The 1971 Budget

The 1971 Budget

Tun Tan Siew Sin’s new taxes, as in the case of all his previous budgets, are biased in favour of the haves and the rich, and weighted against the have-nots and the laboring class.

A good case in point is the doubling of the surtax on all imports from 2% to 4%.

Doubled Surtax

The blanket surtax increase for all imports will raise the cost of imports, such as imported foodstuffs, clothing, medicine, building materials such as locks, screws, steel bars, leading to an increased coast of living. For the lower income group, this will greatly add to their present hardships and difficulties.

Indirect taxation, such as surtax on imports, is a regressive form of taxation as it bears equally hard on the poorer laboring class as on the rich, and as the rich have large incomes, it is the laboring class who really feel the pinch.

The $45 million which the government will net from the doubling of the surtax will not be borne by the rich, but by the lower income group mass of consumers, the poorer members of the community.

This is not the way to narrow the gap between the haves and the have-nots and to provide revenue for government to finance social, economic and educational services, as it makes the poor poorer without making the rich and less rich.

The progressive and enlightened way to narrow the gap between the haves and the have-nots is to place greater reliance on direct taxation based on the capacity to pay, such as income, capital gains and profits tax.

There is a strong case for exempting basic consumer good imports from duty taxation as such levies bear more heavily on the poorer section of the community and on rural relative to urban consumers. By exempting these goods, the increase in the cost of living arising from import duties will be distributed more in accordance with ability to pay.

The DAP proposes therefore a selective surtax on imports. In the case of basic consumer good imports, and necessities, such as tinned food, textiles and medical products, the surtax should be completely abolished.

There should be a rising scale of surtax for different imports depending on their utility, for instance, the 4% surtax for consumer durables such as sewing machines, refrigerators, typewriters. In the case of upper class luxuries, like cosmetic and liquor, the surtax should exceed even the 4% mark.

In this manner, the haves will contribute more to the upliftment of the have-nots.

Direct Taxation

There is complete absence of any attempt to get the richer class to make a greater contribution to the national revenue by increased direct taxation based on capacity to pay, as for instance, by increasing the maximum rate of income tax for those earning $100,000 or $200,000 – a year from the present 50% to 70% greater taxation and levies in the rubber and tin industries, etc.

Payroll tax

The abolition of the payroll tax has been long overdue. It has always been our contention that the payroll tax, being a levy on employment, will deter establishment of labour-intensive industries and aggravate the grave problem of unemployment in Malaysia.

We are glad that Tun Tan Siew Sin has at last seen the folly of his fiscal ways.

Deficit Budgetting

Deficit budgetting has become the hallmark of Tun Tan Siew Sin’s financial ministry. He has budgeted for an overall expenditure of $3,350 million – $ 2,462 million for ordinary spending and $887 million as interim provision for development. The overall shortfall from revenue and therefore deficit for 1971 is $644 million.

Every year, the government is recklessly incurring a huge public debt for $500 million or $600 million. Tun Tan is behaving like a man who thinks he never need to pay the public debt. And Tun Tan is probably right. When the time of reckoning comes, he probably won’t be at the Finance Ministry to meet the debtors. But the people of Malaysia will have to meet the debtors.

Tun Tan has no right to recklessly mortgage the future of the next generation of Malaysians, by yearly putting the country deeper and deeper into debt.

In 1955, when the Alliance took over the government of the country, the national debt was only $758 million. Under Tun Tan Siew Sin’s management, the public debt today stands over $5,000 million, an increase of seven times. This is equal to more than two full years of government revenue.

Thanks to Tun Tan Siew Sin, today every Malaysian, man, woman and child, owes a debt of $500.

The total debt servicing charges is $340 million for 1971, or 14% of the total budget appropriation. In other words, for every dollar that is spent by the government, 14 cents go towards paying debt interests.

At this rate of debt accumulation, multiplying by seven times in 15 years, it will not be very long before our public debt exceeds $10,000 million.

But the deficit budget for 1971 will not stay at $644 million. The budget does not provide for salary increases as from 1st January 1970 for officers in Divisions I to III arising from the implementation of the Suffian Report, estimated to be in the region of $70 million.

There are also other big items of expenditure commitments which have not taken into account, as implementation of the Aziz Salaries Commission and equal pay for women.

On November 20, 1970, the deputy secretary of the Treasury, Inche Abdullah Ayub, announced that the government would create a revolving fund of about $100 million to provide housing loans for its 120,000 civil servants in Divisions One, Two and Three.

Has Tun Tan Siew Sin budgetted for this $100 million commitment? If not, where is the money to come from?

Either there is going to be even more borrowings, or new taxes to meet the extra deficits for next year.

The DAP calls on the government to take a critical look at this reckless deficit budgetting year after year, and to stop putting the country and people deeper and deeper into debt.

We are not convinced that the $3,350 million expenditure budgetted could not be pruned and cut down with economy and the elimination of waste, unnecessary and non-essential projects, and the stamping out of corruption.

We cannot comment on the proposed expenditure items as we do not have the papers and details as to how the government proposes to spend the $3,350 million. This is why we in the DAP wanted a parliamentary debate on the budget, so that we should examine and expose waste, inefficiency, unnecessary and non-essential expenditures to reduce the public burden.


Despite the great debts Tun Tan is putting the country into, he could not solve the unemployment problem in the country.

Tun Tan has said that the unemployment situation has worsened, and has shot up to 9% compared to 6 ½% last year. We can even be sure that the 9% figure is a conservative one.

From his budget speech, Tun Tan disclosed that last from January to October this year, the Employment Service in West Malaysia found jobs for 31,252 job persons, out of which 63% were Malays, 22% were Chinese and 15% were Indians and others, although the Malays have the lowest rate of unemployment in the country, in order to maintain a racially balanced work force at all levels.

Tun Tan also reiterated that the incidence of unemployment is considerably higher in the urban than in the rural areas, and in both areas, highest amongst youths and school leavers.

Armies of young Malaysians leaving school roaming the country without jobs is the biggest economic and social problem in the country.

But we in the DAP must stress that this is a economic and not a racial problem. Any attempt to treat this as a racial problem and with racial solutions will only lead to greater national problems in the country.

The Malacca UMNO General assembly has just passed a resolution calling for 75 per cent of the workers in all factories to be reserved for Malays.

The unemployment problem will not only not be solved by racial solutions, but can only be aggravated. More jobs can only be created by greater diversification of our economy, more purposive industrialisation, and a technically – oriented education system.