KUALA LUMPUR: Economists believe that the government's approach to do away with subsidising those in high-income groups should not be seen as a punishment as they have the means to afford it.
Universiti Kuala Lumpur's Business School associate professor Aimi Zulhazmi Abdul Rashid said the government's move should not be viewed as a punishment but rather to ensure a better wealth distribution, besides making sure that the government coffers would not be burdened by handing out subsidies.
"I don't think the government's move is to punish the T20s; rather it is in the nation's interest to ensure a better wealth distribution among the population and to ensure that the government subsidies won't be a growing financial burden as it is currently.
"The targeted subsidy policy should be implemented to those who really need it and should not be abused, like what is happening now when subsidised diesel fuel is being smuggled to neighbouring countries."
He added that the classification of T20, M40 and B40 needed to be replaced with a more credible, accurate and practical approach.
"Income brackets need to measure the actual net disposable income for every household to reflect more accurately.
"The classification of the income group must also be revisited as differences in locations like rural and urban have high disparities in household income."
Aimi however cautioned that the approach of doing away with the subsidies in high-income groups could lead to them not declaring their earnings.
"T20 being the highest income generator to the nation's economy will face the real economic reality once all subsidies are withdrawn from them which will lead to top earners not declaring their income as what has happened in the Scandinavian countries.
"To a certain extent it will encourage proxies thus a better data collection with real time will be critical to implement the changes that will be introduced by the government," Aimi said.
Putra Business School associate professor Dr Ahmed Razman Abdul Latif said those in the T20 income bracket would be able to bear the higher cost of products and services if they no longer received any subsidies.
"The T20 can bear the higher cost of products and services if they are no longer eligible for subsidies as this group managed to recover the fastest in terms of their income and wealth after the pandemic.
"The tax rate imposed on them is also considered low as compared to other countries and therefore they can afford such removal of subsidies."
Razman added that the approach to remove subsidies was not an act of punishment by the government towards the high income groups but instead it was a way to reduce wealth and income inequality.
"It's not an act of punishment (to the T20 income group), but it is to reduce the wealth and income inequality among and between the groups," he said when contacted by the New Straits Times.
Meanwhile, University Tunku Abdul Rahman economic expert Dr Wong Chin Yoong said using T20 as a threshold was too adhoc and it could be counterproductive.
He said adjustment took time and removing subsidies should be done gradually and with assistance.
"Who can argue convincingly that earning RM12,000 per month for a household with another three dependents can be considered as living a good life, not to mention if all the subsidies are eliminated.
"One should acknowledge the fact that T1's and T2's earning powers are very different.
"I do agree that somehow the subsidies will have to be phased out so that the market prices of electricity and petrol we pay reflect the true social cost but be gradual and with assistance. Adjustment takes time," he said.
According to the Department of Statistics Malaysia, T20 represents the top-tier households whose income is higher than RM 10,959. They are further classified into two sub-groups which are T1 and T2.
T1 represents households with the average income of RM12,586 while T2 represents households with the average income of RM24,293.