Report taxes in Malaya, 1951-1960: a study of the effects on economic stabilization
Date
1966-07
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
In view of the increasing magnitude of export instability and the rising cost of the government outlays in
most of the primary producing counties in the postwar period, export taxes have received considerable attention in recent discussions of economic development.
Using available published data and employing usual techniques for economic analysis, the study examines the experience of Malaya with the use of export taxes, particularly the sliding-scale system imposed on rubber and tin, for the years given the former Malayan government objective of stabilization, the main purpose of this thesis is to analyze how the flexible export taxation system operating in post-Korean-war Malaya's export sector reduced export instability, and thus stabilized the domestic economy.
The results indicate that the sliding-scale export taxes have made a major contributions to reducing export instability and this, in turn, stabilizes the internal economy. This is so because in Malaya fluctuations in export proceeds resulted largely in price variations without correspondingly great change in real output; the high degree of responsiveness to change in export prices in her post-
war sliding-scale export taxation system has thus been the mainstay of contra-cyclical fiscal policy. This means the changes in the export duty revenue of rubber and tin were more price responsive than the fluctuations of not export proceeds during the period under review. Meanwhile, an increase in remission of factor increases abroad and the massive exodus of private capital during the boom seem to suggest that these were other important stabilization regulators operating on the Malayan economy during the
period 1951-1960.
The study noted that the Malayan Government was not able to build up sufficient reserves in the boom to sustain development activity for the subsequent periods of recession, mainly because of the rising costs of emergency in the earlier years 1951-1955 and the increasing current and capital expenditures following the years 1956, although the government revenue in the export boom increased more rapidly than expenditure through the operation of a flexible export taxation system. Thus, a decline of export duty proceeds in the periods of subsequent recession created difficulties for the budget and forced the government to curtail anticipated expenditures on economic and social development, in spite of the continuously non-cyclical growth of import duty revenue in the post-Korean-war period.
Finally, it is also found that the current account in the balance of payments of Malaya over most of the years under review remained with a favorable balance and a substantial amount of foreign reserves of Malaya's official bodies and monetary authorities was built up over the period. Malaya had no balance of payments difficulties, hence no signal of strong inflation throughout the whole period in question.
Description
Keywords
Malaya, Economic stabilization, Monetary system, Export taxes