Apart from highlighting the benefits that civil servants are poised to receive, including RM1.3 billion in a special one-off aid, Center for Market Education (CME) CEO Carmelo Ferlito also noted the 10-15% discount on the repayment of PTPTN student loans.
“I would say that it is more of a pre-election budget than a post-emergency budget,” he said.
“It looks to me like the budget has attempted to help many – which is not wrong per se – but without thinking of the long-term consequences, or without clarifying or improving the way in which revenue will be generated.
“The fiscal measures are here and there, and lack a clear and holistic long-term strategy.”
The next general election is due to be held by July 2023, but could be held in the next 12 months. It will also be an election that will see a large number of younger people voting with the implementation of the Undi 18 amendments.
Being the largest budget ever announced at RM332.1 billion, it saw a 24% increase in development expenditure and a 76% rise in operating expenditure.
Ferlito added that while the measures announced today may seem like the “right solution”, there may not have been proper analysis as to how the expenditure would be financed.
He also noted the potential unintended consequences in terms of inflation and unemployment, as well as other more structural problems that should have been properly addressed.
Ferlito added that while he appreciated the government’s efforts to increase the tax base, it seemed to be the “wrong way” to do so.
He said that as opposed to focusing on “more taxes”, the government should look at “better taxes” and more effective enforcement.
Apart from imposing taxes on the lucrative e-commerce industry, finance minister Tengku Zafrul Aziz today announced a tax on those who receive income from foreign sources.
Another economist hailed Budget 2022 as a valuable opportunity for the government to expand its tax base.
“For years, Malaysia’s tax base has been quite narrow, and Budget 2022 is an opportunity to start putting in place measures that will broaden the tax base towards fiscal consolidation in the next five to ten years,” said Benedict Weerasena of think tank Bait Al-Amanah.
“Efforts to increase compliance and plug leakages such as the implementation of a tax identification number (TIN) is a good step towards broadening the tax base.
However, Weerasena noted that there was no mention of the initially proposed Special Voluntary Disclosure Programme (SVDP), where taxpayers are encouraged to voluntarily come forward to declare tax that has not been paid, underestimated, or erroneously reported to the inland revenue board.
Besides the tax on those receiving incomes from foreign sources, the government will also introduce a sales tax on low-value items from abroad that are sold online and impose a service tax on delivery services provided by online platforms.
Tengku Zafrul said the government will also increase the windfall tax threshold in the palm oil sector from RM2,500 to RM3,000 in the peninsular and from RM3,000 to RM3,500 in Sabah and Sarawak.