The government should not put off plans to rationalise fuel subsidies, say economists.
Professor Emeritus Dr Barjoyai Bardai and Dr Carmelo Ferlito said it was important to prioritise the rationalisation of blanket subsidies.
"The objective of rationalising subsidies is to allow the government to redistribute funds to those most in need," said Barjoyai of Universiti Tun Abdul Razak's Graduate School of Business.
"The rationalisation of subsidies is long overdue. Spending on blanket subsidies is reckless," he said when commenting on former prime minister Tan Sri Muhyiddin Yassin's call on the government to postpone subsidy rationalisation plans.
It was previously reported that the government will begin rationalising fuel subsidies this year. Last year, it spent more than RM50 billion on fuel subsidies.
Barjoyai said the government should also look to control abuse of other subsidised goods, including cooking oil, chicken and eggs by ramping up enforcement against cross-border smuggling.
However, Barjoyai said the government should consider putting on hold the recent two per cent hike in service tax.
He said the current tax system was not productive and the government should consider reforming it with focus on direct taxes.
Ferlito said it was imperative to begin rationalisation, even on a small scale, to test and fine-tune the mechanism.
"Second, the commitment to fiscal responsibility so far has been translated only into more taxes, which are fragmenting the fiscal scheme of the country.
"Rationalisation is important, I am more sceptical about the increase in service tax and many additional scattered taxes."
The Centre for Market Education chief executive said a country's tax system must be simple and fair to ensure compliance.
He also said the government must ensure policy consistency, reduce involvement in business, and create a more business-friendly environment to "unleash entrepreneurship and enlarge the economic pie".
Earlier, Muhyiddin said in the Dewan Rakyat that he understood the country's fiscal burden was due to the significant amount of subsidies.
"But are we willing to see the people suffer while they are already burdened with various issues related to the cost of living and tax increases?" he said
Prime Minister Datuk Seri Anwar Ibrahim, in tabling the 2024 Budget, had announced that the government was planning to rationalise diesel subsidies, allowing it for a select group only.
Cargo transport companies, among others, would still be able to enjoy subsidised diesel.
Muhyiddin said that if the subsidy rationalisation plan was implemented, he was 100 per cent certain that the price of all goods and services would increase.
He added that the government seemed to overlook the burden borne by the people with decisions to raise taxes and other recent price increases.
"It's as if everything is piled onto the people without a comprehensive social safety net strategy.
"Does the government not understand the impact of the Service Tax increase on the overall supply chain, ultimately resulting in nearly all goods increasing in price, with the effects borne by the common people?"
Muhyiddin said the National Cost of Living Action Council (Naccol) had failed to address challenges in the cost of living.
He cited the lingering issues concerning rice stocks and escalating cost of essential items.
"During my tenure in the government, I was involved in managing rice-related matters at the ministry. There was never a shortage of local rice in my time.
"At that time, rice was managed by Bernas. I am not saying that I support a monopoly on rice," he said in the motion of thanks on the royal address yesterday.
He criticised the poor coordination between Naccol and government counterparts, saying that they did not seem to be aligned with each other.
Muhyiddin also stressed the urgency for Naccol to earnestly tackle these challenges proactively to prevent further deterioration, as it would greatly impact the public.