PUTRAJAYA’S decision to share half of the revenue collected from tourism tax with state governments will give the tourism sector in each state a much-needed boost, said economists.

Prime Minister Dr Mahathir Mohamad announced today that 50% of the federal tourism tax charged to foreign tourists, which is currently RM10 per room per night, will be returned to the states as revenue.

Malaysian Institute of Economic Research senior research fellow Shankaran Nambiar said the move will help state governments to spur their tourism industry.

“Encouraging tourism can give the economy a boost in the short term. At a time when growth figures are looking bleak, a quick injection of funds will see some contribution to gross domestic product (GDP),” he told The Malaysian Insight.

Socio-Economic Research Centre executive director Lee Heng Guie said the move would unlikely affect the federal government’s finances as the revenue collected from tourism tax was still nominal.

Finance Minister Lim Guan Eng said in March that the government will be returning a total of RM67.74 million or 50% the amount of tax collected by the states in 2018, by the end of the first quarter.

Sabah collected the largest amount of tourism tax at RM25.34 million in 2018, and received its share of RM12.67 million.

This was followed by Penang, which collected RM21.97 million and received RM10.98 million, and Selangor, which collected RM20.60 million and received RM10.30 million.

Sarawak collected only RM5.16 million in tourism tax and will receive RM2.58 million as its share.

Along with returning half of the tourism tax collected to the respective state governments, Dr Mahathir also said Putrajaya has decided to write off RM3.8 billion worth of loans.

Dr Mahathir said that the loans taken by states from 2001 onwards for the supply of clean water to rural areas would be written off on condition that the state governments complete their respective water asset restructuring  exercise by December 31, 2019.

Nambiar said the move will help state governments get on with the restructuring exercise.

“The restructuring of assets for the water industry is a long-standing one. The objective is to achieve an ‘asset-light’ industry.”

“Although this measure may immediately seem as one that burdens the federal government’s fiscal finances, it actually helps state governments with their plans to restructure the assets of the water industry. States are relieved of their financial burden and consumers will benefit from higher quality water.

“What is noteworthy is the fact that rural areas are being targeted, indicating the federal government’s concern for that section of society.”

Lee, on the other hand, said that more details are required on whether the debt will be written off on a one-of basis, or if it will be amortised over a period of time. – May 27, 2019.