Panel discusses reduction in income tax
KUALA LUMPUR: The reduction in income tax, the fiscal deficit and the incentives announced for small and medium enterprises (SMEs) were among the highlights of the discussion at a 2018 Post-Budget Dialogue.
Among the panelists at the dialogue, Axcelasia Taxand Sdn Bhd group executive chairman Dr Veerinderjit Singh said the fiscal deficit target should be even lower than the 2.8% announced.
“The targeted fiscal deficit is good, at 2.8% but my question always is – could it not have been even lower?
“If the good times are coming then we should be bringing down our fiscal deficit even lower,” Dr Veerinderjit said in reference to the increased revenue expected from the higher oil prices compared to last year.
On assistance for SMEs, he lauded the many measures announced, but called for guidance for the companies in accessing these funds or incentives.
“We have talked to SMEs on the ground and many of them still say that they don’t know that there are such grants and funds available.
“A lot more needs to be done in this aspect, to guide the SMEs and ensure they benefit from all these measures,” he said at the 2018 Post-Budget Dialogue organised by the Malaysian Economic Association here yesterday.
He also disagreed with the move to lower income taxes for households earning less than RM9,000 a month, which will mean over 260,000 people will no longer pay taxes.
“If a certain group needs assistance, it can be done in a more targeted way, by providing a relief for a year.
“Otherwise we are seeing a shrinking of the personal tax base, and this is not advisable,” he said.
In the long term, he said, the goal should be to lower corporate taxes instead.
Economist Prof Dr Jomo Kwame Sundaram questioned the significant increase in the operating budget for next year, in view of the targeted reduction in the fiscal deficit to 2.8% from 3.0%.
“Looking the numbers, the revenue for next year will be about RM240bil and the expenditure is RM280bil.
“So there is a gap of about RM40bil which is about 17% so one wonders how the gap will be filled.
“Of course the government has other sources of revenue, but the people would appreciate greater transparency about where this money is coming from,” Dr Jomo said.
On the increased operating expenditure for the year, he added that it was unclear what accounted for the bulk of the increase.
“The increase is quite significant, over RM2bil – more transparency is needed on this as well,” he said.
He also questioned the country’s inflation figures remaining low despite the implementation of the GST, fall in exchanges rates and rising prices.
“We need a credible explanation with regards to the government data on the inflation - how has the rate remained low despite these changes,” he said.