BUDGET 2020’s benefits will only be realised if the public delivery system works to deliver the incentives and initiatives offered, said tax experts and economists.

Budget 2020 offers many incentives to boost the local workforce, draw foreign investments and upgrade Malaysia’s communications to a 5G network, they said, adding that close monitoring is needed on the outcome of these plans.

Speaking at a recent post-budget forum in Kuala Lumpur Axcelasia Taxand Sdn Bhd’s Dr Veerinderjeet Singh said there is no doubt that Malaysia remains an attractive country for investments but asked who is monitoring the outcome.

“The challenge is about take-up, success and outcomes,” said the tax consultant.

Citing Malaysia’s experience with helping small and medium enterprises (SMEs), Veerinderjeet said there are plenty of incentives for SMEs every year.

“But every year, these SMEs complain that they don’t get it.”

One unresolved problem after many years of complaints is the existence of overlapping jurisdiction between ministries and agencies. The government, Veerinderjeet said, needs an objective committee that could track the progress of initiatives.

“One good sign I see is the parliamentary select committee on the budget chaired by Mustapa Mohamed (Jeli MP). This select committee can call the different ministries to find out their progress and hence, provide better accountability.

“This is a very positive step by the new government.”

World Bank Group country economist Shakira Teh Sharifuddin also found many positive aspects in Budget 2020.

“We are positive on the number of gender-gap-closing initiatives and the momentum for making changes to the labour laws.

“Measures, such as allocations for early childhood education and increased maternity leave of up to 90 days from 2021, are all steps in the right direction to boost women’s participation in the labour market.”

Shakira said these measures would bring Malaysia closer to international norms.

She also commented on the targeted fuel subsidy programme that left out the wealthy who used to enjoy petrol subsidies.

“Another thing we like is the government’s plan to move away from a blanket subsidy that benefits the top 20 group. There are, however, some steps to improve, like removing the vehicle restrictions as we found that many in the bottom 20% do not have vehicles,” she added.

Revenue problem

One caution, however, is the need to boost government revenue as income, taken as a share of gross domestic product (GDP) has been on the decline from its peak in 2012.

“(Government revenue has fallen) from 26% of GDP to 15.4% this year. This is well below other regional countries.

“Other upper-middle-income economies typically record around 28% while high-income economies record about 36%,” she said.

Malaysia also collected less – at 2.3% of GDP – from personal income tax while other countries collected around 3%.

“High-income economies, such as the Scandinavian countries, collect up to 8%.”

While Malaysia only collects 1.7% of its share of GDP from a consumption tax (SST), other middle- and high-income economies collect around 7% to 8%, she added. – October 16, 2019.