WITH the political uncertainties now mainly behind the current government, the next order of business is going to be just what will be tabled for Budget 2024 on Friday.
We can expect, as in previous national budgets, the usual slew of spending packages that will be proposed for different segments of the economy.
Healthcare, education and various other big and small ticket items will be announced as the Finance Ministry goes about doling out the money that will be used to run and expand such services throughout the country.
Allocating large sums of money towards welfare and development projects will obviously require a sizeable amount.
Raising increasingly larger sums of money through direct and indirect means has been an uphill struggle for the different administrations in recent years, as every year the cost of the budget goes up but tax collection does not rise as fast.
As it stands, Malaysia’s tax base is narrow. It was 11.8% of GDP at the end of last year, a low percentage compared globally.
What the government will now need to show is the political will to reintroduce a consumption tax, such as the goods and services tax (GST), to bump up tax collection.
Raising new monies is not easy. New taxes are not popular and the concept of a GST is a hot potato that can be used as political capital in any election.
But it is not something that can be easily ignored: Consumption tax is now being applied in 175 countries worldwide. What the Malaysian government needs to do is make good use of the sufficiently long runway of its remaining four years to show the benefits it can deliver by having a well-run consumption tax regime.
The government will also need to show that the tax collection will deliver tangible results to the rakyat.
Having enough money to effectively provide better and meaningful services will be key in winning the support of voters.
One benefit of having a consumption tax is that it can help reduce the size of the fiscal deficit.
The Federal Government has been running a fiscal deficit for a quarter of a century and such largesse has to eventually stop.
With the national debt now at RM1.5 trillion, something has to be done to keep that figure in check and eventually reduced.
Our debt service ratio at 14% leaves little wriggle room before it becomes a huge problem, and eliminating higher debt is just good financial sense.
Another key move will be to raise the minimum wage. The absurdity of a minimum wage that is below the national poverty line needs to be corrected.
Also, having a decent enough minimum wage or average wage levels will mean that people will be able to afford basic necessities without the need for the subsidies that the government has been consistently providing, which itself is a big drain on government coffers.
With the government expected to spend RM81bil on subsidies this year, cutting that down can mean money directed towards essential services, such as better quality and affordable healthcare for the people.
So Budget 2024 will be watched not for how the government will go about doing its business, but rather for the difference it intends to make for the betterment of the country in the long run.
