Treasury secretary-general Datuk Johan Mahmood Merican.
KUALA LUMPUR: The government is committed to staying the course of the reform agenda as reflected by the initiatives of Budget 2025.
Treasury secretary-general Datuk Johan Mahmood Merican said one of the main objectives of such initiatives such as the targeted subsidy plan for RON95 fuel is to reduce leakages from foreigners, corporates and the wealthy.
This benefit has already been reflected in the government’s earlier removal of diesel subsidies which has resulted in a 30% reduction in leakages, he said at a post-budget discussion here yesterday, organised by the Malaysian Economic Association.
In June, the government cut diesel subsidies, resulting in a price jump of around 50% for diesel.
However, there is still targeted cash assistance provided to eligible owners of diesel vehicles, as well as small-time farmers and business owners.
“In theory. a form of tiered pricing is being considered for the RON95 fuel,” Johan said.
To a question, he said the government had not completely ruled out the goods and services tax or GST as part of its strategy to boost its coffers.
“The Prime Minister has not ruled out GST but it is challenging to introduce a regressive tax when the rakyat is still facing challanges.
“We continue to look at ways to improve the tax system,” Johan said.
Meanwhile, panellists at the discussion were concerned about the ratio of revenue to expenditure, with Prof Tan Sri Noor Azlan Ghazali of MINDA-UKM pointing out that operating expenditure (OE) has crept up steadily whereas revenue, while rising, has not kept pace, bringing government finances to “the danger zone”.
He noted that 60% of the OE has been locked up and cannot be changed.
“It’s ok to borrow for development expenditure (DE) but not ok to borrow for OE”, Noor Azlan said.
All panelists said spending on DE should be followed up closely by what the outcomes or impact would be.
Prof Nik Maheran Nik Muhammad of Universiti Malaysia Kelantan questioned what the impact from the expenditure can have or the reality of the spending on people’s lives.
AmBank Group chief economist Firdaos Rosli questioned whether the government has provided the right diet for the right fiscal policy for growth.
Saying that the audience can make up their minds on this, he said the revenue-to-spending ratio showed the impact on DE as spending on OE rises.
“The buy side (of equity research houses) gives you one answer, and one answer only”.
Separately, Johan said the introduction of a 2% tax on dividend income exceeding RM100,000 for individual shareholders, beginning in the 2025 assessment year, reflected an equitable contribution towards Malaysia’s tax revenue by different segments.
Johan pointed out that, similar to wage earners in Malaysia who pay higher taxes as their income increases, individuals who earn income through dividends, whether they own a business or hold significant shares, should also contribute to taxes.“The government is being more progressive to meet the needs of those in need by requiring those who are able to contribute to do so.
“If the person earns more than RM100,000, then the person pays an additional 2%.
“In fact, for someone who earns RM100,000, if it’s you or me the wage earner, we are already paying 19% tax,” Bernama reported.
Johan reiterated that this is a category the government believes can afford to contribute to its efforts to broaden the tax base.
Prime Minister Datuk Seri Anwar Ibrahim, who is also Finance Minister, announced this while presenting Budget 2025 in Parliament last Friday.
Anwar said the initiative aimed to diversify income tax sources, ensuring that revenue is not solely reliant on contributions from wage earners, but includes earnings from company owners and individuals with substantial shareholdings.
