communication – the _

[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.

[2898] Visual representation is history repeating itself

They say history repeats itself. Wikipedia in fact as a page calls historic recurrence describing the phenomenon.

I have been thinking how this is relevant to this age of hyperconnectedness with information overload that is increasingly becoming beyond the capacity of human beings to analyze and verify. We already have the too long don’t read culture that permeates everywhere. When I was working at a unit inside the Financial Times, we were told to write a piece no longer than a thousand words and ideally, 500. I found that a constant challenge, with all the nuances that needed to be explained to audience without the prerequisite backgrounder.

A majority of people simply do not have the stamina to read long, whatever the reason. And social media does not accommodate nuances very well, whatever the reason. This failure to provide room for context does not do justice to truth, and instead creates room for misunderstanding or disinformation.

This is a challenge for a libertarian like me who believes in free speech but at the same time finding myself exasperated seeing rampart disinformation spread not only directly by humans, but also bots.

In terms of communication, increasingly, there is a move towards graphics. In the past, at least I feel so, graphics were merely an assistive tool. Charts for instance enhance the experience of reading complex proses. It is never easy to read, for instance, the real gross domestic product rose 4.9% year-on-year in the second quarter of 2019 over whatever percent growtn in consumption and import, or the consumer price index increased by 1.1% from a year ago, which was an acceleration from 0.7% year-on-year inflation in the previous month. Each word is contextualized and requires preexisting knowledge. A person unfamiliar with the lingoes would be lost in the sea of letters: level versus flow, base versus base, the second derivative versus the third derivative all happening simultaneously that even the best of us will make mistakes. Math clarifies these things to some levels, but charts will clarify it all the way to the bottom for all through simplification.

Charts can be dumb too, But when it is dumb, it is easy to see quickly with the necessary basic skills, unlike complex verbose proses requiring additional brain power.

And charts are only a subset of graphics. Or infographics… whatever that redundant phrase means these days.

But graphics are becoming more than that now. Rather than an augmenting tool, I feel it is becoming the tool in disseminating information regardless of its truth. This is especially so on social media with respect to political messaging.

So, in the age of information overload that discourages reading and killing nuance, graphics are king.

This reminds me of the days of old when murals in Christian churches, friezes like bas-reliefs, and paintings were the main means of communication at a time when the population was largely illiterate. I remember clearly a famous scene from the Hindu story of the Churning of the Milky Ocean carved on the wall of one of Angkor Wat’s long corridors. The wall would show the Devas and the Asuras of pulling a long large snake acting as a rope wrapped around a mountain churning the Ocean of Milk. I could understand the bas-relief by just looking at it, though to have the full picture, I would have to read the story through text, or have someone taught me the legend.

Perhaps there is a parallel here if we contextualize illiteracy given itself time. In the modern era, illiteracy is turning into the lack of discipline to read textual nuance, while in the past illiteracy was the inability to read text.

The solution to both are graphics, or visual representation of an idea.

When I say history repeats itself, I mean we are down going back to visual representation as a means of popular communication. The then and now contexts of returning back to visual representation maybe different, but it is a repeat of past trend nonetheless.

I have a value judgment to make here on top of this. Perhaps the historic recurrence is damning in the sense that despite our massive advancement and improvement in mass education, we are becoming more stupid collectively. Technological progress in terms of information is becoming so advanced that we cannot cope with it. Relative to the frontier of information, we are being left behind so far as information becomes more massive and impossible to process by us individually without the aid of any machine.

In the past, we individually perhaps could catch up with the frontier of information even as the frontier was expanding. We could get darn close to it if we wanted. We could be polymaths.

However today, the frontier is expanding faster than we can ever hope to catch-up. We are made stupid by our own success. And visual representation is a tool to address our regression that we have to rely on it once again.