Budget 2019 encouraging but lacks sustainable revenue measures
KUCHING: The Federal Government has announced encouraging fiscal reforms for the National Budget 2019 but analysts at Standard Chartered Bank (Standard Chartered) note that it lacks sustainable revenue measures.
In its global research report, pointed out that the new Federal government has maintained a fiscal consolidation stance.
“Encouragingly, starting from a new baseline of a 3.7 per cent fiscal deficit target in 2018, the government proposes to gradually reduce the deficit over the next few years. The government’s commitment to reduce the deficit over time should support fiscal sustainability.
“Furthermore, one could argue that the initially committed fiscal deficit target of 2.8 per cent for 2018 may be met,” it said.
It pointed out that the announced increased transparency of the fiscal balance sheet, with the settlement of the income tax and GST refund, are positive.
It also highlighted that the government has implemented fiscal reforms, with fiscal governance recognised as imperative to fiscal reforms.
Nevertheless, the research team pointed out that there is a lack of sustainable revenue measures being proposed.
“Potentially due to the short timeframe of 24 weeks in office, the 2019 budget shows a lack of sustainable revenue measures being proposed to address the GST- SST shortfall.
“Expenditure rationalisation and leveraging of assets ( for example, the government hopes to raise RM4 bi l lion from selling a 30 per cent stake of the Airport Real Estate Investment Trust that the government intends to set up) appear to be the short- term measures that the government has proposed,” it added.
In the more immediate term, it believed that the government might still have to find new revenue measures to address GST removal, in addition to enhancing tax compliance.
“Reliance on oil has been proven to be vulnerable to the swings in global commodity markets. Other new measures in the 2019 budget such as higher real property gains tax and sugar tax will only provide slight support to revenue.
“Nevertheless, it is comforting that the government has noted in its medium-term fiscal framework that non- petroleum revenue is still expected to remain the largest revenue source,” the research team said.