KUALA LUMPUR, Oct 22 (Bernama) — The 2016 Budget, to be unveiled tomorrow by Prime Minister Datuk Seri Najib Tun Razak, will likely revolve around strategies to transform the country into a developed and high-income economy by 2020.
The Budget proposals will include strategic measures to stimulate domestic demand following concerns over a challenging external environment next year, as well as, further compensate households, especially low income earners, from the introduction of the Goods and Services Tax (GST).
“Several measures to ensure economic growth stays on a strong and stable path will be announced in the 2016 Budget,” said Najib, who is also Finance Minister, in his twitter recently.
Budget 2016 will be the first budget under the 11th Malaysia Plan (11MP).
And for this, most analysts expect Budget 2016 proposals to contain specific strategies for the medium to long-term, focusing on improving productivity, intellectual capital, skills, innovation and technology and, strengthen the country’s underlying fundamentals.
“This will help prepare Malaysia for a possible entry into free trade pacts, with strong measures in promoting international trade (exports of domestic products and services) as well as further enhance the competitiveness of the country’s industries”, said Affin Hwang Capital in a research note.
Consistent with the people-centric theme of the 11MP, it said the Prime Minister would ensure that more focus is given to human capital development in the aspect of education and training.
With productivity seen as key driver for economic growth under the 11MP, the analysts also expect Budget 2016 to further incentivise the private sector to invest in productivity improvement.
Meanwhile, both Deputy Finance Minister Datuk Chua Tee Yong and Performance Management and Delivery Unit Chief Executive officer Datuk Seri Idris Jala shared a similar view that the 2016 Budget will be a “people-friendly budget”, much bigger than the previous one, in the quest to help low and middle-income groups cope with inflation and rising cost of living.
“More incentives and promoting affordable housing would be a continous measure as the plan to build more affordable homes was part of the Barisan Nasional’s manifesto,” said Chua.
As for Idris Jala, he said,” there will always be a balance in what we put into the budget for the capital economy, as well as, the people’s economy. What will be put in the budget will reflect our 11MP.”
Turning to the GST, it is understood that more details will be provided during the Budget 2016 announcement, indicating how and where the revenue collected would be spent.
This includes gross revenues and refunds for businesses and tourists; actual numbers of GST-registered companies paying and not paying the tax; amount of fines collected for late GST registrations and other non-compliances and breaches of the GST Act.
RHB Research Institute said there was likely to be some clarity by the government on the possible move to corporatise the Royal Malaysian Customs Department to improve the efficiency of the GST administration, as it did with the Inland Revenue Board.
GST revenue collection in the second quarter of 2015, which is the first three months after of GST implementation, amounted to RM7.6 billion compared with the Sales Tax and Services Tax (SST) revenue of RM4.1 billion collected in the corresponding period of last year.
The government’s full-year target for the GST is RM23.2 billion.
However, with small and mid-sized companies with revenues of less than RM5 billion only filing their GST from August onwards, the amount is expected to trend higher in the second-half 2015 and could exceed government target.
For the 2016 Budget, the government is expected to reveal a target that is probably nearer to the RM31.4 billion annual target set under 11MP.
“The economic situation, coupled with plunging oil prices that affected the country’s revenue, made drafting next year’s budget a challenge, but fortunately, the country had income from the GST as a buffer,” said Najib over the weekend.
All in all, analysts said more measures were likely to be introduced to cushion the impact of the GST on households, in the form of cash payout and bonus payment for civil servants, including an increase in Bantuan Rakyat 1Malaysia (BR1M) across the board for households and individuals.