. And I know my end and I frown at the end of taxation savings. In promoting the economy, it penalizes prudent spenders and it penalizes effort to smooth out consumption by savers.
I say allegedly because savings can be turned into loans and that encourage economic activities. There are ways to promote economic activities without penalizing savers. Indeed, that is how the banking sector helps grease the economy. Fractional banking is a magnificent social technology that takes care of that.
In Australia now, there is a big discussion regarding tax reform. Called the Henry tax review, the report was released just days ago. It aims to reform the Australian tax system. One way it seeks to support those reforms is by proposing a large tax on miners. That is dominating the headlines. There appears to be a war between the big miners and the Rudd government right now.
Meanwhile, many other details slip away from public attention. One of the details is the proposed cut on interest earned on savings.[1]
I like that particular proposed tax cut. Hell, I always like tax cut. I hate giving away money that I earned just like that.
[1] — The review proposes a 40 per cent discount on all income from savings, as well as on all residential rental income and losses, and capital gains.
These recommendations were widely flagged prior to yesterday’s announcement, with critics saying the current system doesn’t give enough incentives for workers to put money in savings accounts. [The Henry tax review – what it means for you. Chelsea Mes. News. April 15 2010]
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In an ideal world, the Dewan Negara would serve to strengthen division of powers in Malaysia. It is supposed to represent the interest of member states of the Malaysian federation. In the world we live in, such idealism is as mythical as a unicorn. If being a glorified rubber-stamp is not insulting enough to the idea of federalism, the upper house functions as Santa Claus’ sack, with the prime minister as Santa. Every time he reaches in to reward his political allies, the farther the myth of federalism floats beyond memory.
Yes, this refers to the recent appointment of four new senators to the Dewan Negara.
Put aside the issue of appointment as political reward for a moment. Put aside even questions regarding the capabilities of these new senators.
Consider what the appointment does to power of the 13 member states vis-Ã -vis the federal government, which for years appeared to be more of a central government for a unitary state than that of a federal one. Each time the prime minister plays the role of a generous political master, the 13 member states lose their rightful influence to shape the course of this country.
The line where the Dewan Negara begins to stop functioning as protector of state interest has long been crossed. What else is there to say when the number of senators speaking on behalf of the federal government is nearly double that of those who truly represent their states?
For federalists, a discussion on capabilities of these senators is a worthless exercise to have. For them, the Dewan Negara is dead. It is dead as a symbol of federalism and it is dead as the protector of federalism.
Life can only be injected into it by relieving the prime minister of power to advise the Agong with respect to the appointment of senators, as well as convincing the Agong and relevant institutions to give up the power to appoint senators. Without such power, there is one fewer avenue for the federal government to bully the states.
Efforts to convince the rulers to give up the power might not be as hard as it sounds. After all, it is in their best interest to have a functioning Dewan Negara, where the interests of each state can be properly forwarded without being beholden to the federal government. With greater say within the federation, member states will attain prestige. That prestige will come in the form of a more balanced relationship between the states and the federal government.
Without such power, the Dewan Negara, again, is dead. One buries the dead.
Yet, the institution and its senators walk aimlessly and pretend to debate matters of national importance with nauseating pomposity, as if their debates and votes matter. At times, these senators even have the audacity to request for more public money in the name of serving the people. The dead cannot serve the people.
Either empower the Dewan Negara, or be done with it altogether. Rather than let the dead walks to consume precious public funds the living need, it is better to let the dead be dead.
Federalists would mourn the demise of the upper house. Know however, that to mourn once is far less painful for federalists than to suffer mockery all the time.
First published in The Malaysian Insider on April 30 2010.