RM40b-RM45b revenue from GST next year: MARC

PETALING JAYA: Malaysian Rating Corp Bhd (MARC) said it expects the Goods and Services Tax (GST) revenue to be within the range of RM40 billion to RM45 billion in 2018, constituting about 20% of total revenue.
In its Pre-Budget 2018 report yesterday, MARC chief economist Nor Zahidi Alias said it foresees budget deficits to slip marginally to circa 2.8% of gross domestic product (GDP) next year, driven by higher GST and oil-related revenue.
Nor Zahidi said the credit rating agency anticipates another year of positive growth in revenue next year, after two consecutive years of contraction in 2015 and 2016.
“We foresee development expenditure to be accelerated to support growth, while operating expenditures will be closely monitored to ensure minimal leakages. While we do not rule out further subsidy liberalisation efforts in the future, we do not think they will be introduced during this (2018) Budget.”
He also noted that Malaysia will probably not see higher taxes this year, including the GST, as the government wishes to keep up the “feel good” factor with the rakyat.
He said MARC believes that other tax measures such as capital gains on short-term financial transactions would bring additional revenue without significantly affecting market sentiment.
“Such a measure would also prevent excessive short-term speculations in the financial market.”
As global crude oil prices remain uncertain, Nor Zahidi said the government would likely continue to look for other revenue sources to ensure its fiscal consolidation efforts continue in the years to come.
“Several possible alternatives have been discussed in the media, including taxes on foreign digital business providers.
“The recent proposal to amend the GST Act 2014 is aimed, among others, at incorporating a permanent establishment clause that would enable the tax authority to include foreign digital companies into the GST bracket.”
MARC opined that such an effort could bring in additional revenue, although it could slightly dampen business and consumer sentiment during its initial phase of implementation.
However, Nor Zahidi said the rating agency does not foresee any outright reduction in the personal income tax for next year as the government remains cautious about its revenue growth in 2018 despite a slight recovery in crude oil prices in the past one year.
“MARC opines that measures such as the further widening of personal income tax bands would be a commendable long-term solution to ensure that workers do not quickly fall into higher tax bands once their incomes increase.”