Speaking to FMT, economist Geoffrey Williams estimated that a “tiny” levy of 0.5% on an e-payment sum could provide a monthly pension of RM500 for every person over 65 years old, which would cost RM9 billion annually.
Last week, Nurhisham Hussein, senior director of economics and finance at the Prime Minister’s Office, told BBC Radio 4 that Malaysia had limited options in financing a universal pension scheme, due to the country’s relatively low taxation levels.
The scheme, which is funded by revenue from taxation, had been suggested as a remedy to counter low EPF savings among Malaysians.
According to the statistics department, there are currently 2.5 million people over 65 years old and 3.8 million over 60 years old.
“A 1% EPT would give the same (RM500) to everyone over 60 years old, and a 1.5% EPT can fund the current civil service bill completely.
“This would release RM32.4 billion currently committed to civil service pensions, which can be redistributed to a RM1,000 per month universal pension for everyone else,” said Williams.
Data released by Bank Negara in January showed that Malaysians transacted RM1.4 trillion electronically last year, which, Williams said, provides a baseline to estimate the revenue from an e-payments tax.
Williams previously explained that an e-payments tax was a small charge on all electronic payments – for goods, services, fees and payments of every type, at the transaction point.
He also suggested using savings from cutting wastage, leakages and corruption to fund such a scheme, as well as consolidating some of the smaller GLICs into a “Malaysian Superfund” and using its investment returns to fund pensions for Malaysians.
A universal pension scheme – which is in place in countries such as the Netherlands, New Zealand and Sweden – guarantees that all citizens receive a minimum income upon reaching retirement age.
Last November, Prime Minister Anwar Ibrahim said 6.3 million EPF members, or 48% of those under the age of 55, had less than RM10,000 in EPF savings. The sum amounts to less than RM42 per month over a period of 20 years.
Another economist, Suhaimi Ariffin, said that apart from reintroducing the goods and services tax (GST), the introduction of an inheritance tax is another potential solution to fund a universal pension scheme in Malaysia.
Suhaimi, a senior lecturer at UniKL Business School’s finance/Islamic finance section, said the idea drew on practices in several American states and was aimed at addressing the disparity between a country’s wealth and its gross domestic product.
He also noted that countries such as Norway use sovereign wealth funds – financed by oil and gas revenues – to support social protection, adding that this model was being explored in Sarawak and could be scaled nationally.
Suhaimi said another solution would involve adjusting Malaysia’s tax regime by increasing taxes on high earners and corporations.
He said this approach mirrored the progressive tax systems seen in countries which have successfully implemented universal pension schemes, such as the Netherlands, New Zealand and Sweden.
“Admittedly, an in-depth cost-benefit analysis will be required for the implementation of such a tax regime.
“It is equally imperative for the government to examine the fiscal expenditure that is budgeted and how it is implemented,” he said.