Decoding Malaysia’s Fiscal Strategy: Budget 2024 and Beyond

Decoding Malaysia’s Fiscal Strategy: Budget 2024 and Beyond

Prime Minister’s Announcement on Revenue Generation

Malaysia’s Prime Minister, Datuk Seri Anwar Ibrahim, has given a statement advising all to wait until the Budget 2024, upcoming in October, for detailed information about the government’s plans for revenue generation. These plans are likely to incorporate strategies related to taxes and other forms of income generation for Malaysia. The ulterior objective is to maintain expenditure within the nation’s means and significantly reduce the fiscal deficit.

Queries Around New Tax Regime

The Prime Minister’s statement came as a response to questions proposed by Datuk Seri Dr Wee Ka Siong. Dr Wee raised queries about the government’s plans to introduce a new tax regime and its strategies to generate more income. He also inquired about the implementation of a tax plan targeting the rich at the beginning of 2024.

Dr Wee expressed concerns about the proposed annual spending of RM90bil plus RM15bil for the 12th Malaysia Plan. He questioned the source of income that would fund this expenditure. Particularly, he asked whether the government had plans to reconsider the goods and services tax (GST) as a source of income and any measures to address previous shortcomings, such as reducing the GST rate from 6% to 4%.

Revisiting the Goods and Services Tax (GST)

Earlier in the year, Deputy Finance Minister Datuk Seri Ahmad Maslan mentioned that the reintroduction of GST was not off the table. The government was studying the impact of implementing GST in the current economic situation. However, Economy Minister Rafizi Ramli later expressed the government’s preference for non-regressive forms of taxation over the controversial GST, citing potential harm to poor households.

Economists’ Perspective on GST Reintroduction

In the context of increased spending and an economic downturn due to the Covid-19 pandemic, some economists suggest that Malaysia needs to replenish its depleted funds. They believe that reintroducing the GST might be a viable solution. However, they emphasise the need for improvements and corrections before its reintroduction. This situation highlights the complexities of fiscal planning in the face of economic and societal challenges.

Looking Ahead: Budget 2024

As the Malaysian government prepares to present Budget 2024, the nation waits in anticipation for the new strategies to boost revenue generation and reduce the fiscal deficit. The proposed plans, their potential implications, and their execution will play a crucial role in shaping Malaysia’s economic trajectory in the coming years. It remains to be seen how the government will balance its commitment to fiscal responsibility with the need to stimulate economic growth and support the well-being of its citizens.