Proposal to TN50 — Zero Tax

proposed by Ng Kong Leng

Malaysia should have zero tax by 2050. “Zero tax” — no income tax, no corporate tax, no GST.


Why tax is bad?

  1. any government in the world do not often make the right economic and financial decision in allocating tax revenue for the right purpose;
  2. tax deters company to invest more in local economy, e.g. Apple does not manufacture iPhone in US;
  3. tax deters a person to attain higher income, there is no incentive for you to work harder because you need to pay more tax;
  4. tax deters economy growth, especially on consumption as tax had taken away disposal income


What is the solution?

  1. Crowd funding or Equity Funding
  2. Economic Efficiency via Pareto Improvement

1) Crowd funding or Equity Funding
All infrastructure or mega projects can be funded from crowd funding or equity funding where rakyat can take part as equity holder or getting a non-monetary reward in return.

For example, if government wishes to build a dam to generate electricity, the sources of fund will come directly from rakyat via crowd funding or equity funding rather than from tax revenue.

2) Economic Efficiency via Pareto Improvement
By 2020, Malaysia should be a developed country, the next mission is to attain Economic Efficiency by using Pareto Improvement.

Economic Efficiency: an economic state in which every resource is optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency

Pareto Improvement: a change to a different allocation that makes at least one individual or preference criterion better off without making any other individual or preference criterion worse off, given a certain initial allocation of goods among a set of individuals. An allocation is defined as “Pareto efficient” or “Pareto optimal” when no further Pareto improvements can be made.

If we reach Economy Efficiency, then there is no need for a government to impose any tax, quota and preferential treatment to any group.


How Does Pareto Improvement Work?

Currently, our economy policy uses quota system to allocate resources. For example, there are total of 100 places for medical courses. A quota of 50% will be allocated for members of group A. But if there are 200 applicants from members of group B, then only less than 50 members from Group B will be allocated. This is Economic Inefficient.

If Pareto Improvement model is used, then the government will first compile the total number of applicants for medical courses 2 years in advance. Assuming the result is:-

  • Group A requires 100 places.
  • Group B requires 200 places.
  • Group C requires 50 places.

Then government will create or add additional 250 places, making it a total of 350 places for all members from all groups. Thus attaining Pareto Efficiency or Economic Efficiency.

However, Pareto Efficiency does not say anything about the quality of the intake of medical students. To improve the quality, then a minimum score of CGPA 2.00 is set for the medical course intake examination for all 350 students from 3 different groups.

Government role has fulfilled when 350 places is allocated to all groups. Which is Pareto Efficiency. Whether or not a student can meet the minimum score is not the responsibility of the government.

This will achieve 2 things:-

  1. Economic Efficiency because all members from all groups are happy because government has allocated spaces for everyone.
  2. Quality because a minimum score has been set. And it applies to all members from all groups.