The Socio Economic Research Centre (SERC) said Putrajaya could announce it when tabling Budget 2021 next month.
“It will be good if the government can give us a heads-up in the coming budget if it is looking at introducing some new form of broad-based consumption tax,” said SERC executive director Lee Heng Guie.
Lee said this during a talk on “Economic Outlook and 2021 Budget Expectations”.
He was asked if there was a probability of the government introducing new ways to collect revenue in the upcoming budget.
“There are concerns that a new tax system will lead to inflation as seen previously,” he said.
“Yes, it is a one-off (price hike) but it could be managed well in ‘protecting’ consumer items for the low-income group.”
GST, which was introduced in April 2015 at 6%, was replaced with the sales and services tax (SST) on Sept 1, 2018.
The change in the tax system saw a shortfall of RM20 billion as RM44 billion was collected under the GST system.
Lee predicts that the government may plan a budget deficit of 5.5% to 6% of gross domestic product for next year.
He said the budget is likely to be formulated with the recovery movement control order in mind, to cement early signs of recovery amid concerns about a second wave of Covid-19 infections.
SERC also proposed that the government focus on boosting consumer spending and implementing productive public projects in Budget 2021.
Lee said voluntary cuts for employees’ contributions to the Employees Provident Fund (EPF) should continue next year and withdrawal of EPF i-Lestari of RM500 should also be extended beyond December.
He also proposed a reduction in the personal income tax rate for the middle-income group and a tax-free holiday for those with income below RM150,000 a year.
The RM30 monthly public transport subsidy should be extended till December next year, he said.
SERC also proposed for the wage subsidy programme for companies with fewer than 200 employees to be extended to the middle next year.
It suggested that the government spend on productive expansion projects such as the MRT2 line, LRT3 line, Pan Borneo Highway, Gemas-Johor Bahru double track, East Coast Rail Line (ECRL) and Singapore-Johor Bahru RTS.
As for the tourism sector, which is the worst-hit during the pandemic, Lee said tax incentives and tax relief should be given for two years starting July 1.
“Also, assist the industry operators and tour agencies to adopt digital technology for the virtual tourism experience,” he said, adding that the government should also identify travel bubbles and green zones to revive the industry.
To boost the agricultural sector, the think tank proposed establishing a database for idle land through the cooperation of federal and state authorities.
“Such land can be leased out to farmers and corporations for agricultural ventures,” Lee said.