Professor Geoffrey Williams, provost for research and innovation from the Malaysia University of Science and Technology, said the government could probably afford the increased spending.
But he noted that Malaysia is very heavily affected by what’s happening in the global economy and there are some “headwinds” on the international front.
“So although (revenue) is slightly lower in terms of its overall projection, it very much depends on the strength of the economy. So from a revenue side, I think that it is affordable,” he told CNA’s Asia Now.
Malaysia’s economy is forecasted to expand 4.5 per cent in 2023, Mr Anwar said, slowing from the 8.7 per cent growth in 2022.
Prof Williams pointed out that actual revenue for 2022 turned out to be “very much higher” than predicted in the original budget that year.
Last month, the government announced that Malaysia’s trade surplus hit a record high of RM255.1 billion in 2022. This is the 25th consecutive year the country has recorded a trade surplus since 1998. A trade surplus occurs when the value of a country’s exports exceeds the costs of its imports.
More specifically, the proposed capital gains tax could have a large impact on raising revenue, said Mr Soh Lian Seng, KPMG’s head of tax in Malaysia.
“Capital gains tax will have wide implications, pending details of the mechanism that will be in place; more of interest will be the tax rate that will be imposed,” he said.
If the imposed rate goes up to 30 per cent, which Mr Soh said is the current rate of real property gains tax, he highlighted that this will be a “significant revenue stream” for the government.
Commenting on the luxury goods tax, Prof Williams said it will not be a “big revenue earner”.
Economist Khor Yu Leng, Southeast Asia research director at Segi Enam Advisors, added that the luxury goods tax could be of “limited fiscal revenue significance, but serves as part of the shift for a progressive approach to tax”.
“The new luxury and income taxes may not cover the increased spending,” she said.
With that said, BowerGroupAsia director Adib Zalkapli said the “devil is in the details” when determining how much these taxes could help raise revenue.
“Until the mechanism for capital gains tax is finalised and the definition of luxury goods is made clear, we won’t be able to tell how they will improve government revenue,” he said.
However, others like Professor James Chin of the University of Tasmania are less sanguine. He believes that the new taxes will not be able to fund the extra spending.
“But this does not matter in the big picture,” he said.
“It’s likely that Malaysia will borrow to fund the difference. All countries are borrowing big to recover from the pandemic and as long as the country grows over the long term, borrowing is all right.”
Malaysia’s national debt is expected to reach RM1.2 trillion in 2023 – more than 60 per cent of the gross domestic product (GDP), said Mr Anwar when tabling the budget. It would have reached RM1.5 trillion when liabilities are included.
Additional reporting by Amir Yusof.
Source: CNA
