Who is going to pay the bill?

I received this from a friend via email. You may have read it long ago (since email stories go round and round), but i think it is worth  reading it again and get the gist of the meaning at this stage.

It is written by a professor in US (David R. Kamerschen, Ph.D. Professor of Economics, University of Georgia) but is applicable to most tax system in the world.

In the Malaysian context, it is especially relevant not only to our tax  system but our economic policies as well.  In Malaysia, Idris Jala has mentioned that one million people pay tax, out of our population of 27 millions.

If we chase away the tax payers (brain drain may have such an effect), and we run out of oil and gas, then who is going to foot the bill??

This is it: 

Bar Stool Economics

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.

The fifth would pay $1.

The sixth would pay $3.

The seventh would pay $7.

The eighth would pay $12.

The ninth would pay $18.

The tenth man (the richest) would pay $59.

So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good customers, he said, ‘I’m going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).

The sixth now paid $2 instead of $3 (33%savings).

The seventh now pay $5 instead of $7 (28%savings).

The eighth now paid $9 instead of $12 (25%savings).

The ninth now paid $14 instead of $18 (22% savings).

The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

‘I only got a dollar out of the $20,’ declared the sixth man. He pointed to the tenth man,’ but he got $10!’

‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I did!’

‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’

‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

Advertisements

Opposite effect?

In Malaysia, everything boils down to race, and because of this, politics in our context means that everything must be distorted to become a race or religious issue.

This is especially so after 308, when the Big Brother feels that desperate situation requires desperate moves.

So a NGO is established to voice out very racial issue. The head, I.Ali, who I like to call Loud Mouth, has uttered such nonsence that it is hard to believe that there are still people who believe and subscribe t what he says. But he is backed by a powerful Horse, and also a newspaper which has only one agenda, to win back the votes of the  majority ethnic group.

Initially , this strategy seems to be working , looking at the last few buy by elections result.

But as Eastern philosophy dictates, when things are going too extreme, it may result in unintended results.

I do not know about the rural sentiments, but of late, i can sense some reverse trends among the urban groups.

The Chinese support  are gone still, but even among the urban Malays, there is a beginning of resentment against too extreme racism as displayed by the Loud Mouth, especially when he allegedly uttered  an threat   ‘advice’ . Whether it is an advice or threat, it is up to each individual to interpret, but most people I talked to certainly did not like what he said.

Given the burden of trying to make ends meet, most urban people,  irrespective of their colour,  are not happy about the direction the country is moving .

Of course , the big question will be whether such unhappiness can translate back into votes and support for the opposition. If so, then the Big Brother would be in big trouble, since many of these urban people originate from rural areas , and that they would have some influence over their folks back home.

I foresee the more this Loud Mouth utters, the more he will help to alienate the very people the Big brother is trying to win back, at the same time, he helps to make sure that the other ethnic groups will remain resentful of the Big Brother.

Politicians have forgotten the very basic: that to win votes, you must win the heart. To win the heart, there must be sensible policies, good governance and a healthy economy..

If only efforts are channeled to achieve this instead of trying to play politics…

“The Hit Group”

Idris Jala is a person I respect, even though I do not necessarily agree with his views, especially in the past year or so.

I have written an article praising him some time back: Success story of a Bumi CEO.

He is also one of the few that warns that Malaysia can be a bankrupt country in a few years time, if we do not do away with subsidies. Indirectly, by saying so, he actually hinted that wastages and leakages may lead this country to bankruptcy, hence there was so much of reaction against him then..

Today, he was quoted to say that the economy can absorb an official inflation of 5%.

In the Malaysian context, a 3% inflation is already very high, since i have a feeling, and a lot of people agree with me, that the CPI does not really reflect market prices.   Whenever there is a 3% increase in CPi, you can be sure that many things go up more than 3%.  Food prices, house prices and rentals, electricity tariff, transport costs and entertainment costs (Astro for example) are among some of the things that have gone up a lot. A lot of other things have gone up too.

An example is that medicine prices have gone up;  even colds medications have gone up 300% in the past year, because of the Ministry’s directive to restrict import  , sales and production of a component called pseudoephedrine , and thus there was an artificial shortage of colds medicine containing pseudoephedrine in the market, and thus prices went up almost 3 times. It is a drug that can be abused of course, just like any other drugs, but because of the abuse of a small group of patrons at certain night spots, the ministry imposed restriction of import and production of a drug that is being used by so many others..

This is a mentality that sounds similar to that of banning file sharing sites. Just because some info in these sites infringes on copyright, there is a blanket block of these sites… The correct things to do is to inform these sites of those materials that infringes on copyright and ask that these materials be deleted, as many sites have done in the past.

The correct things to do,  with regards to colds medication, is to have strict law enforcement, and not by restricting a medicine which is used by so many for relief of colds and nose blocks. Nab the culprits that abuse the drugs by all means and let others who need them have access .

Now, back to inflation and the economy!

The 7% rise in electricity tariff is said to affect only a quarter of users.  But many of these quarter of users actually run the retail businesses and manufacturing businesses, and hence these increase will be translated as increase costs for goods and services.

I realise that all the increases actually hit at the same  group, which I would like to called ” The Hit Group”,  more than anyone else. This is also the middle income group.

While the rich has plenty of reserve to cushion them of any ugly  inflation, and the poor are sometimes helped by some of the government programs, it is this group that are worst hit in any inflation situation.

This group is among the one million who pay income tax to support the other 26 millions. Majority of this group stay  in urban areas, and are also the group that is hit by increase in electricity tariff. This group, because of its work nature, is also the group hit most by increased hawker-food prices since because of the nature of their work, they have to eat a meal outside..

This group is also among those who subscribe to  internet, astro and hence are hit by increase in Astro fees (I concede that Astro  can actually be done without). This group is also worse hit by house prices or rentals, and rising bank interest and petrol price increment.

This group, unfortunately is also the group that does not qualify to apply for a low cost home, or study loan for children.

Now, back to Idris Jala’s figure of 5% inflation that we are going to face.  The econmy can withstand this 5% increase, says Idris. Our experience tells us that a 5% increase in inflation rate means that most things will go up more than 5%. Many things will go up more than 10– 20%

If things go up more than 5%,   I doubt that this middle income group can withstand anymore .  As I have mentioned in another article ” when belts cannot be tightened anymore”, their belts have already be pulled to the limit and cannot be tightened anymore.

I suspect Idris is trying to prepare the populace for another subsidy cut.

What this group of people hopes is that the government be more understandable of their woes. Have more incentive and tax break for this group, too.

Money can actually be found if there is less wastages and leakages. There is really no need to squeeze this group any tighter..

Failings, failings and failings

Many parts of the Klang Valley, including almost whole of PJ, Bandar Utama, Tropicana and part of Kuala Lumpur etc etc will have no supply of water for the next 48 hours because of some maintenance work to be carried out in a dam.

The notice of pending water disruption was made only yesterday, and many people were caught off guard and many knew only in the evening and there was of course a mad rush to stock up some water in containers.

If this cut in water supply is due to a sudden mechanical failure, then I can understand why the notice was sent out so late.

Apparently, this is only for maintenance, and so it must have been decided many weeks ago, or at least days ahead. Why the last minute notice really baffles me.

I think this is another case of Tidak Apa attitude in play. The water authority must have taken all its customers for granted. “You-need-me-and-I-don’t-need-you’ type of culture must have taken roots. Customers no longer comes first.

They, of all the people in the world should have understood how a sudden disruption in supply is causing difficulties not only to households, but to businesses and factories as well.

They have forgotten that the customers are the paymasters, and that they owe it to the customers and water users for their livelihood.  That is the same problem with many in the civil service. They are supposed to serve the people, but instead, they think they are the ‘hands-and feet’ of the top leaders.

In the 60s , when I was a small boy and staying in Reservoir Garden Penang, we were always given a notice through distribution of a flyer from the water authority, days ahead of a water cut. So most families were well prepared for any water disruptions, at least the planned ones i mean. For the unplanned disruption due to mechanical failure, that was understandable, since all things made by human would fail eventually.

This disruption makes me think of the recent failings of the government or government linked services.

Just a few weeks ago, in the welcoming ceremony for Chinese Premier, the Backdrop contained certain Chinese words that sounded like Japanese; you can guess the meaning but the phrase was grammatically very wrong. This was from the Protocol Division that was supposed to be the elite of service.

Then the nude squat case of 2 Singaporean girls. According to their account, they went through a channel with green lights on top of the board, but there was no one manning the counter. After they went through, there was no alarm sounding, like what would happen when cars go through toll booth without paying.

Immigration counters are supposed to be the  doors to the country. A immigration booth must be manned if the light is green, and there must be alarm system if anyone try to get across illegally. There must also be backup soldiers or armed enforcement officers from immigration, in case a car try to rump through the checkpoint.

Alas, two girls could just drive through, and no system there to check them.This is called “failing’, and the authority must bear some of the blame for the incident.

The girls did commit mistakes of  not getting their passport chopped , but I am sure they did it out of ignorance  more than anything else.

I have mentioned that the ‘manhole’ syndrome that i talked about has evolved to a Malaysian Syndrome. The above incidents are all examples of this syndrome. If this is not checked, we will have more failings, and eventually, we may end up along the sides of countries like Zimbabwe and Sudan. No wonder we have invited them for dialogue…..

Postscript: As a Malaysian, I do not like to point out our failings. I would have proudly written good things for the country,like the ones I did on the improved LRT service, and the improved passport issuing system, but unfortunately, there are really more and more failings which are making the people more and more  disappointed.

1Malaysia, 2Sets of law?

Bersih will have a march on July 9th. Apparently UMNO youth is doing the same. Both are out to ask for a more transparent and clean election machinery.

As the demand of these groups are in line with the aspiration of the people, the authority should perhaps seriously consider allowing these 2 groups to march . In a democratic society, the more force you use to suppress, the more will be the reaction, as we have all seen from many examples overseas.

Then there is the Perkasa group going on march, too.  But since the head of this organisation had already uttered a veil threat against a certain community, openly saying that a riot may result and openly asking people to stock up food,  the intention of this group is in question.

What I Ali has uttered is clearly seditious, under the present law. Even the UMNO Youth chief has called for action to be taken against him.

The government should take action against I Ali, otherwise whatever little credibility left  of our law enforcement  authority will be gone.. In a country, a law is a law, and no one should be above the law. That is the basic principle of a country ruled by law. If nothing is done against IA, then we cannot pretend that we are  still a country ruled by law anymore.

Why have lawyers,  courts and so on, if laws are applied differently against diffferent persons? We might as well do away with all the pretense and call ourselves a feudal state.

What IA has uttered is not only clearly against the law, it is against the basic values of humanity . Lives are sacred. No one can threaten to cause trouble that may lead to loss of lives and property.

The power that be must exert his authority now, otherwise it would become: 1Malaysia, 2Sets of law.

Missing the point

The Malaysian Insider carries 2 headlines on its homepage today. One is:

Government portal brought down, 51 sites attacked

The second is:

MCMC shrugs off Operation Malaysia, says ‘little impact’

Hacking another person or organisation’s web page is of course very wrong. I don not condone the actions of these hackers.

But MCMC has missed a point here, too. Even though many of the websites are back to normal operation soon after the attacks, the fact that the sites were down even for a few minutes show how vulnerable these sites are. If there is any personal information and data in these sites, it would have been hacked and obtained by the hackers.

MCMC has missed another point . The attacks have put Malaysia in world news, but  for  wrong reasons.

Malaysia is now probably known as a country that infringes on basic human rights of file sharing, asa country that reneges its promise not to censor internet. This will result in  many of the internet community  shunning this country, among them many IT experts and companies and investors too.

As I have mentioned in my last post, it is actually very simple to by pass the block. I have tried it after some of the websites blacklisted by our government become inaccessible due to the ISPs blocking the sites. After configuring my DNS to Google DNS (8.8.8.8), I have no problem going to the sites again, not to download, but just to try out how easy it is to bypass the block.

What will be next?

Probably the vulnerability of the websites would be cited as reasons to get outside ‘experts to re-design the pages.

 Probably many millions extra would be spent, going by the rate a facebook webpage costs the tax payers. Probably many people would be happy for these extra spendings, since there will be leakages and wastages as usual, and those beneficiaries will be laughing to the banks..

What hypocrisy!

For internet users, and those who store or download certain files from file sharing sites, the government decision to block these sites comes as a shock.

There are no doubt that certain files stored in these sites are infringing copyright act, but to impose a blanket block of these sites is like using a sledgehammer to kill a fly.

Many people store their legitimate files on these sites. Even scientific files are stored and shared.

Sometimes, if a person wants to share a file with his uncle or brother or sister or friend overseas, it would be too tedious to send the file via email, if the file is big.

For example, yahoo allows  a person to send an email with a 20meg limit. To send  friends or relatives certain big files more than 20 meg, a person can upload and store the files in these file sharing sites and the intended person/s can then download it and view. Scientific files/medical files are stored for the same reason.

A person can post his wedding video on these sites for his classmates all over the world to view it. That is how file sharing sites function.

Those who use file sharing sites are not profiting from monetary gains, since most  downloads are free.

It is like you buy a harry Potter book from the bookstore and after finishing it, you lend it to someone else. It is perfectly legitimate, as long as you don’t make any monetary gains from it. You can also start a book club, and invite people to share books that they have bought by keeping these books in the library of the book club.

File sharing sites are like book clubs.

Furthermore, to ban it or block it is contrary to government promise not to censor internet.

I do not know about those policy makers. To us common people, a promise is a promise. To renege a guarantee made not to censor internet is a big slap to the integrity of the government.

To combat piracy, they can do better to go round closing those stores selling pirated dvds. These are  becoming ubiquitous, and just go to any shopping complex or pasar malam, you can see people selling pirated discs.

The government can do well to clean their own backyard first before trying to censor internet, as almost all these file sharing sites are hosted overseas, and users are from all over the world. When within our own backyards, there are still so much of rubbish, why bother to clean other people’s houses.

What hypocrisy!

…………………..

There re also many ways to bypass the block.. Read David Wang’s site.

Previous Older Entries