This article first appeared in The Edge Malaysia Weekly on April 1, 2024 - April 7, 2024

IN the week when it became clear that Malaysia will not implement the so-called “luxury tax” now known as the High Value Goods Tax (HVGT) on May 1, Economy Minister Rafizi Ramli gained ammunition to counter a renewed barrage of criticism on the Central Database Hub (Padu) — with registrations surging significantly ahead of the March 31 deadline.

Some 9.24 million people have registered on Padu as at 11.59pm last Thursday (March 28), according to the latest release at the time of writing — doubling in just two weeks from 4.65 million on March 13 (see Chart 1).

The number of daily registrants surged above 300,000 a day since March 19 and continued to stay above it at the time of writing, according to The Edge’s compilation of official data releases.

On March 28, Padu gained around 430,000 registrations — a record high since the database opened for registration on Jan 2 this year — even after Rafizi told reporters that the database sees over two million cyberattacks a week from around the world but has stayed safe thus far.

Speaking to reporters on March 27, Rafizi expressed confidence in Padu getting over 10 million verified registrations when the database closes on March 31 for data analysis necessary to implement targeted subsidies.

“That [10 million verified adults] is quite representative, it means you have the comfort of at least 70% to 80% of [nine million] households verified one way or another… All it takes is one person to validate information for the rest (three or four people) in the household. It is important to put that into perspective,” Rafizi says.

“What we are trying to do with Padu is to change the status quo … the way we handle aid, subsidies, classifications and eventually [digital government services under] GovTech. In any attempts at change, there will be [pushback],” he adds, noting that information stored in Padu is subject to the Official Secrets Act “which is of higher liability” even though information shared with the government is not covered under the Personal Data Protection Act (PDPA).

Asked about Sarawak Premier Tan Sri Abang Johari Tun Openg’s reservations over data privacy and whether there is a need for Padu to collect detailed financial information, Rafizi notes that Padu had been approved for implementation last year, not just at cabinet level, but at various stages of government, including before the National Statistics and Data Council where all states and chief ministers have representation.

While an engagement session has been scheduled in Kuching to address concerns, Rafizi notes that Padu registrations are among the highest in Sarawak.

Indeed, with 0.89 million registrations from Sarawak as at March 28 — which works out to 45.2% of the 1.97 million citizens aged 18 and above in the state — Sarawak has the fourth-largest pool of registrants after Selangor, Johor and Perak, official data shows (see Chart 2).

This is despite there being a decline in the speed of Padu registrations in Sarawak last week even as sign-ups at several states sped up when it became clear that the March 31 deadline would not be extended (see Chart 3.)

While the 45.2% of the targeted age group puts Sarawak at No 8, percentage-wise, it is still above the median of 44.8% and average of 43.5% among 13 states and three federal territories.

The 9.24 million registrations as at March 28 work out to a simple national average of 42.1% of 21.97 million Malaysians aged 18 and above (see Table 1.)

Asked if he was worried that 50% of the population might be left out if Padu registrations only reached about 10 million by end-March, Rafizi said Padu has its own way of reducing exclusion errors as it already has data even if some people choose not to register.

“I’m not worried. We are asking for verification. If you take out the top 20% who think they will likely not get any subsidies or assistance, then we are actually looking at about 16 million to 17 million people, so 10 million plus gives about 60% to 70% [coverage]” Rafizi says.

In a last attempt to push up registrations — with two full days to deadline — Chief Statistician Datuk Seri Mohd Uzir Mahidin’s office issued a statement on March 29 to say Padu serves as the “single source of truth” to be used to strengthen the implementation of government programmes and usage of public funds for the betterment of the people. Following data mapping and integration works, some of which are being implemented in stages, the resultant database would prove to be a strategic asset for the country, the statement went on to say, denouncing as “reckless” speculation of Padu utilising obsolete methods and system architecture.

Fans or critics alike would be keeping watch on how Putrajaya proceeds now that three full months have been given to the people to sign up for Padu, with full warning that whatever data the government has in hand will be used to target subsidies as early as the second half of this year.

Prime Minister Datuk Seri Anwar Ibrahim last week reiterated that Putrajaya had already saved RM4 billion in 2023 by reducing subsidies for high users of electricity while keeping them for 85% of households. He also spoke on Putrajaya’s need to broaden its tax base while noting that prices at Ramadan bazaars should not be hit by the increase in service tax from 6% to 8%, which is estimated to only raise the Consumer Price Index (CPI) by 0.2 percentage points.

“It is clear [that] Putrajaya wants to expand its revenue base without incurring political backlash from implementing the demonised Goods and Services Tax (GST). Politicians would go ahead with a broader tax if they can continue to say that the lower- and middle-income group are being helped by targeted assistance. That is where Padu comes in, is supposed to come in or can potentially come in. Technical capabilities are important [for Padu to work], yes, but it is really about sending the right message to the people,” a seasoned observer says.

He also asks critics not to brush aside the contributions of HVGT too quickly, even though the guided revenue from it looks small at only RM700 million.

“HVGT may only give RM700 million revenue [to Putrajaya] initially, but who is to say that the scope would not be widened after its implementation?” the observer said. “Everything that was not on the GST zero-rated list could potentially be added eventually, if they dare to push the envelope.”

While details on the HVGT is scarce, apart from the generic rate of 5% to 10% on luxury goods purchased by Malaysians, the RM700 million revenue estimate may have been derived from the assumption on taxes being applied to cars priced above RM200,000, timepieces above RM20,000 and jewellery above RM10,000 as per engagements done with some industry participants.

To implement HVGT, a bill needs to be tabled in parliament, which next reconvenes on June 24 to July 18. More details on Padu, and learnings from it, should be available before that. With the subsidies bill rising to RM80 billion in 2023, a way to sustainably bring that down without incurring political backlash would not only free up valuable fiscal space for more strategic investments but also win brownie points for the next election. 

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