PETALING JAYA: New revenue sources in Budget 2024 such as the Capital Gains Tax, Luxury Goods Tax and the 2% increase in the Service Tax are encouraging but efforts to generate more revenue must continue, says the Institute for Democracy and Economic Affairs (Ideas).
The think tank also said the Budget provides ample support for micro, small and medium enterprises (MSMEs), to grow local talent, access adequate financing and increase their competitiveness.
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Its chief executive officer Dr Tricia Yeoh said with new sources of revenue, it was possible for the government to achieve the fiscal deficit target of 3% of GDP in the next three to five years as mandated by the Public Finance and Fiscal Responsibility (PFFR) Act.
However, in the long run, she said the government should consider restoring the Goods and Services Tax (GST) to further widen the country’s tax base, given Malaysia’s poor tax to gross domestic product (GDP) ratio when compared to its regional peers.
“Most importantly, the financial contribution of these new sources of taxes to total revenue was not announced in the Budget speech nor were they made available in other published Budget documents.
“In the interest of transparent public financial management, we call on the government to provide detailed revenue and expenditure targets for the next three to five years to ascertain that the mid-term fiscal deficit targets are indeed achievable,” she said in a statement.
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Yeoh added that the modest trim in subsidies in electricity and diesel was minimal and insufficient for creating fiscal space for investing in development in the long term.
Budget 2024 allocates RM58.1bil for subsidies, whereas the subsidy spent for 2023 was reported to reach RM77.7bil as of Oct 12, she noted.
“Given that the major contributor to subsidy increases is petroleum products, we are concerned whether the government’s projections on subsidy savings are accurate. The government should disclose assumptions for these estimates.
“In addition, the government needs to announce a definite mid-term plan and mechanisms for implementing targeted subsidies in order to provide predictability in the phased transition to subsidy rationalisation,” she said.
Yeoh also welcomed the Prime Minister Datuk Seri Anwar Ibrahim’s commitment to tabling the Government Procurement Act next year, adding that this step is essential to guarantee that the procurement process will be transparent, accountable and efficient.
This will also contribute positively to investor confidence as it strengthens the country’s commitment to the rule of law, said Yeoh.
Ideas research director Dr Juita Mohamad pointed to Budget 2024’s focus on supporting MSMEs, saying that funds meant for them should be transparently distributed.
As in previous years, generous funds have been allocated to the automation and digital transformation of MSMEs, Juita said.
“The focus now has to be on effective disbursement of funds, so that uptake for MSMEs to digitise and automate can be improved significantly,” she said.
