MARC: Consumers may turn cautious if new taxes introduced
PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has warned that sentiment among Malaysian consumers may turn cautious if new taxes are introduced in the upcoming Budget 2019 amid the tight financial condition of many Malaysians.
According to the rating agency’s chief economist Nor Zahidi Alias, a more cautious consumer sentiment may take a hit on private consumption, which is already expected to decelerate in growth to 6% next year from a forecast of 6.8% in 2018.
He pointed out that the government was looking at introducing several new tax measures to introduce alternative revenue streams and meet the revenue shortfall post-abolition of the goods and services tax.
Nor Zahidi also said the government was in urgent need to raise additional revenue in the medium and long term. However, he believes that the much-speculated inheritance and capital gains taxes would not be among the tax measures to be introduced in the near term.
This was primarily because, he said, “more studies are required to assess the effectiveness and repercussions of their implementation on the capital market and economy”.
“MARC opines that an inheritance tax will not be effective in generating much revenue. Taxes on capital gains from financial market transactions could also affect investor sentiment.
“Taxes on property-related transactions such as higher stamp duties for property transactions by foreigners, and foreign providers in the digital economy are likely, although their effectiveness would depend on the details to be announced,” stated Nor Zahidi in a note issued yesterday.
MARC expects Malaysia’s economy to expand by 4.6% in 2019, slightly slower than its revised 4.8% growth in 2018.
On the country’s expenditure next year, the rating agency foresees the government to continue rationalising its operating expenditure, and at the same time sustaining the development expenditure.
“Going forward, while the government will continue to rationalise operating expenditure, the room for further reduction is diminishing.
“Trimming emoluments will be politically difficult, while debt service charges could increase due to rising interest rates.
“This suggests that further efforts will be carried out to plug leakages through more efficient procurement processes of supplies and services, contract negotiations and transparent processes,” it said.