PETALING JAYA: Fiscal discipline and sustainability are the key drivers behind Budget 2024, say economists as the Madani administration sets out to reform the economy while continuing to aid low income and vulnerable groups.
But even as the Federal Government sets out to cut the RM81bil bill for fuel, electricity and food subsidies, it also puts in place measures to increase government income.
“The budget is within expectations where the government said that it wanted to implement reforms, make the government fiscally responsible and put the country on a sustainable path to growth,” said Lee Heng Guie of the Socio-Economic Research Centre.
The administration has earmarked RM393.8bil for 2024 of which RM90bil will be spent on development and RM303.8bil will be used for the government’s operating costs.
Another RM2bil is set aside for reserves.
Lee said one of the main thrusts of the administration’s roadmap was that blanket subsidies for diesel, electricity and chicken and eggs, would be trimmed and redistributed to low income households and the marginalised.
Among others, subsidised diesel, which is currently sold at the pump, will only be given to certain groups such as logistics firms and fishermen, while the prices for chicken and eggs will be floated.
Electricity subsidies, which have already been slashed for big firms and wealthy households, will be further targeted based on consumption.
“The details of how the government will do this will come later because it has to get public buy-in for it but the important thing is that the method must be credible, comprehensive and well communicated,” said Lee.
Finance Minister Datuk Seri Anwar Ibrahim said the first round of electricity subsidy cuts had saved the government RM4.6bil while capping a ceiling price on eggs and chicken had cost the country RM3.8bil.
Despite cutting subsidies, the government still increased funds for aid programmes such as the Rahmah Cash Aid programme from RM8bil to RM10bil, RM200mil for Rahmah discount sales and maintaining living allowances for fishermen.
In addition to trimming subsidies, another major thrust of the budget is new taxes (on luxury goods), raising current taxes (service tax) and enforcing new ways to collect taxes (e-invoicing for enterprises).
Economist Prof Barjoyai Bardai said these measures were why the government estimated that it could collect between RM4bil and RM5bil in additional revenue in 2024.
Individuals or companies, which earn more than RM100mil per year, will have to file e-invoices while taxpayers will be issued with a tax identification number.
Barjoyai of Universiti Tun Abdul Razak said these measures could potentially bring in income from the “grey market” to the tune of between RM40bil and RM50bil in four to five years.
The grey market refers to informal commercial activities that occur below official supply chains or channels, he explained.
He said the government’s coffers were also expected to be boosted by a 10% tax on luxury goods, a capital gains tax on the share sales of unlisted companies and an increase in the service tax to 8% for karaokes and bars.
“On the whole, the budget is still expansionary as the allocation is more than 2023. But it is crafted so as to ensure that we meet our aim of cutting the deficit to below 5%, because we want to reach the target of 3% by 2025,” he added.
