GST - Part 3: Getting Squeezed Tighter

The Goods and Services Tax to be implemented by 1 April 2015 has been the talk of the town, at least it had been until the unending swarm of rate hikes shifted our attention. Nonetheless, there is still a lot left under the carpet. The government has been airing various misleading advertisements about GST and word from social media has been equally misleading albeit spun in the opposite direction. To do my part to clear any confusion regarding GST and to capitalise on my prior research on GST, I shall write a series of articles on the subject.

Part 3 - What will GST do to us?

Foreword

Obviously, GST affects every individual and household in different ways, depending on income and consumption patterns. There is simply no way to account for all the variations therefore I will rely on statistics to prove whatever point I'm trying to prove. That being said, this is not a full-fledged research paper. For that, click here.

Is GST a progressive or regressive tax?

What is a progressive tax? A progressive tax is when the rich, in addition to paying a higher amount in taxes, pay a higher percentage of their income in taxes than the poor. 

For an example of progressive tax, look at an income tax system where the first RM1,000 earned is taxed at 10% and anything above is taxed at taxed at 20%. We have 2 people, A who earns RM1,000 and B who earns RM3,000.

A will pay RM100 in income taxes, effectively 10% of RM1,000. Simple. B, on the other hand, needs to pay RM100 for the first RM1,000 he earns and RM400 (20%) for the next RM2,000. B, in total pays RM500 in taxes for a RM3,000 income, effectively 16.67%. B, who earns more than A, pays more in taxes in proportion to income.

A regressive tax is the opposite, where the poor pays a large proportion in income as taxes as compared to the rich. This is never the case with income taxes, not in a single country in the world, as it is simply unconscionable to tax the poor more (in percentage) than the rich.

Back to the question, is GST a progressive or regressive tax?

In short, it is regressive. Why? Look at the graph below.

Income-expenditure relationship in Malaysia. Source: Penang Institute[1].

The graph shows the relationship between income and expenditure of Malaysians. As we can see, if you're earning RM1,000, you will most likely spend all or close to all of the money; if you're earning RM15,000, only about a third of your income is spent. So 6% of all your income is more than 6% of a third of your income, effectively 2%, in relation to income, zero-rated and exempt supplies notwithstanding.

Taking consumption patterns of standard-rated, zero-rated and exempt supplies into account, the effective GST on different income groups in Malaysia is shown in the graph below.

Effective GST (GSTI) of different income groups. Source: Penang Institute[2].

As we can see, GST is marginally progressive over the income range of RM500 to RM1,999. Afterwards, the decline in GSTI gets steeper as income increases. This is a sign of a regressive tax and worse, one that gets more regressive as income increases. Supposed RM5,000 is not the upper limit for this graph, say it were RM100,000, the GSTI would be far lower and the burden of GST is much larger on a poor person than it is on the rich. If you belong to the latter portion of the graph, put aside the benefits for you and ponder upon whether or not it is equitable that a poorer person is burdened more than you by a tax.

Will GST burden us more than the current tax system?

Yes. For a few simple reasons established in my previous article.

Firstly, GST now affects roughly ten times more businesses than the previous Sales Tax[3]. It can be assumed that ten times more businesses under GST would mean more products being taxed. More products being taxed means consumers are paying more taxes.

This is further reinforced by reason number two, the Royal Malaysian Customs is projecting an increment of RM5 - 6 billion in tax revenue due to the switch from the current Sales and Services Tax to GST[4]. Since GST is completely borne by the consumers, as established in part 1 of this series, the tax burden on consumers is sure to increase.

There is another side to the increase in burden - inflation. We can expect a one-time "blip" in the Consumer Price Index (CPI) once GST is implemented[5]. This is due to GST implementation costs as systems have to be set up to handle GST transactions[6]. However, CIMB analysts expect the inflation rate to just jump once and not accelerate further as GST is a refundable credit system (how does that figure?), there are exemptions e.g. exempt and zero-rated supplies, and last but not least, "strict market enforcement to monitor price changes"[7]. Pardon me for being cynical but 'strict enforcement', 'monitor'? Seriously?

But the government claims that prices will go down after GST is implemented.

Try not to be shocked when you read this: the government lied.

I know what the government tries to sell. Sales Tax is 10%, Services Tax is 6%, with GST, only one tax at 6%. Huge savings.

There are a few fallacies in that claim. One, Sales Tax is levied on manufacturers and is a one stage tax, as compared to GST, where the value added at every stage of the supply chain, is taxed and the taxable value is the final price of the goods or services. Think about it, 10% of the manufacturer's price is much likely to be lower than 6% of the final price after goods have passed through the hands of the manufacturers, wholesalers, retailers.

Two, there can be a marginal decrease in tax once GST is implemented, but it is most likely not going to happen. Say, if there are only 2 stages in the supply chain, manufacturer and service provider. Since under Sales Tax, the service provider will not be able to claim input tax deductions for the 10% paid to the manufacturer, the 10% will be priced into the service provider's price upon which another 6% will be levied. At the maximum, assuming the price of the manufacturer including Sales Tax (110%) is the same as the service provider's price, (now pause for a moment and think about how ludicrous that is, a business that has 0 gross margin,) add 6% service tax onto that (116.6%), effectively, it results in a tax saving of 63.86% from switching from the current system to GST (106%).

(16.6% - 6%)/16.6% = 63.86%

However, this situation is close to impossible in the real world. Supply chains are longer and there would be value added at every stage, which means the final service provider's price would be much higher than the manufacturer's price, cutting the tax savings to a point where they would be minimal. Also, businessmen in the real world are unlikely to pass on savings to consumers when consumers are already willing to pay the higher price, especially when it is not significant enough to increase demand. Don't forget about the implementation costs which would be priced into the goods and services if the government doesn't fully subsidise them.

As a result, prices are most likely increasing, as evidenced in the inflation rate projections by various think tanks and research houses.

Are there any measures in the budget to ease the burden?

There are in fact, two measures that the government has proposed to ease the burden of GST on the rakyat. First is an income tax rate cut; second is an increment in Bantuan Rakyat 1 Malaysia, more commonly known as its acronym, BR1M.

The proposed income tax rate cut is as follows:

Note that as opposed to the other graphs in this article which refer to monthly household income, the income here refers to annual individual income.

So how many people actually benefit from the income tax rate cut? According to PM Datuk Seri Najib Tun Razak, less than 10% of Malaysia's working population pay income taxes, which works out to be 5.6% of the entire population[8]. So, only 5.6% of Malaysians are benefiting from the cut.

BR1M is an annual handout of RM650 paid to heads of households with monthly household income of RM4,000 and below, senior citizens (aged 60 and above) living alone with monthly income of RM4,000 and below, and under 21s with monthly income of RM2,000 and below[9]. It is increased from RM500 for 2014 and beyond. For 2013, there were 6.8 million BR1M applicants[10].

Given that 44.7% of Malaysian households earn more than RM4,000, they are not eligible for BR1M[11]. Minus the 5.6% who benefit from income tax rate cuts, which is supposed to be a much smaller percentage once converted to household from individuals, that leaves about 40% of people who do not benefit from both measures and are to bear the brunt of higher living costs as a result of GST.

Net effect of income tax saving, BR1M and GST payments (household). Source: Penang Institute[12].

This, ladies and gentleman, is the middle class of Malaysia. This is always the group getting the short end of the stick.

Conclusion

As of now, it seems that GST implementation is a certainty. For the poor, the effects of GST will be mitigated; for the rich, the income tax rate cut will result in great savings; for the middle class of Malaysia, there is little that can be done but to brace for a tighter squeeze and pray and hope that this is the last squeeze. However, before GST hits, price and rate hikes are already wrapped and packed as 2014's New Year's gifts, and the effects are not limited to the middle class.

So, during this festive season, remember to be grateful and thank the government.

Chong Yu Cheng

Part 1 - What is GST and how does it work?
Part 2 - Is GST a good system and is the government ready for it?
Part 3 - What will GST do to us?
---------------------------------------------

[1]K H Lim & P Q Ooi, Implementing Goods and Services Tax in Malaysia [PDF document]. Retrieved from Penang Institute Site: http://penanginstitute.org/gst/GST&You_20131109.pdf

[2]Ibid.

[3]T Pua, The Tiger That Lost Its Roar: a Tale of Malaysia’s Political Economy, Democratic Action Party, 2010.

[4]Ibid.

[5] H G Lee, "Inflating Expectations of Subsidy Cuts and GST", Macro Pulse, CIMB, Jun 7, 2013.

[6]Ibid.

[7]Ibid.

[8]http://www.theedgemalaysia.com/commentary/221121-pre-budget-2012-caught-in-the-middle.html

[9]https://ebr1m.hasil.gov.my/

[10]http://www.nst.com.my/nation/general/govt-may-up-income-eligibility-for-br1m-1.311470

[11]http://www.epu.gov.my/documents/10124/c9352eab-28fe-4b0f-9fc1-8a70c18b0cd9

[12]Ibid. 1.

GST - Part 2: Generally Superior, Theoretically

The Goods and Services Tax to be implemented by 1 April 2015 has been the talk of the town, at least it had been until the unending swarm of rate hikes shifted our attention. Nonetheless, there is still a lot left under the carpet. The government has been airing various misleading advertisements about GST and word from social media has been equally misleading albeit spun in the opposite direction. To do my part to clear any confusion regarding GST and to capitalise on my prior research on GST, I shall write a series of articles on the subject.

Part 2 - Is GST a good tax system and is the government ready for it?

Is GST a good tax system?

At any point where you have no idea what the hell I'm talking about because you're unsure how GST works, scroll up and click here.

GST is an excellent tax system. If otherwise, it would not be implemented in 160 countries around the world. It is without a shred of doubt better than the current system in Malaysia whereby there are two taxes - Sales Tax and Services Tax in terms of efficiency.

Before any comparison can be done, we need some explanation on how the taxes work.

Sales Tax is levied upon any person (individual or company) who engages in the manufacturing of taxable goods in the course of business[1]. Manufacturers with an annual turnover of less than RM100,000 of taxable goods can apply to be exempt from Sales Tax[2]. As it is only charged to manufacturers, it is a one stage tax, as compared to GST, which is a multistage tax levied on every business in the supply chain. Sales Tax rate is generally 10% but is 5% for basic products, 20% for others while fuels have specific tax rates[3].

The inefficiency of the Sales Tax lies in the fact that it is a one stage tax. Manufacturers which are required to pay Sales Tax can easily set up companies to sell their products to at rock bottom prices. As a result, they are taxed less and the companies which bought the products are free to sell at market prices, without paying Sales Tax. With GST, there is no escape from the taxman as goods and services are taxed at every stage. The companies set up by the manufacturers would be taxed anyway when they sell their products, eliminating this trick from the book. This is why GST is more efficient, as it is more difficult to avoid taxation.

Services Tax is 6% which is the same rate as GST so no changes there other than the turnover threshold which is up to RM500,000 for GST from a range of RM150,000 to RM500,000 for Services Tax[4]. Taken at face value there should be no gain in efficiency in the switch. That being said, the gain in efficiency lies in the fact that there will be one tax system - GST as compared to the current two - Sales and Services Tax.

All in all, GST is a more efficient tax as it is harder to avoid and eliminates the need for two tax systems.

Is the government ready for it?

It is pretty much established that it in theory, GST is superior tax system as compared to the current system. It is also excellent for our government in terms of revenue as it affects more businesses than before and is projected by the Royal Malaysian Customs to rake in an additional RM5 – 6 billion per annum[5]. However, is the government ready for it?

I don’t think so. We know that a system is only as good as its execution. Any system, no matter how theoretically sound it is, means nothing if it’s poorly executed. That is the concern I have for the implementation of GST in Malaysia. GST, as much as it is efficient, is more complex than the previous tax systems. The complexities are not only present in the administration of the tax but also in its legal side. Bear with me and let me explain how.

Administration

The first issue I have with the administration of GST is the workload. Let us look at it using simple mathematics. Currently, there are about 20,000 manufacturers with Sales Tax licences, meaning they have to pay the taxes. Once GST is implemented, the number of businesses affected will be north of 200,000, tenfold of what it was before[6].

It doesn’t end there. Sales Tax involves little to no refunds, except in the cases of erroneous refunds, overcharging, or with approval from the Finance Minister or the Director General of Customs and Excise[7]. We can assume that most taxes go one way, from manufacturer to customs, with the few exceptions. If it goes the other way, it would mean that our customs is doing a poor job to begin with. With GST, taxes go both ways in the form of input and output taxes as shown in my previous article. 

Using my previous example, with 3 businesses in the supply chain, under the Sales Tax only the manufacturer would be taxed. That is it. Under GST the same supply chain would have tax collected from 3 businesses taxed and 2 businesses getting deductions. Bear in mind that this is possibly the simplest supply chain. In the real world, manufacturers would be procuring raw material from other manufacturers. There could also be more than one wholesaler. Most goods actually go through multiple distributors in a supply chain. Every time goods change hands, two tax transactions occur. As such, the administrative workload would be multiplied by factors way beyond ten.

As far as I know, Customs has no plans on mass recruitment for the implementation of GST. It would seem that it is relying more on systems than personnel for the smooth running of GST. However, even the best systems need to be monitored. With the much larger number of transactions once GST is implemented, one would think that they would need a larger workforce. This is one reason I doubt the government’s readiness for GST.

If in any case that the system fails to live up to its promise and Customs rushes GST deductions and refunds due to increased workload, many fraudulent claims would pass through the net, causing losses for the government[8].

Legal

The issue regarding the legal side of GST is a bit less intuitive than the previous point. Still, it is no less important.

GST is governed by a piece of legislation, the GST act. In the GST act, a very important section is the list of taxable and exempt supplies. Now, it may seem strange that there would be complications arising from such clear cut distinctions of what is taxable and what is not. I assure you that this is, in fact, true. The best way of demonstrating this is to study a real legal case.

Proctor & Gamble (P&G), manufacturer the potato crisps (or chips, if you’re American), Pringles, won a case in the UK High Court for their product to be exempt from VAT (same as GST), because the judge ruled that the product is in fact, not a crisp[8]. In the UK, crisps are taxable supplies whereas most foodstuffs are not[9]. P&G argued that Pringles, due to their ‘melt mouth’ taste, ‘uniform colour’, ‘regular shape’ which is ‘not found in nature’ and they contained non-potato flour unlike other crisps[10]. It was also argued that the tube packaging unique to Pringles distinguishes it from crisps[11]. The judged ruled that Pringles were found to fall outside the definition of crisps as the products, in all their flavours contain less than 50% potato[12]. The judge also agreed with most of P&G's arguments[13].

However, the Court of Appeal then overturned the decision on the basis that Pringles contained 42% potato which is sufficient to be reasonably viewed as to be made from potato, therefore are in fact, crisps and liable for VAT[14]. The tax amount in question was £100 million plus £20 million per year in the future. 

The above example shows that determining whether or not a supply is taxable is not as simple as it sounds and the amount of money in contention could be extremely sizeable.

If I remember correctly from one of my Tax Law lectures, there is also another case in Australia where the argument was on whether Italian shortbread is bread or biscuit, whereby bread is GST exempt whereas biscuit is not. In Australia, between 2011 and 2013, there are on average 3 GST-related cases every month[15].

Is our judiciary ready for this type of workload? One could argue that with Sales Tax, these cases would already have existed. However, it is important to go back to the point where many more businesses are affected by GST as compared to Sales Tax.

Conclusion

GST, taken on its merits as a system, is a beautiful piece of work. However, it entails much more work than our existing system. Given the track record of our government and civil servants, there is much room for doubt on the smooth running of a complex tax system. Don’t get me wrong, I am not outright accusing them of being too incompetent to do it. What I am saying is the level of assurance required for me to believe that it will be well run is pretty damn high.

If the government does it wrong, the tax revenue could fall short of expectations, requiring either the system and/or personnel to be revamped or raising the GST rate. I think we know very well which is the easier option.

Chong Yu Cheng

Part 1 - What is GST and how does it work?

Part 2 - Is GST a good system and is the government ready for it?

Part 3 - What will GST do to us?

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[1] http://www.agc.gov.my/Akta/Vol.%202/Act%2064.pdf
[2] Ibid.
[3] http://malaysiantax.com/attachments/Malaysian-tax-PUA-355-Sales-Tax-2.pdf
[4] http://www.nbc.com.my/service-tax-in-malaysia.html
[5] http://www.freemalaysiatoday.com/category/business/2013/11/22/rmc-gst-at-6-to-raise-rm22b-revenue/
[6] T Pua, The Tiger That Lost Its Roar: a Tale of Malaysia’s Political Economy, Democratic Action Party, 2010.
[7] http://www.agc.gov.my/Akta/Vol.%202/Act%2064.pdf
[8] Ibid. 6.
[9] http://www.bakeryandsnacks.com/Markets/Pringles-are-not-crisps-rules-UK-court-in-VAT-case
[10] Ibid.
[11] http://news.bbc.co.uk/2/hi/8060204.stm
[12] Ibid. 9.
[13] Ibid. 9.
[14] Ibid. 9.
[15] Ibid. 11.
[16] http://chrissievers.com/gst-case-summaries-2/

To the Barisan Nasional Facebook Page Team: No more disturbing photos

I don’t usually ‘like’ Facebook Pages. When I do, it’s so I can receive regular notifications and updates on my personal home feed. Recently, I’ve ‘liked’ several pages, not out of sincere support for these groups or individuals, but so I can be updated with the material they’ve chosen to upload or publish. These pages include Utusan Melayu, UMNO, Barisan Nasional, Najib Razak, Khairy Jamaluddin and a few others.

Expectedly, I began receiving hourly updates on my home feed from the Barisan Nasional page. I made a mental note that they most likely employ a diligent group of staff to upload photos, complete with captions and photoshopped effects, onto the page. Bearing in mind that BN is an amalgamation of parties and therefore a coalition, perhaps their machinery outclasses those of other major political parties and by extension, their social media teams.

Let’s talk statistics for a minute. BN’s Facebook Page has 259,709 followers (users who’ve ‘liked’ the page and are subscribed to its updates) while the Democratic Action Party, the next largest political entity in Parliament, has 512,940 followers. What’s interesting is how many users ‘talk about’ these pages and its content. 

Only 5,512 users mention DAP (through tagging) on Facebook and share its photos while a whopping 48,019 users mention BN or share its photos. So BN Facebook posts successfully engages 18% of its support base (if you consider ‘likes’ as support votes) while DAP only manages to engage 1% of its support base. 

What’s clear is that there are more Malaysian Facebook users viewing, ‘liking’ and sharing material posted by BN’s social media team, and does the team work hard. There is no question that the hourly photos are well-received and circulated by many users. One can argue that BN’s social media strategy is to aggressively and vigorously post pictures and hope that these pictures go viral through user sharing. 

This is all fine and well with me. Indeed, I find BN’s government propaganda and not so professional photo-editing skills quite amusing and a welcomed change of pace to the sometimes depressing news one usually sees online.

That’s until I noticed a trend. A picture of a team of Commandos appeared on my news feed with over 1000 ‘likes’. ‘Surely,’ I thought to myself, ‘us citizens, or at least over a thousand of us, are fascinated with soldiers with guns and cool uniforms’. I wrote it off without much thought.

Then a picture depicting children sitting in an armoured vehicle, dressed in uniform and wielding assault rifles popped up on my feed. The comments mostly read: “How cute!”

1273 likes and 50 shares.

The caption read: “Melentur buluh biarlah dari rebungnya”. 

To bend a bamboo, start when it’s still a shoot. 

How ominous.

In disbelief, that’s when I started paying attention to the content BN publishes and collected a few photos. The following are a sample of uploaded photos onto the Barisan Nasional's Facebook Page by their social media team within a span of 24 hours (Dec 17th - Dec 18th).

A few disturbing inferences can be drawn from their most peculiar strategy to win the hearts and minds of Malaysia:

1. Guns and more guns

The majority of these uploaded photos depict uniformed personnel wielding guns and weaponry. This could be a tactic to garner more 'likes'. However, with already escalating gun violence in Malaysia, why does the Government want to disseminate images of professionals with firearms on an hourly basis to its 259,000 followers, consisting largely of people (such as myself) who don't understand the responsibilities attached to holding and operating a lethal weapon? This is not a game of cops and robbers. 

2. Children in Uniform

And with guns. There's not much to be said except that this worrying fascination with children wielding weapons in uniform has to stop. Does a country with developed nation aspirations view its children as armed assets? Are we building brains or brawn?

3. Religion and service

The police and armed forces of Malaysia serve the people of Malaysia and not just a section of it who are Muslim. There is nothing wrong with observing religious rituals such as prayer during service, but one has to wonder why pictures of these service personnel in mass prayers are posted and widely circulated. While 65% of the population are Muslim, will the other 35% have the confidence and assurance that they will be protected?

These pictures are as vexing as they are ludicrous. It is my hope, as a concerned Malaysian citizen (and netizen), that my Government exercise more care and responsibility in its social media strategy.

Dennis Kam

Gerrymandering & Malapportionment - How the concept of 1 Man, 1 Vote & 1 Value is destroyed?

Introduction

In Malaysia, the process of drawing or delineation of electoral constituencies is done by the Election Commission (EC) which is supposed to be independent and enjoys public confidence[1]. The delineation of electoral constituencies is supposed to be in an equal and proportionate manner where the number voters in all of the electoral constituencies are almost the same. However, this is the opposite of what is happening in Malaysia, resulting in what we called malapportionment.

Malapportionment simply means the unequal or uneven number of voters in one constituency and another constituency which creates an uneven playing field for political parties in what should be clean and fair election in accordance to international standards. Malapportionment makes it unfair for voters in larger constituencies as their votes are not equal to those of smaller constituencies as well as it is unfair for political parties which contest in bigger constituencies.

Another element to consider is gerrymandering which is defined as the drawing of electoral constituencies to benefit one particular party, usually the ruling government. There has been long standing allegations of gerrymandering occurring in Malaysia. As a result, we see the real life example of how non-Barisan Nasional (BN) parties have to work harder to win more votes to get one seat as compared to BN.

From the Merdeka Constitution to the current Federal Constitution

In 1957 when Malaysia achieved its independence the provision regarding delineation of electoral constituencies was fair in the sense it allowed only a maximum variance of 15% for the size of an electoral constituency to the size of the average constituency of a particular state. The EC was independent in conducting its delineation process and was uninfluenced by the Prime Minister (PM) in the Dewan Rakyat in its process[2]. 

This later drove the Alliance Government in 1960 to amend the Constitution to release the Chairman of the EC but it failed. It was later in 1962, when the Constitution was amended to take away that safeguard and allow rural weightage to be changed so that urban constituencies can be double the size of the rural seat. The amendment also annulled the 1960 delineation retrospectively[3] and in effect the EC now has to submit its redelineation report to the PM for the Dewan Rakyat to approve and the PM has the right to make necessary modifications. 

It was later in 1973 where the limit was removed altogether leaving no safeguard to the way electoral constituencies are delineated.  This would result in the drawing of electoral boundaries at the discretion of the EC. In this case, a fully independent EC would not create any problems when drawing the electoral boundaries. The main concern is that what happens when the EC is not independent and not impartial. In reality, the EC draws the electoral boundaries to benefit a certain political party to help them win more seats. This is, as earlier stated, gerrymandering. 

The current Federal Constitution provides for several principles for the delineation of electoral constituencies. Among many, the delineated constituency must not cross State boundaries and State Constituencies must not cross Federal Constituencies[4], the presence of administrative facilities to facilitate registration and polling machines[5], equal number of electors in constituencies taking into account the difficulty of reaching electors in rural constituencies and the measuring of weightage to be given to such constituencies[6] and finally the inconvenience of attendants on the alteration of constituencies and the maintenance of local ties[7]. Despite these principles, without the 15% safeguard as stipulated in the Merdeka Constitution these would seem useless as they serve only as guidelines and not rules for the EC in the delineation process. As such we now see electoral boundaries drawn so unfairly and unequal with seats like Putrajaya which have only 15,800 voters approximately amounts to one Parliamentary seat while Kapar with 144,000 voters also form one Parliamentary seat. 

So where does the one man, one vote and one value concept comes in? Definitely not in Malaysia.

Delineation Process

The EC is empowered to make recommendations for constituencies delineation by informing the Speaker of the Dewan Rakyat and the PM and shall publish in the Gazette and in at least one newspaper of their recommendations for the public to inspect[8] and any representation or objection with respect to the recommendation can be made within one month from date of the publication of such notice. The recommendation which is made by the EC can be objected by the State Government or local authority whose area is wholly or partly comprised in the constituencies affected[9] or by a hundred or more persons whose names are on the current electoral roll of the constituency in question[10]. The EC shall then conduct a local enquiry in those constituencies. Any objection or representation to the EC’s recommendation must be made within one month from the publication of the notice of the recommendation, in which case the EC shall publish again a notice on the revised original recommendation with the same requirements of the original publication[11]. There shall be no more than two local inquiries held by the EC in the respective constituencies.

After the completion of the procedure of the recommendation, the EC shall submit a report on the constituency showing that the constituencies they recommend that each unit of review should be divided in order to give effect to the principles set out in section 2[12] and the names by which they recommend that those constituencies shall be known[13]. The report would be submitted to the PM to be presented to the Dewan Rakyat with a draft Order to be made. The draft Order must receive votes from more than one half of the total number of members of the Dewan Rakyat before the PM submits the draft order to the Yang Di-Pertuan Agong. His Majesty shall then make an Order based on the draft submitted to him by the PM and it will only come into effect after the next dissolution of Parliament or Assembly[14].

First-Pass-The-Post System

In Malaysia, we practice the conventional First-Pass-The-Post (FPTP) System where the winner of the highest number of votes wins the particular seat. In this system, it is paramount that the translation of votes into number of seats is fairly equated if not it would not only taint the election results but the whole process of democracy itself.

The defect of this system in Malaysia is that it is always disproportionate because the translation of votes to number of seats is uneven among political parties. The largest party wins more seats than the smaller parties although the votes received by the smaller parties are more than that of the largest. Hence it would be fair to say that the FPTP awards a more than proportional share of seats to the largest party and a less proportional share of seats to the other parties[15]. The non-proportionality increases the share of the legislative majority of the governing party and creates a more stable and stronger government[16].  Due to this disparity we now see the ruling coalition having 133 Parliament Seat with only a 47% popular vote. Among this 133 seats, the 112 seats won by BN amounts to 2,189,599 votes which is 16.5% of the 13,268,200 votes cast nationwide[17].

Proposed Solutions

Despite all the freedom given to the EC to make the recommendations on delineation exercise there still exist Constitutional safeguards in the form of 2/3 majority vote in Parliament to amend the number of Parliamentary seats in each States as well as amendment to State Constitution when State seats are concerned. However several proposals need to be made in order to improve the current delineation process.

Firstly, let us look from the legislative perspective. We would need that very important Constitutional safeguard whereby constituency size in terms of number of voters cannot vary more than 15% from the average constituency in a particular state. To do so we would have to amend the Constitution to bring back that safeguard we once had in 1957 which is in the Merdeka Constitution. This requires legislative reforms in Parliament by bi-partisan support from both the ruling coalition as well as the opposition coalition to vote for that amendment bill. Only with a 2/3 majority vote from the Dewan Rakyat can enable the Constitutional amendment bill to be put through. Besides that, the EC must be independent and free from interference from the PM or the Dewan Rakyat in its delineation process as provided in the Merdeka Constitution.

Secondly, we would need to look at institutional reform in the EC. We all know that in order to play an effective role, the commissioners must truly be independent and impartial. They must not be affiliated with any political parties to ensure they are able to execute their duties without fear or favour. We have seen allegations that the Chairman and Deputy Chairman of the EC are also members of the United Malays National Organisation (UMNO) and the Chairman and his Deputy admitted that they could have been members of UMNO before but were inactive members[18]. In order to ensure a truly independent commission, only commissioners who are not affiliated to any political parties are allowed to be appointed hence it must be put into true effect Article 114 (2) where election commissioners appointed enjoys public confidence. Only with a truly impartial EC can the Election Laws be properly enforced and most importantly the electoral constituencies can be fairly delineated.

Thirdly, the Electoral Roll must also be clean and free from phantom voters. The courts must be able to review the Electoral Roll gazetted to ensure that phantom votes do not skew the election results like what happened in the Likas case[19]. There must be no delineation exercise until the Electoral Roll is reformed to ensure clean and fair elections to be held. If the courts do not allow the review of the EC’s decision to gazette the Electoral Roll it would amount to the court condoning electoral fraud[20].

Finally, the EC should look into other types of electoral system such as the Proportionate Representation (PR) system. Of course, a change in system comes together with its pros and cons. However, hybrid systems can be adopted by picking the good features of one particular system together with other good features from other systems. This new system would have to represent the will of the people in a proportionate manner with a balanced number of voters among constituencies.

Conclusion

The lessons from the 13^th General Elections should be an awakening for every one of us. Gerrymandering must be stopped at all costs in order to create an equal level playing field for all political parties. Also, the drawing of electoral boundaries to tip the scales in the favour of any party must be prevented in the future. The effect of unequal number of voters in constituencies does not only breach the equality clause in human rights but also creates an unfair situation as if voters in smaller constituencies’ votes have higher value than those from bigger constituencies. Therefore, it is paramount that the delineation in its effect must represent the will of the people in the form of equally represented constituencies to enable the proper translation of votes into number of seats for the political parties. The rakyat must always be aware of their rights and the current affairs of the country to discourage any hanky-panky from the authorities. As a final word, should any constituency redelineation be conducted prior to the aforementioned reforms there will definitely be a strong protest from the rakyat and that is a call the government should heed if it considers ours a modern, democratic society.

Vince Tan

Edited by Chong Yu Cheng

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[1] Article 114 (2) of the Federal Constitution

[2] Yong, Andrew (2013),  Malapportionment & Gerrymandering - What Can We Do About It, LoyarBurok, pg 1

[3] Yong, Andrew (2013),  A History of Malapportionment : How BN can win 59.9% seats with 46.7% Votes, LoyarBurok, pg 1

[4] Thirteenth Schedule Part I 2(a) of the Federal Constitution

[5] Ibid 2(b)

[6] Ibid 2(c)

[7] Ibid 2(d)

[8] Thirteenth Schedule Part II Procedure for Delimitation of Constituencies 4(a) (b)

[9] Ibid 5(a)

[10] Ibid 5(b)

[11] Ibid 7

[12] Ibid 8(a)

[13] Ibid 8(b)

[14] Ibid 12

[15] 2005 UK General election results

[16] Hong Hai, Lim (2011), Reducing Unfairness in the Delineation of Electoral Constituencies, USM: Memorandum Submitted to the Parliamentary Select Committee on Electoral Reform

[17] C.W. Lam (2013), Gerrymandering : We can do something about it!, The Rocket: Kuala Lumpur, September Issue

[18] http://www.freemalaysiatoday.com/category/nation/2012/04/27/ec-bosses-admit-being-umno-members/

[19] Successful challenge of the Electoral Roll in court which pended the Government to introduce Section 9A of the Election Act to oust the court’s jurisdiction to question the Electoral Roll once publish by the EC on the Government Gazette

[20] Gurdial Singh Nijar, Chief Prosecutor of the Legal Team of the BERSIH’s People Tribunal