A whole lot more facets than just new taxes

has been written both in the print and online media on the forthcoming 2019 Budget. Lots of comments, considerations and speculations have been made of the possible new taxes and their pros and cons.

The said possible new taxes range from carbon tax, sugar tax, capital gains tax to inheritance tax. Not forgetting also one facet of business that has yet to be taxed to put it on level playing field with traditional retail business. This is, of course, the tax on digital sales.

Controlling and deferral of

large expenditures

In trying to achieve a balanced 2019 Budget, the controlling and curtailing of expenses and expenditure is just as important.

Expenses can be reduced by having better controls, cutting down on frills and by open tender and accountability. The government has already implemented the open tender basis, for large projects. Expenditure, particularly for big projects, can be cut.

We have noted the re-negotiations and thus reductions of many projects particularly the Mass Rapid Transit (MRT).

It was announced that the ongoing MRT contract renegotiations resulted in savings of RM5.2 billion.

The 2019 Budget balancing would also be assisted by the deferral and cancellation of large expenditure including the high speed rail between Kuala Lumpur and Singapore and the East Coast Railway Link.

Better revenue from Petronas and other government

investments

Revenue from Petronas would contribute more to government coffers this year compared with last year. Further, there would be a significant increase next year compared with this year.

The primary reason is the substantial increase in oil prices from a low of US$45 (RM187.11) a barrel last year, to US$84 now.

Malaysia’s other investments are mainly held through Khazanah Nasional Bhd. With a change in management and better controls, the nation can look towards better returns from its investments.

Additionally, the government plans to cut stakes in major government investments like Telekom Malaysia Bhd and Tenaga Nasional Bhd. This will bring in funds and also create greater liquidity in the stock market.

Better tax collection form

existing taxes the Government needs to ensure that current taxes are correctly paid and collected.

Tax audits and investigations particularly where the taxes long remain unpaid or appears at unreasonable level are needed.

The Inland Revenue Board and the Customs need to raise tax compliance and reduce the tax gap to ensure that the rightful taxes are collected and is fair to diligenttaxpayers who are paying the right amount as a national duty.

Taxing Internet sales

Most physical goods are taxed under the sales tax when sold by manufacturers to the wholesalers or directly to the retailers.

Goods imported from overseas are also subject to the sales tax before being released by the Customs at the ports of entry.

However, sales via the Internet may not incur any sales tax if the consignments are below RM500.

Not only is the government losing tax revenue, but it is also inequitable to the local wholesalers and retailers who are providing employment and support to the Malaysian economy.

5-year plan to reduce total

government debts

On the government’s balance sheet, it must be noted that despite having RM1.087 trillion in total debt, what is deemed as actual long-term debt should be defined as RM885.9 billion.

The balance of RM201.4 billion is an income statement issue as these are commitments to pay annual lease payments under the public private partnership programme.

Hence, the actual debt, which includes government guarantees for entities that cannot service their respective debts, translates to a debt/ Gross Domestic Product ratio of about 65.5 per cent based on end-2017 figures.

The present government inherited this previously “hidden” problem.

The government should consider solving the same to reduce total borrowings to, say, 55 per cent over a five-year period.

Drastic or over-aggressive measures will hurt economic growth, employment and development for the nation.

Like the old saying, “Many Roads lead to Rome”, the 2019 Budget will have more facets than just new taxes.

The objective of our finance minister and his team will certainly be economic sustainability for the well-being of the rakyat.

Like the old saying, ‘Many Roads lead to Rome’, the 2019 Budget will have more facets than just new taxes. The objective of our Finance Minister and his team will certainly be economic sustainability for the well-being of the rakyat