BMI RESEARCH: TAX REVENUE TO EXPAND 6.4PC NEXT YEAR

Govt also expected to attain fiscal deficit target of 2.8pc of GDP

MALAYSIA’S strong economic growth is expected to boost tax revenue collection next year. BMI Research, a unit of Fitch group, expects the government to attain its fiscal deficit target of 2.8 per cent of gross domestic product (GDP) next year, from three per cent this year.

“We expect strong growth to spur higher corporate income tax, individual income tax and Goods and Services Tax (GST) revenue collections,” it said in a report.

“Plans to expand the GST collection will include a broader range of goods and services that should also provide tailwinds to the government’s revenue collection. We forecast revenue growth to expand by 6.4 per cent next year, compared with three per cent this year.”

BMI Research said the strong growth outlook was based on investment in the infrastructure sector and a still-positive business environment.

Business activity in Malaysia is likely to remain strong, with the Nikkei Malaysia Purchasing Managers’ Index strong score of 52.0 last month (versus 48.6 in October), driven by accelerated growth in both output and new orders, as well as stronger business confidence over the next 12 months.

“As corporate taxes form more than a quarter of total tax revenues, we expect this to be positive for the government’s revenues next year. We expect individual income tax revenues, which account for 15 per cent of total fiscal revenues, to increase next year on the back of an improving growth outlook.

“The positive economic outlook is likely to bode well for wages and accordingly, individual income tax revenues.

“As such, the increase in number of employed workers paying income taxes and prospects of higher wages should offset the negative impact of the income tax cuts in the 2018 Budget,” said BMI Research.