INTRODUCTION
Federalism
concept is an administrative system that creates a division of power between central
& state government. It is also defined as a system in which states unite
under central authority. Federal system is one in which the functions of
government are shared between a central authority & regional authorities
both set as being autonomous in certain areas & driving their respective powers
from the constitution or interpretations of it, not from each other. Under the
Malaysian constitution, there is a clear demarcation of financial powers between
the central and state governments, though the balance is tilted heavily in favour
of the Central or Federal government. Hence the Federal government controls most
of the lucrative sources of revenue and the states on the other hand have minimal
sources of revenue. According to Shafruddin, argues that this imbalance, which
can be referred to as vertical imbalance is derived from two basic principles.
First
it was argued that the federal government
needed control of the major sources of revenue to equalize the “levels of
wealth among the states”. It was argued that only if the federal government
had the main taxation powers could income be redistributed from rich to poor
states. Most of the lucrative sources of revenue such as income tax, customs
and excise duties, sales tax and licenses for motor vehicles are assigned to
the Federal government. Schedules 9 and 10 of the Federal Constitution specify
in detail the sources of revenue of the federal government. Hence income from
banking, foreign exchange, capital issues, insurance, passports, visas,
newspapers, radio, TV, tourism, foreign pilgrimages, maritime and estuarine
fishing, shipping on the high seas, trade, commerce, industry, patents and
designs are allocated to the federal exchequer (Shafruddin, 1987).
Except
for state power over license fees, the development of mineral resources; mines,
mining, minerals and mineral ores; oils and oilfields; import and export of minerals
and mineral ores; and all petroleum products are within federal jurisdiction. All
foreign and extra-territorial jurisdictions (presumably including offshore
prospecting for oil, gas or minerals) are in federal hands (Shafruddin, 1987).
Second,
it was argued that the principle of
financial responsibility implied that responsibility for rising and spending
money should rest with the same authority. This, in turn, meant that if the
provinces were to have limited taxing powers they must also have limited
expenditure responsibilities. Since the federal government has the more lucrative
sources of income, they also have to shoulder most of the responsibilities in
the nation. Thus, foreign relations, diplomatic and consular
representation, international organisations, national defence, internal
security, the armed forces, the police, prisons and intelligence services are
federal responsibilities. Criminal and civil courts, elections, education,
medicine, health, fire services, federal pensions and gratuities, medicine,
health, social security, currency, audit, roads, bridges, ferries, railways,
ports and harbours, posts, telegraph, communication, transport, airways are
also within the ambit of the Federal government. The state government, on the
other hand is in charge of land, customs and religion and water. The general
principle is that the central government pays for all 27 items in the Federal
list and the states bear the burden of all 13 items in the state list
(Shafruddin, 1987).
MAIN FUNCTION OF FEDERAL AND STATE
GOVERNMENTS.
Baron
De Montesquieu in book of ‘The Spirit of the Laws’ stated a good government must
exercise separation of power into three major branches which are legislative,
executive and judiciary. Basically, Malaysia implement fusion of power whereby
the executive been appointed by legislative member and judiciary be apart from
both of it. The bodies had function completely to ensure stabilize and
harmonious situations in our country. These system been applied in federal
government. It has been differentiate with state governments.
The
Federal Government of Malaysia consist three bodies which are legislative, executive and judiciary.
These particular bodies exercise difference functions that help the Federal
Govt. to maximize the efficiency and effectiveness of administrative system.
Firstly, legislative refer to the bicameral parliament consists of the lower
house, the House of Representatives or Dewan Rakyat (literally the
"Chamber of the People") and the upper house, the Senate or Dewan
Negara (literally the "Chamber of the Nation"). All
seventy Senate members sit for three-year terms (to a maximum of two terms);
twenty-six are elected by the thirteen state assemblies, and forty-four are
appointed by the king based on the advice of the Prime Minister. The 222
members of the Dewan Rakyat are elected from single-member districts by
universal adult suffrage. The parliament follows a multi-party system and the
governing body is elected through a first-past-the-post system. Parliament has
a maximum mandate of five years by law. The king may dissolve parliament at any
time and usually does so upon the advice of the Prime Minister ("Federal
Constitution of Malaysia," n.d.).
These
bodies play important roles in regulating, making, and amend policies. They
enacted the general rules of society in the forms of law. These rules and
regulations help society to ensure their peaceful and harmonious situation.
These bodies also had functionality in term of financial, supervision and
administrative ("Federal Constitution of Malaysia," n.d.). Example of
legislative function is these bodies passed
out the bills and budget cycle of the current year like Budget Cycle 2014.
Secondly,
executive refer executive power that vested in the cabinet led by the prime
minister; the Malaysian constitution stipulates that the prime minister must be
a member of the Lower House of parliament who, in the opinion of the Yang
di-Pertuan Agong (YDPA), commands a majority in parliament. The
cabinet is chosen from among members of both houses of Parliament and is
responsible to that body. The Executive branch of the government
consists of the Prime Minister as the head of the government, followed by the
various Ministers of the Cabinet. These bodies play important roles in
implementing policies and give order regarding the process of execution of law.
It included financial executive that need to plan on how to obtain income from
various sources in order to stabilize economic condition of the country.
Example of financial executive is the
Ministry of Finance will advise the ministries that want to make budget
planning for the program that they want to implement towards society ("Federal
Constitution of Malaysia," n.d.).
Thirdly,
judiciary refer to the highest court in the judicial system is the Federal
Court, followed by the Court of Appeal, and two High Courts, one for Peninsular
Malaysia, and one for East Malaysia. The subordinate courts in each of these
jurisdictions include Sessions Courts, Magistrates' Courts, and Courts for
Children. Malaysia also has a Special Court to hear cases brought by or against
all Royalty. These bodies ensure the administration of justice and judicial
review.
They
also interpret law and creating law that need to be establishing to ensure the
financial stabilization ("Federal Constitution of Malaysia," n.d.). Example
of law is Act Anti-Money Laundering and
Anti-Terrorism Financing Act 2001 (Act 613).
The
state governments in Malaysia
are the governments ruling the 13 states in the federation of Malaysia.
All 13 states adopt the Westminster Parliamentary system and each has a
unicameral state legislative assembly.
The state government structure in all 13 states is similar to the government
system of the federal government of Malaysia except for
minor native judiciary powers in Sabah and Sarawak and that the state
legislatures consist of only a single chamber.
The function of State Government that been listed in Federal Constitution is pursuant
to Article 73-79 of the Federal Constitution,
the state legislature is empowered to legislate on matters such as land
matters, public works, local government, agriculture and forestry, Islamic law
and public holidays. Pursuant to Article
80 of the Federal Constitution, the state executive in turn has
administrative power over all matters which the state legislature may legislate
under the constitution ("Federal Constitution of Malaysia," n.d.). Federalism in Malaysia is quite strong
whereby the federal government retains by far more powers compared to the
respective state governments. This is also reflected in the budget allocation
towards the state and federal government.
Example
of section in Federal Constitution that refers to State Government is Section 73 (b). It stated the
legislature of the state may make laws for the whole or any part of the state.
The role of the state government is to promote the state economy and to take
operational control of over most government program for individual, such as
social program and risk management. Basically, each state would face same
difficulties like welfare and social programs. In the initial of government
functions and tasks most social program such as social security would be
transferred to the states. Thus each state would be responsible for retirement,
medical programs, unemployment insurance and program to aid the poor.
REVENUES SOURCES OF FEDERAL AND
STATE GOVERNMENTS.
Malaysian
Federal Government’s revenue is classified under three general categories,
which are non-tax revenue, non- revenue receipts and tax revenue. Tax revenue
is further divided into direct and indirect tax revenue. Revenue generated from
the indirect tax will be analysed and focusing specifically on the import and
excise duties particularly on motor vehicles sector. Firstly, non- tax revenue
consists of receipts from registration fees, licenses and permits, service
fees, proceeds from sales of goods, rental, interests and return on investment,
fines and penalties, contributions and compensation from foreign governments
and international agencies. Included under licences area all charges imposed on
the granting of rights to individuals, corporations, businesses and other
enterprises for purpose of regulation or control, and motor vehicle license.
Service fees consist of receipts for services rendered by the Federal
Government to the public ("Financial Procedure Act,"
n.d.).
Plus,
proceed and return from sales of goods are receipts from the sale of physical
assets owned by the government including land, building, store facilities and
miscellaneous goods to the public. Interests and returns on investments include
all interest on loans granted by the government, bank interest, interest or
dividends earned from shares and royalty on petroleum as well as gas. Example
of non-tax revenue is registration and renewal fees of company (www.asosai.org/r_p_government-revenues).
Secondly,
non-tax receipts include all refunds of expenditure, inter- departmental
credits, refunds of overpayment in previous fiscal year, reimbursements and
contributions from other government departments, statutory bodies or government
owned enterprises and receipts from the Federal Territories. Refunds of
expenditure include receipts from the Consolidated Fund from the previous year,
refund of salaries on resignation and refund of training expenses, while
receipts from other government agencies consists of inter-ministerial or inter-
departmental transfer of funds for services rendered by the government to other
government owned bodies. Receipts from the Federal Territories consist of tax
and non-tax revenue, which includes receipts from licensed and permits,
premium, quit rent, sales of assets, rental, service fees and entertainment
duties (www.asosai.org/r_p_government-revenues).
Thirdly,
tax revenue is classified into Direct Tax Revenue and Indirect Tax Revenue.
Direct Tax Revenue includes revenue from income tax (individual, company,
petroleum and cooperative), stamp duty, real property gains tax and Labuan
offshore business activity tax. Example, income taxes are for the people who
had income exceeding RM 30, 667 while business tax maximum charge is 24%.
Indirect Tax Revenue consists of revenue from export duties, import duties,
excise duties, sales tax, service tax and levy (www.asosai.org/R_P_government-revenues).
Example, value-added tax (VAT) is only imposed on the individual who buy food
at McDonalds and Kentucky Fried Chicken (KFC).
Meanwhile,
state government implies its own financial budgeting from the conditional and
unconditional grants that been granted to them by Federal Government. These
grant been granted to state government by number of populations times
allocation of budget per head. It can be implied as major sources of income to
pay all the expenses for multi-purpose programme that state government want to
hold. Other sources of State Government are entertainment duty, licenses,
Islamic religious revenue (zakat) and treasure trove.
Firstly,
entertainment duty refers to Entertainment Duty Act 1953. It includes admission
to any place in which an entertainment to any place in which an entertainment
is held or any other place. Entertainment also includes any exhibition,
performances, amusement, game or sport, or any other activities may declare to
be entertainment by the Ministry of Finance (MOF). Section 4 (2) of Entertainment Duty Act 1953 stated
that any entertainment consists such of those elements will be charged with
entertainment duty; a stage play, a ballet (whether a stage play or not),
a performance of music
(whether vocal or instrumental), a lecture, a music hall or other variety
entertainment, circus, vehicles, motor vessels or aircraft. Any entertainment
activities will be levied and imposed an entertainment duty.
Secondly, licenses refer to revenue from licenses
other those connected with water supplies and services, mechanically propelled
vehicles, electrical installation and registration of business. It stated under
The Water Services Industry (Act 2006) (Act 655). Example, license for water
supplies and service is needed for the all water supply and sewerage service
operator under the Suruhanjaya Perkhidmatan Air Negara (SPAN). There are two
types of licenses connected with water supply that are individual (public
system) and class (private system). Furthermore, Rents here means the charge
imposed when property of state is being rented. It called
as Rents on State
property. For example, under House and Government Offices Building, the officer
who being allowed to stay at the government housing required paying rent
according to prescribed rate.
Thirdly, Islamic Religious Revenue refers to
collection of Islamic religious matter of the state such as Zakat, Fitrah and
Baitulmal. It stated under Income Tax 1967. Individual under Section 6(A) must
pay a certain amount for religious duty which includes al-mal (wealth). Companies
under Section 44 (11A) refer amount of paid by a company is to be treated as
deduction of up to 2.5% of the aggregate income. In Malaysia, a Muslim individual
has to make two compulsory payments that are income tax and zakat. A rebate is
granted for payment of any zakat, fitrah or other obligatory Islamic religions
dues in the basis year. Example, zakat paid in year 2012 can be claimed as tax
rebate in income tax return form for year assessment 2012.
Lastly, treasure trove refers Treasure Trove Act 1957
(Act 542). Treasure Trove means any money, coin, gold and silver plate,
bullion, jewelry, precious stones or any
object or article of value found hidden in. Example, In Malacca state, the
state governments have found the billion ringgit treasure hunt at Pulau Nangka.
Besides that, any matters related to mines or forests or land that will
generate income of the state
will be one of the revenue sources for the state government. National Forestry
Act 1984, under section 16 had been stated, occupy
or carry out any activity upon any land in a permanent reserved forest by way of a use permit, may be granted by
the State Authority.
REFERENCES
Federal Constitution of
Malaysia. (n.d.). Retrieved August 8, 2014, from http://unmis.unmissions.org/Portals/UNMIS/ConstitutionmakingSymposium/Federal-ConstitutionofMalaysia.pdf
Financial Procedure Act.
(n.d.). Retrieved August 8, 2014, from http://www.ilkap.gov.my/download/pekeliling/agc/Act61.pdf
Shafruddin, B.H,
(1987), The Federal Factor in the Government and Politics of Peninsular
Malaysia,
Singapore, OUP.
Malaysia.
(n.d.). Retrieved August 8, 2014, from http://http://www.asosai.org/R_P_government-revenues/chapter_15_malaysia.htm
Thanks so much for the info! It was a good read :)
BalasPadam