PUTRAJAYA(Oct 18): Prime Minister Datuk Seri Anwar Ibrahim stressed the importance of prioritising good governance over taxation to combat leakages and corruption.

During his address at the Symposium — The Path Towards Greater Prosperity for Malaysia organised by Universiti Malaya's Social Wellbeing Research Centre (SWRC), Anwar asserted that taxation should take a back seat to effective governance.

“Taxation should be secondary in any reasonable economic public policy. First, we must focus on governance and ensuring the prevention of unnecessary leakages and corruption. Only then can we assess the necessity for additional taxation. 

“Taxation is something that is essential only if it is deemed to be so critical. Do not ever forget that this country has two major problems, governance and then corruption which is systemic,” he said. 

The prime minister also pointed out specific areas of concern, including diesel subsidies. He noted that during the Covid-19 pandemic, demand for diesel surged, but the increase was not proportional to the actual need of public vehicles running on diesel. 

This imbalance has resulted in significant financial losses due to leakages — with funds being funnelled offshore or lost to border smuggling — amounting to billions, he added. 

While tabling Budget 2024 on Friday, Anwar said the government will enforce targeted subsidies on diesel in phases in order to prevent leakages and smuggling of the product, but assured that selected categories of users, such as freight companies, will not be affected to reduce the subsidiy rationalisation programme's impact on prices of goods. 

The current price of subsidised diesel is set at RM2.15, compared to the market price of RM3.75 per litre. The government has to bear RM1.60 per litre of diesel or around RM1.5 billion in total.

Sales of subsidised diesel have increased by up to 40% since 2019, although the number of vehicles using diesel has only increased by less than 3%, Anwar said, adding that smuggling was a possibility due to the cheaper price of Malaysian diesel. 

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