Alongside income tax, what other taxes do you pay and how much do these actually matter to the government? After all, these monies are used by the government to invest in the country’s economy.

This article utilises data on federal government revenue obtained from Bank Negara Malaysia’s monthly bulletin on statistics.

1. Companies’ income tax

The number one revenue source for the government comes from the taxes collected from companies’ and businesses’ profits.

In 2019, RM64 billion in tax was collected from companies, representing a share of 24% of total government revenue. This share has declined through the years, with 2014 representing the peak share of 30% before the implementation of the Goods & Services Tax (GST) in 2015.

According to the Inland Revenue Board of Malaysia, gains or profits from conducting business activities, trade, vocation, or profession are liable to be taxed.

About 24% of the profits made by companies and businesses are taxed currently, where 24% represents the lowest tax rate currently in Malaysia’s history.

However, with the Covid-19 recession in 2020, tax revenue has declined significantly. Tax from companies for the first nine months of 2020 was RM27 billion, compared to RM46 billion for the first nine months of 2019.

2. Government investments

The government is a big investor and obtains dividends from Petronas, Bank Negara Malaysia, and other investment-related companies.

In 2019, the government collected RM60 billion from its investments, the largest in recent memory, consisting of 23% of total government revenue.

For context, government investment returns only averaged around RM31 billion yearly from 2010 to 2018.

3. Personal/individual income tax

The government collected about RM39 billion in personal income tax in 2019, representing 15% of its total revenue. Personal income tax collection has been growing substantially, consisting of only 11% of tax revenue in 2014.

The individual income tax rate differs by how much you are earning. The higher your salary is, the higher your tax rate will be.

Personal income tax only declined slightly from RM30 billion in the first nine months of 2019 to RM28 billion in the first nine months of 2020.

However, this is masked by the fact that income tax is deducted directly from your salary and you will probably receive some of your tax rebates back this year.

4. Sales and Service Tax

The Goods and Services Tax (GST) was eliminated in 2018, and replaced with the Sales and Service Tax (SST), covering a smaller range of goods and services.

In 2019, the government collected a total of RM28 billion in SST, comprising 10% of total revenue.

The SST was initially replaced by GST in 2015. By 2017, GST comprised 20% of total government revenue. Prior to 2015, SST contributed about 8% of the government’s total tax revenue.

Interestingly, SST comprised about 13% of tax revenue in the first nine months of 2020, making it similar to GST in terms of contribution to tax revenue.

SST did not experience a significant decline in collection, only decreasing from RM20 billion in the first nine months of 2019 to RM19 billion in the first nine months of 2020.

5. Petroleum income tax

The government collected about RM21 billion in petroleum income tax, representing 8% of total revenue in 2019.

However, the amount the government collects is dependent on the price of crude oil.

For example, from 2015 to 2017, oil prices plunged, affecting the amount of profits petroleum companies made – only about 4% to 5% of total tax revenue.

It was no surprise then with the collapse of oil prices in 2020, petroleum income tax revenue consisted of only 3% of total revenue in the first nine months of 2020.

For your information, a rate of 38% is charged on income from petroleum operations in Malaysia.

6. Stamp/ Export/ Import/ Excise Duties

In 2019, these duties made up about 8% of total government revenue, generating about RM21 billion.

Duties used to make up a bigger portion of government revenue, consisting of 11% of tax revenue in 2014, and are defined as:

• Stamp duty: Levy on legal, commercial and financial written documents which are mainly for property-related transactions.
• Export duty: Levy on goods and services being exported to other countries
• Import duty: Levy on goods and services being imported into Malaysia
• Excise duty: Tax imposed on certain goods imported or manufactured in Malaysia such as liquor, tobacco, motor vehicles, playing cards, and mahjong tiles.

However, with the decreasing consumption of cigarettes and the prevalence of contrabands, the amount of excise duties has been on a decline.

The gradual downturn of the property market after 2016 also meant that the amount of stamp duties has declined slightly.

7. Licenses and permits

The government made around RM9 billion in 2019 from the issuance of licenses and permits to the general public. This revenue represented around 4% of total revenue for the government.

The government imposes charges on these issuances to individuals and companies – road tax, business permits and licenses, foreign workers’ levy are also included in the licenses and permits category.

Together, these permits and license fees add up and contribute a sizeable amount to government revenue.

This article first appeared in MyPF Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.