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Economics Politics & government Society

[3004] Expanding the tax base requires rationalization, sequential approach and public buy-in

The ongoing exercise to expand Malaysia’s tax base (the most popular discussion is the expansion of the sales and services tax, but there are other taxes at play too) has got me revisiting several relevant issues. There are multiple factors to think about in making the policy a success: tax regimes, tax types, distributional effects, redistribution policy, subsidies, etc. These factors cannot be looked at in isolation. Yet, it is possible to talk of them individually as long as we do not lose sight of their interconnectedness.

In that spirit, the five items I have been pondering the most in recent days are:

  • the needs for base expansion
  • political constraints
  • rate of expansion (gradualist versus abruptic approach)
  • spending goals
  • policy sequencing and communication

The needs are clear. The expansion of the sales and services tax is a necessary step towards fulfilling the inevitable requirement for greater public expenditure in multiple fields. The areas are especially healthcare, education, infrastructure (for the purpose of energy transition, data, public transport and climate adaptation) and defense. I have a (partial) list of challenges that Malaysia faces that necessitate greater public spending.

Yet, nobody likes to pay taxes regardless of the legitimacy and benefits of the tax-funded spending. The time horizon mismatched between the benefits of greater public spending and the cost of higher taxation does not work well with voters who mostly more attuned to short-term concerns over long-term considerations (instant gratification factor), and private challenges over public objectives (the tragedy of the commons-like tension). Add concerns for corruption and leakage into the mix (reflecting a low-trust society), this makes any tax hike sensitive to the domestic political stability (or perhaps more accurately political longevity) of a government that functions within a working democratic framework.

Given these constraints (the political sensitivity of tax hikes and the need for greater tax-funded public spending), how fast could the government hike taxes?

The current government is choosing the gradualist approach and it is defensible in many ways: sudden large tax hike would be too disruptive to most people in the immediate terms with welfare-diminishing in the short-term. The last large tax hike was in 2014 when the GST was implemented without flawed tax return mechanism, although it came with cash transfers to mitigate the welfare-diminishing nature of the tax. That was absolutely unpopular and poisoned the otherwise tax regime that is better than the current SST. And Malaysia had taken the abruptic approach before during the Abdullah Ahmad Badawi administration (with Najib Razak as the Finance Minister) through the drastic liberalization of petrol subsidy. That too was massively unpopular.

But the drawback of a series of gradual tax hikes is the expectation-building among the voters, even if it makes the welfare-diminishing aspect more manageable. Surrounded by tax hikes, they would associate the party-in-power with continuous tax hikes (and possibly feeding into inflationary expectations). That is a tough association to live with in an electorally competitive democratic environment.

Most government would like to stay in power and in our democracy, such unpopular tax policy requires a buy-in from the population. Any buy-in must be preceded by a policy and messaging that explain the greater need for public spending and the subsequent taxation.

The sequence must be right: one does not put taxation above spending (and far too many politicians tend to confuse policy sequence too many times, which reflects incomprehension of the issues at hand and the need to take short-cuts for quick gains. Many challenges that Malaysia faces are of long-term in nature resembling a complex sequential puzzle: most of the times, the temptation to pick low-hanging fruits is a mistake in a world of quickly shortening attention span.

Those spending goals must be explained clearly to the electorate. The government must outline the goals (W% of GDP for health by certain year, X% of GDP for education, Y% for defense, Z% for social transfers, etc) in a simple and coherent manner. Explain the benefits and requirement the government seeks to fund. Just as important, these goals must be harmonized a single readable document. And then, the goals have to be sold to the public as seriously as trying to win a referendum (or better yet, an election).

Bit-size documents. Social media posts. Roadshows. Carnivals. Posters. Pamphleteers at shopping malls like how candidates gives out pamphlets at wet markets or food bazaars. These efforts must follow. It is a referendum after all: a referendum of a future of Malaysia that we might want.

At the moment, some of these goals exist but they exist disparately, set in silo buried and in thick unread policy documents. And most government documents are readable only by experts despite being public documents. Worse, sometimes these goals are delivered in arrogant, unsystematic and confusing ways, which wins no allies. That is no way to sell a tax hike necessary to address great challenges Malaysia faces in a fast-changing world.

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Books & printed materials Society

[3003] Reading Gertrude Stein’s Paris France

I am conflicted about Gertrude Stein’s Paris France. There are some great observations in there but the writing style and most of all, the essentializing of a society are something that do not sit comfortably with me.

Stein typed up her stream of consciousness casually with little regards to punctuation. Stein appears not believing in commas no she does not believe in it although sometimes she does, and she does not believe in question mark or quotation marks or full stop as she goes on to stress the same point multiple times although there are times some points are unstressed but I could imagine easily a friend of hers would have asked but don’t you believe in structure to which she would reply but structure is structure is structure like how a rose is a rose is a rose is a rose.

When the back cover of the book claims Paris France is the perfect introduction to her work oh boy I said in my head what an introduction it is with long sentences where nobody is permitted to take a real or imaginary breath so much so that the readers run the risk of asphyxiation for focusing too long on a sentence that runs for what ought to be an impossible length measuring longer than the tail of a long cat or a long dog’s or a long cat’s or a long dog’s or am I suffering from dementia but I would not know but would I know but perhaps I am just frustrated with the writing style.

At times, the style of writing makes reading the book feels like reliving somebody’s fever dream as an anecdote flows into another anecdote before another anecdote takes over the narrative.

Style asides, the essentializing of the French especially of the 1900s-1930s (the book was published in 1940) offers too much generalization. Generalization of money, of luxuries, of logic, of family, of tradition and of fashion.

That got me thinking, how does one write about a society without a hint of essentialization? Maybe essentializing is a big word that I should avoid and that I should not equate it with term generalization with ease. But to write about a society without generalizing to some extent is a tall order. I thought that was something I struggled while writing The End of the Nineteen-Nineties: some form of generalization (if not essentializing) had to be made before any coherent critique could be offered in return.

Or am I too afflicted with apophenia?

Maybe. Yet a society is clearly different from one another and that differences point towards some form of way of life that is true for a particular society but not the other. What is to be written critically of a society when everything is atomized anarchically?

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Books & printed materials Conflict & disaster Politics & government

[3002] Reading George Orwell’s Homage to Catalonia or… “Nak PN ke?”

I suppose if we are intent on finding similarities between two events however different they are, we would find it one way or another. Some of us are wired to find patterns or connections, even where none exists. A cat in the clouds that sort of things. Apophenia.

I kept telling myself that while reading George Orwell’s Homage to Catalonia recently. However I tried adjusting down my pattern-finding bias, my mind kept on returning to contemporary Malaysian politics each time Orwell describes the republican politics of the late 1930s Spanish Civil War. As I opened Wikipedia to understand the war through a wider lens, I thought, indeed, there was a lesson, or two, from Spain for Malaysia.By Hafiz Noor Shams. Some rights reserved.

The differences between the 1920s/1930s Spain and the 2010/2020s Malaysia are aplenty. Spain experienced multiple military coups during those decades that makes Thailand a more appropriate comparison instead of Malaysia. And the Spanish conflict was bloodier than what Malaysia underwent in the 2010s and 2020s: our currently political conflicts are more boring when compared to the Spanish passion of the interwar period.

But if the Spanish Civil war was to be stripped of its details and the conflict made general, there are parallels to the today’s Malaysian reality. And the parallel is this: by the 1920s, support for the traditional powers—that is the monarchy along with the religious Christian class—was in rapid decline (within Malaysian context, throughout the 2000s and the 2010s, traditional power holders in the form of Umno suffered sustained severe erosion of support). So much so that by 1931, the king fled country over rising republican influence. Soon, the Second Spanish Republic was established (again here within Malaysian context, that runs parallel to the election of Pakatan Harapan as the federal government in 2018).

The Republic went through some difficulties right from the beginning. The traditionalists were feeling the heat of radical reforms. Land redistribution and restrictions imposed on the Church from owning properties were proceeding rapidly and pushing the traditionalists out of power further. Meanwhile, weak official responses to certain events that favored the traditionalists left republican supporters thinking the government was betraying them. All this took place with the Great Depression happening in the background. Times were just tough for almost everybody. This feels all too familiar for the 2020 Malaysia.

For the 1930s Spain, the political tensions eventually boxed everybody into an armed conflict. One on side was the republican government supported by the communists, the anarchists and the liberals, who are largely urban dwellers supported by the Soviet Union and Mexico. On the other side were the nationalist rebels comprising the monarchists, Christian conservatives and a group of fascists. By and large, the nationalists were rural folks backed by Nazi Germany and Fascist Italy.

Of interest is here the divisions within the republican ranks, which is one of two main subjects of Homage to Catalonia (the other being war conditions experienced by Orwell). By 1937, a year after the civil war officially began, republican politics was becoming immensely complex but it could be generalized as a competition between the anarchists and the communists. While there was a republican government at the national level, various institutions and cities were controlled by different factions of the republican supporters, with the anarchists and the communists being the more influential factions.

The anarchists wanted a revolution in the sense that workers would control the means of production. The communists wanted those means controlled by the state. The rivalry created a civil war within a civil war, which the communists won and purged the anarchists from government (while I am in no way stating that Rafizi Ramli is an anarchist, the leading-PH party PKR did push Rafizi aside). That communist victory was irrelevant however. So weak was the government from infighting that they eventually succumbed to the fascist rebellion led by Francisco Franco, who would hold on to power for the next 40 years.

Orwell, who was fighting for the Spanish republic with the anarchists, saw the purging as a betrayal, which is perhaps the same feeling many Pakatan Harapan supporters currently feel of the current government. In fact, Orwell writes several pages about being disillusioned, which again, a feeling that appears to be widespread about Pakatan Harapan supporters.

Yes, he felt betrayed but the realist him wrote something for the disillusioned:

As for the newspaper talk about this being a ‘war for democracy’, it was plain eyewash. No one in his senses supposed that there was any hope for democracy, even as we understand it in England or France, in a country so divided and exhausted as Spain would be when the war was over. It would have to be a dictatorship, and it was clear that the chance of a working-class dictatorship had passed. That meant that the general movement would be in the direction of some kind of Fascism. Fascism called, no doubt, by some politer name, and—because this was Spain—more human and less efficient than the German or Italian varieties. The only alternatives were an infinitely worse dictatorship by Franco…

Whichever way you took it it was a depressing outlook. But it did not follow that the Government was not worth fighting for as against the more naked and developed Fascism of Franco and Hitler. Whatever faults the post-war Government might have, Franco’s regime would certainly be worse. [George Orwell. Homage to Catalonia. 1938]

In other words, “Nak PN ke?”

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Politics & government

[3001] The tension between popularity and values in political parties

The recently concluded PKR party elections and its ongoing repercussions have attracted a lot of criticisms.

One thread of such criticisms that I find interesting is the allegation that newer party cohorts are not guided by the original ideals of the party, which I would think was progressive politics (or at least center of left in the traditional sense before the Overton window was blown and opened wide). With PKR’s rhetoric now appearing to sway to the right, I feel the criticism has some truth in it.

The criticism goes further that by stating that most of the newer members are attracted to the party because of power (and the potential wealth it brings) more than anything else, leaving reformasi as an empty slogan.

There is some empirics to back that sentiment. Since 2018 when the party first tasted federal power, its membership has grown by approximately 44% to 1.2 million people (as of March 2025). That growth has turned PKR into the second largest party in Malaysia by the total membership in a very short time. And the sequence of events seems to fit nicely into the criticism: power came first and then a surge of membership followed.

Trivia: DAP, the party with the most seats in the Dewan Rakyat, has about 0.2 million members only. Meanwhile, Umno is the largest party with about 3 million members by far (although arguably, the figure should be lower given various defections in recent years; for instance, Bersatu in 2023 claimed to have 0.7 million members and it is reasonable to suspect a large portion of that number were former Umno members). Just behind PKR is Pas with approximately 1 million members.

With a surge in membership in such as short time that PKR experienced, it is inevitable the original value would get diluted. Even a perfect cadre system would struggle to process that kind of surge.

Yet, that criticism is only one part of a whole equation. There is a greater tension at play here due to the nature of democracy.

In a democratic framework, any political party with aspiration for power must enjoy popular support. That almost always translates into more membership and this is true for either power-membership or membership-power causality. And political party should want new members either way.

In the case of PKR, if the criticism is on target, then it suggests that the party’s the application vetting process along with its imperfect cadre system, might be at fault. But there is also a dilemma here: how tight does one need the process to be?

Too tight and one might suffer what Umno suffered back in the 2000s where complaints were often made that joining required support from the existing local leadership that was hard to get (because nobody on the inside wanted to share the gravy). Too loose, then one could argue PKR is a case in point where the party’s values get diluted.

Categories
Economics History & heritage Society

[3000] When history is blurry: reading Patricia Crone’s Meccan Trade and the Rise of Islam

Mecca has a long history. It is so long parts of its history is blurry and backed by uncertain sources. Pre-Islamic sources at best give imprecise descriptions of the city, if the city described is indeed Mecca. Meanwhile, traditional understanding of Mecca’s history before and during the coming of Islam was only developed much, much later.

The orthodox understanding takes the city as an important commercial and religious center prior to the coming of Islam. This much at least has been impressed upon the minds of many who grew up as a Muslim. The seige of Mecca during the Year 570 (the Year of the Elephant), the presence of the Kaaba and Qurasyhi caravaneers are proofs of Meccan commercial and religious prestige during pre-Islamic period.

In the 1987 book Meccan Trade and the Rise of Islam, Patricia Crone challenges the mainstream history of the city by juxtaposing non-Muslim sources with traditional Islamic ones.

The first half of the book goes with great length inspecting trade pattern of various goods that concerned Byzantium, Egypt and Syria in the north, Persia and India (including the Malay Archipelago) to the east, and Yemen and Ethiopia to the south. These chapters are really encyclopaedic entries more than anything else and reading them is a little more exciting than reading a high-level mathematical textbook.

But the conclusion is phenomenal in that all the major trade routes between these locations involving major commodities did not go through Mecca. For most goods by 400s and 500s, sea routes were preferred. The advent of sea trading meant Byzantium could now circumvent the Arabs. In limited cases where land travels were necessary, Mecca was miles off known routes. Meccan trade existed only in the sense that the city folks needed provisions and not in a way of an entrepôt or an emporium. Add to the fact that Mecca was too dry to support a large population with no special commodity of its own that others lacked, it is hard to reject Crone’s idea that Mecca was not a major trading center in pre-Islamic Arabia.

The second part of the book, I feel, stands on shakier grounds. Here, Crone argues Mecca was also not a major religious center. She states that there were three other pilgrimage locations nearby that were bigger than Mecca. This is an echo of her more controversial thesis written in a 1977 book, Hagarism: The Making of the Islamic World. But how does that negate the idea of Mecca as a major pre-Islamic religious center is something that I struggle to process and ultimately unconvinced. This is where other readings will come in handy.

The final part of the book explains two bigger themes that worked in the background: first it is about the state of Meccan (and the wider Arabian) society in the 500s and second, about the unreliability of sources of pre-Islamic Mecca history.

On the first subject, Crone understands Muhammad and Islam as a materialist instead of an idealist phenomenon. That is, the prophet and the religion were primarily a pan-Arabian proto-nationalist movement rising up against Byzantium and Persian influence (instead of the rise of a religion fighting the immorality and decadence of the Jahiliyah period).

On the second subject, these traditional Islamic sources were written long after the rise of Islam—the primary example being Ibn Ishaq—should be considered as an act of storytelling instead of history-writing. Crone argues many of these sources provide contradictory details of the same events. Crone goes on to claim that these Islamic sources place the need to tell ‘the moral of the story’ above the need to record history accurately. That is to say, outside proofs must be considered when (re)constructing the history of Islam.