It is not always that Malaysia can claim that it is better than developed nations so it is no surprise the government took pride in declaring to Parliament that Singapore and Japan have worse inequality problems than Malaysia.

Addressing Parliament on Tuesday, Deputy Minister in the Prime Minister's Department Razali Ibrahim dismissed what he said was a wrong perception that Malaysia's income disparity is wider than other Asian nations'.

He pointed out that Malaysia had a Gini coefficient of 0.421 based on preliminary data for 2014, compared to Japan which was at 0.488 in 2009, and Singapore and China at 0.478 and 0.474 respectively in 2012.

A lower Gini coefficient means a lower income disparity.

What Razali failed to mention is that the figure he provided omitted taxes and wealth redistribution in the form of transfers, for example for welfare.

Going by Razali's before taxes and transfers statistics, Malaysia is more equal than developed nations such as US (0.49), Australia (0.47), Germany (0.5) and Sweden (0.43) in 2014.

However, after taxes and transfers are factored in, Malaysia falls far behind these countries.

According to the World Bank's Malaysia Economic Monitor Report 2014 which puts Malaysia's Gini coefficient at 0.43, the figure only falls to 0.41 after taxes and transfers.

This is in contrast to US (0.38), Australia (0.34), Germany (0.3) and Sweden (0.26), after taxes and transfers are factored in.

The same applies to countries mentioned by Razali.

Japan's Gini coefficient for 2009 dropped from 0.49 to 0.34 after taxes and transfers, the Organisation for Economic Co-operation and Development (OECD) reported.

Likewise, the Singapore Department of Statistics reported that the country's Gini coefficient for 2014 stood at 0.464 but fell to 0.412 after taxes and transfers.

China does not publish its Gini coefficient after taxes and transfers.

Welfare barely helping inequality

While Razali is right that Malaysia's Gini coefficient has been on a downtrend, albeit marginally, the country is not better off than developed countries as Putrajaya would like to paint.

Furthermore, the attempt to ignore post-taxes and transfer figures highlight the apparent ineffectiveness of Putrajaya's wealth distribution measures.

According to the World Bank report, Malaysia's wealth redistribution which includes policies such as Bantuan Rakyat 1Malaysia (BR1M), book vouchers, and school assistance, barely helped in reducing inequality.

"Malaysia's fiscal system is progressive, but it achieves limited redistribution and thus has a negligible impact on inequality," read the report.

Kluang MP Liew Chin Tong argued that BR1M only makes up a small part of wealth redistribution and most wealth is recirculated to the already wealthy in the name of spurring investment.

"We have growth every year but profit earnings goes to capital. The money goes to employers rather than being distributed to employees," he said.

Also, he said cheap foreign labour pushes down average income which hurts employees, while benefiting employers.

The DAP lawmaker said this is aggravated by a relatively low income tax rate on the country's richest, compared to other countries in the region.

While this can be addressed by expanding the tax base, he said the goods and services tax (GST) is not the way to go as it will only exacerbate inequality by also imposing on lower income groups.

"For the high income people, they are already paying low income taxes but we are forcing the people at the bottom who do not earn that much and do not qualify to pay income tax to now pay GST.

"You are sucking up more disposable income from the system," he said.

Liew said the government's priority should be addressing inequality by boosting productivity and income instead of massaging statistics to paint a rosy, but misleading picture.