The Star Malaysia - Star2
Corporate tax to drive revenue
tax revenue expected to reach rm189.9bil in 2020
WITH oil prices projected to remain weak, corporate tax is expected to be the main driver of government revenue next year.
The government expects crude oil price to average at US$62 per barrel for 2020. This compared with its average oil price projection of US$70 per barrel for 2019.
Overall, the government expects its revenue collection next year to decline 7.1% to Rm244.5bil, compared with Rm263.3mil for 2019, on lower investment income.
It expects tax revenue, particularly corporate income tax (Cita) and individual income tax, to remain the major contributor to the total income.
For 2020, total tax revenue is expected to reach Rm189.9bil, accounting for 77.7% of the total government revenue. This compared with Rm180bil, or 68.4% of total revenue, in 2019.
Of that, direct tax is estimated to increase by 5.2% to Rm142.7bil, accounting for 75.1% of total tax revenue. The bulk of this increase is primarily attributed to better collection from Cita and individual income tax.
Collection from Cita is expected to increase 6.7% to Rm75.5bil in 2020 from Rm70.76bil in 2019. This will account for 30.9% of the total projected tax revenue for next year, compared with 26.9% in 2019.
The higher collection from Cita is primarily contributed by better corporate earnings prospects and continuous efforts in enhancing auditing and tax compliance.
Individual income tax collection is expected to increase 6.1% to Rm37.4bil in 2020 from Rm35.2bil in 2019, while collection from petroleum income tax (Pita) is expected to decline 2.4% to Rm17.5bil on weaker global crude oil prices.
Revenue from other direct tax, comprising stamp duty, real property gains tax (RPGT) and other taxes is expected to increase 7% to Rm8.7bil. The increase in stamp duty and RPGT to Rm6.8bil and Rm1.7bil are in line with the expected stable property market.
Meanwhile, indirect tax collection is expected to increase 6.5% to Rm47.3bil, driven by higher collection from sales and services tax (SST).
Collection from SST is expected to increase 5.6% to Rm28.3bil in 2020 from Rm26.8bil in 2019, in tandem with higher consumption, Visit Malaysia 2020 programme and various international events.
In the absence of the one-off special dividend from Petroliam Nasional Bhd (Petronas), non-tax revenue is expected to decline 2.4% to Rm54.6bil.
The annual dividend from Petronas is projected to be Rm24bil for 2020, compared with Rm30bil in 2019.
Licences and permits are expected to decline marginally to Rm15.2bil on account of lower proceeds from petroleum royalty in tandem with lower average crude oil prices. However, other major components for licences and permits such as motor vehicle licences and levy on foreign workers are forecast to increase to Rm3.4bil.
With crude oil prices estimated at US$62 per barrel for 2020, petroleum-related revenue is expected to decline to Rm50.5bil from Rm51.2bil (excluding one-off special dividend from Petronas).
Non-petroleum revenue is projected to increase 6.6% to Rm194.1bil consistent with the government’s commitment to diversify revenue through tax reform initiatives.
As a percentage to gross domestic product, non-petroleum revenue is expected to remain stable at around 12.1% next year, compared with 12% in 2019. The government will continue to widen non-petroleum revenue to drive sustainable revenue stream in the medium term.