Malaysian Rating Corporation Bhd chief economist Firdaos Rosli said: “A federal budget should not just be about announcing expenditures. This is when the government should give clear signals to both revenue and expenditure in the coming years under the 12th Malaysia Plan.”

He told FMT the abolition of the GST in 2018 had had a great adverse effect on the government’s revenue and the country had yet to recover from it.

“We now have a very narrow tax base where we have to be overdependent on corporate and individual taxes. Only a small percentage of the population is paying for everyone else.

“This has led to a greater dependence on dividends from GLCs like Petronas. They have been declaring higher dividends to the government since 2018 when tax reforms were reversed.”

Firdaos said it was unlikely that the government would announce a return of the GST today, but added that it was inevitable Malaysia would go down the path again.

He said it would be appropriate for Putrajaya to make clear where the country’s tax regime was headed and prepare the market for the reintroduction of the GST. The consumption tax not only broadened the tax base but also provided a level of predictability.

“If you rely heavily on direct taxes like corporate and income taxes, the tax revenue will drop when productivity drops. But with GST, you have better tax buoyancy during a crisis.”

On GLCs, he said their role in the economy was vague.

“Are they cash cows to supplement the government’s revenue or commercial entities to create value? If they are commercial entities, supporting the government’s coffers cannot be their primary objective,” he said.

Firdaos said the lack of clarity would be a disincentive to foreign investors since they would see GLCs as crowding out the market. Static foreign direct investment rules were not helpful either.

At the same time, he said, it would be difficult for GLCs to plan for the future if they had no clarity on their roles.