FISCAL reforms are under way, the Finance Ministry said today, a day after announcing that the goods services tax would be zero-rated from June 1.

It said the revenue shortfall from the zero-rating of the GST will “be cushioned by specific revenue and expenditure measures”, which will be announced later.

The Finance Ministry said today that crude oil prices that are higher than the US$52 a barrel estimated for Budget 2018 will provide a buffer as the new government carries out reforms.

It said the sales and services tax will be re-introduced, government spending will be reduced by “rationalisation, efficiency measures and reduction in wastages”.

The rating agencies and analysts have voiced concerns about how the government will make up for the revenue shortfall when the GST is scrapped – a key election promise for the Pakatan Harapan coalition as it campaigned to unseat the long-ruling Barisan Nasional at the May 9 polls. 

Officials figures show GST collections make up about 18% of government revenue, surpassing the contribution of the oil and gas sector. The consumption tax, much maligned among voters, is credited by the past government of lowering the fiscal-deficit-to-GDP ratio. 

Fiscal consolidation was also a key initiative of former prime minister Najib Razak, who oversaw a gradual easing of the deficit from 6.7% in 2009 to about 2.8% last year, but analyst expect it to rise to 3% this year. – May 17, 2018.