Malaysian PM announces range of Budget initiatives
The Malaysian government is to spend RM393.8 billion (£68.25 billion) in 2024 to boost economic growth in the country, Prime Minister Anwar Ibrahim announced in this year’s Budget.
Anwar – who is also the country’s Finance Minister – said transport will the biggest are of investment, with a RM19.1 billion allocation. Education (RM14.3 billion) and security (RM12.6 billion) will be allocated the next largest shares.
Despite development expenditure dropping from RM97 billion in 2023 to RM90 billion in 2024, the next 12 months will see more infrastructure spending. This is because the 2023 figure included RM13.2 billion to pay off debts of accrued by state fund 1MDB.
Before his Budget speech the PM said his government was seeking “a more just, equitable system so that no community or part of the country is seen to be ignored or marginalised”.
He also said the government spending will act as a buffer against geopolitical issues including the Russia-Ukraine war, China’s slowdown, and supply chain and trade issues within the global economy.
According to the finance ministry’s economic outlook report, the economy is expected to grow just 4% in 2023 – less than half of 2022’s 8.7% – and to stay in the 4-5% range in 2024.
The government expects to continue trimming its budget deficit next year, having set a medium-term target of no more than 3% of gross domestic product (GDP), in a bid to control debt of over RM1 trillion.
For 2023, government expenditure is expected to exceed revenue by 5% of GDP, down from 5.6% in 2022. This figure is expected to drop further in 2024, with the government setting a target of a 4.3% budget deficit for next year.
New taxes to be introduced
The Prime Minister said service tax would be increased to 8% from 6% and a capital gains tax would be enforced at a rate of 10% from 1 March 2024. A high-value goods tax of 5% to 10% would also be introduced, he said.
However, this will not include services such as food, beverages and telecommunications, the Prime Minister Anwar announced.
The government is also set to expand the scope of taxable services to include logistics, brokerage and underwriting services, he added. High-Value Goods Tax is increased from 5% to 10% on certain high-value items such as jewellery and watches.
To boost revenues, new taxes such as a capital gains tax on the disposal of unlisted shares will also be introduced.
E-invoicing will also become mandatory for taxpayers with income or annual sales exceeding RM100mil from Aug 1, 2024.
Implementation for taxpayers in other income categories to be made in phases with a view of comprehensive implementation by July 1, 2025.
Social assistance spending to be cut
Malaysia is projected to spend RM52.8 billion on subsidies and social assistance in 2024, down from the RM64.2 billion expected this year.
Inflation could go higher due to the move to targeted subsidies, the government said. Malaysia expects inflation at 2.1% to 3.6% for next year, compared with this year’s revised estimate of 2.5% to 3%.
In the Budget report, the government said it would shift to a targeted subsidy system for fuel and electricity, but did not elaborate.
Revenue for next year is expected to jump to RM307.6 billion from RM303.2 billion.
State oil company Petronas is expected to pay the government a dividend of RM32 billion next year, lower than the RM40 billion projected this year, reflecting reduced dependency on petroleum-related revenue.
Other measures unveiled in the Budget include the earmarking of RM720million to encourage women and young people to go into business. And RM2.4 billion has been allocated for helping the country’s micro entrepreneurs and smallholders.
In his Budget speech, Anwar said that the government aims to increase women’s labour force participation to 60%, so women who re-enter the workforce will get tax incentives until 2027.
To encourage employers to support women in the workplace, organisations that offer their staff allowances for childcare will be entitled to tax exemptions from RM2,400 to RM3,000.
