Selangor Journal
An aerial view of the Ministry of Finance (MOF) building in Putrajaya. — Picture via FACEBOOK/MOF

Finance Ministry expects govt revenue to grow by 1.5 pct to over RM300 bln next year

KUALA LUMPUR, Oct 13 — The Federal government’s revenue collection in 2024 anticipates a marginal growth of 1.5 per cent to RM307.6 billion or 15.6 per cent of gross domestic product (GDP), driven by higher tax collection.

Tax revenue continues to be the major contributor and is expected to grow by 6.4 per cent to RM243.6 billion, which constitutes 79.2 per cent of total revenue or 12.3 per cent of GDP, the Ministry of Finance (MoF) said in its Fiscal Outlook and Federal Government Revenue Estimates 2024 report released today.

“The revenue collection will be supported by robust economic growth, coupled with measures initiated to further enhance the revenue mobilisation through broadening the tax base, and improving tax compliance and transparency.

 

“Furthermore, several measures will be implemented, among others, introducing a capital gains tax for the disposal of unlisted shares by companies and e-invoicing,” the ministry said.

Earlier, the government revenue projection for 2023 was revised upwards by four per cent or RM11.7 billion to RM303.2 billion or 16.4 per cent of GDP, compared with the initial estimates of RM291.5 billion. In 2024, the MoF said the collection from direct tax is estimated to increase by 6.9 per cent to RM185 billion or 75.9 per cent of total tax revenue.

The bulk of the increase is primarily attributed to continuous higher collection from companies’ income tax (Cita) and individual income tax at RM106.4 billion and RM42.5 billion, respectively.

The increment in Cita is primarily contributed by better corporate earnings prospects and continuous efforts in enhancing audit and tax compliance. Similarly, individual income tax is projected to increase by 6.9 per cent, in tandem with a better outlook for the unemployment rate and annual wage growth.

Likewise, the petroleum income tax (Pita) is expected to record a stable collection of RM21.7 billion on account of steady average crude oil prices averaging at US$85 per barrel.

On the other hand, revenue from other direct taxes comprising stamp duty and real property gains tax is expected to register RM8.6 billion and RM800 million, respectively, in line with a better property market outlook.

Revenue from indirect taxes is anticipated to increase by 4.7 per cent to RM58.6 billion, mainly contributed by higher sales and services tax (SST) collection.

The SST is forecast to register RM35.8 billion or 1.8 per cent of GDP in accordance with higher consumption and optimism surrounding consumer and business sentiments.

Sales tax collection is projected to increase by four per cent to RM18.3 billion, primarily from machines and spare parts.

Similarly, services tax is estimated at RM17.5 billion due to higher demand for food and beverages, followed by the telecommunication and insurance sectors.

Excise duties collection is estimated to grow by 3.8 per cent to RM13.6 billion on account of higher imported cigarettes, measures introduced like imposing excise duty on liquid or gel products containing nicotine used for electronic cigarettes and vape devices, as well as widening the scope of sugar-sweetened beverages tax and a stable outlook in the automotive industry.

Meanwhile, the non-tax revenue is projected to decrease by 13.8 per cent to RM64 billion, mainly due to lower dividends from Petroliam Nasional Bhd (Petronas), reflecting the reduced dependency on petroleum-related revenue.

The annual dividend from Petronas is projected to be lower at RM32 billion, while the annual dividends from Bank Negara Malaysia and the Retirement Fund Incorporated (KWAP) are estimated at RM3 billion and RM1 billion, respectively.

In addition, licences and permits are expected to register RM14.6 billion, mainly contributed by petroleum royalties amounting to RM5.6 billion, followed by the levy on foreign workers (RM3.3 billion) and motor vehicle licences (RM3.1 billion).

The petroleum-related revenue in 2024 is anticipated to be lower at RM61.8 billion or 3.1 per cent of GDP, compared with RM69.8 billion or 3.8 per cent in 2023, mainly due to lower Petronas dividends despite the forecast higher average crude oil price.

Meanwhile, non-petroleum revenue with a share of 80 per cent is envisaged to increase by 5.3 per cent to RM245.8 billion, reflecting better revenue diversification on the back of a favourable economic outlook.

“Moving forward, the government will continue to ensure sustainable non-petroleum revenue generation to finance expenditure commitments, particularly in providing better infrastructure and social welfare for the public,” it said.

MoF added that the government remains committed to fortifying its revenue base, narrowing the tax gap and enhancing tax efficiency, to establish a sustainable revenue collection framework.

“This objective will be pursued through a diversified array of initiatives, including but not limited to the optimisation of tax incentives, the reduction of tax losses, and the augmentation of tax compliance through effective audit processes.

“In addition, efforts will be intensified to enhance revenue mobilisation and tax transparency through the implementation of the Medium-Term Revenue Strategy and tax expenditure reporting,” it said.

— Bernama

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