Shoring up government coffers

KUALA LUMPUR: There is a need for the government to introduce new taxes to shore up revenues especially as the economy gradually recovers, economists said.

But this must be done by simultaneously consolidating the expenditure side, and take into account the current fiscal situation and how it would support the economy moving forward, they added.

Economist Dr Nungsari Ahmad Radhi said while he appreciated the need to raise revenues, doing so without a thorough look at the expenditure side was just an abuse of power – using statutes to raise new taxes to solve immediate short-term cash flow.

Nungsari said any new taxes or an increase of existing ones would put more burden on individuals and businesses.

A measure to ensure sufficient revenue in government coffers is to shelve projects that incurred expenses.

“I know the government is short on revenues, but I do not think it can introduce any new taxes or increase rates of existing taxes without also consolidating the expenditure side.

“If that is to be done, what has the government done to cut costs or delay or even stop projects that incur future expenses? It seems to be merrily going on with mega projects and throwing money everywhere without consolidating,” he told the New Straits Times.

He said the government had previously stated it would spend RM80 billion on subsidies whereby a large chunk of the amount would benefit the people.

However, the government had done nothing to make it more efficient.

Deloitte Malaysia tax leader Sim Kwang Gek said the amount of tax revenue collected should increase in tandem with the gradual recovery of the economy.

Sim noted the need to introduce new taxes would depend on the country’s fiscal position and how fast the government wanted to close the gap on fiscal deficits.

“In view of the government’s aspiration to achieve a fiscal deficit of 3.5 per cent of gross domestic product by 2025, swift measures must be taken to enhance compliance, reduce tax leakages, as well as broadening our tax base.

“On reducing tax leakages, I applaud the tax authorities’ move to introduce the Tax Identification Number for all individuals aged 18 and above and the Tax Compliance Certificate as a pre-condition for government tenders.

“In addition, mandating an e-invoicing management system that integrates with the government’s system would be a powerful tool to tackle tax evasion and tax leakages,” said Sim.

She added that besides introducing new taxes to shore up revenue, strong fiscal governance and optimising expenditure were equally important.

The government’s effort to introduce the Fiscal Responsibility Act, scheduled to be tabled soon, reflected a positive effort on the government to embrace transparency and accountability in terms of fiscal management of the country, she said.

“Proper execution and implementation will enhance not just public trust but also investors’ trust in Malaysia,” added Sim.

Ernst & Young Tax Consultants Sdn Bhd tax managing partner Farah Rosley said the government must continue exploring new revenue sources to fund operating costs and sustain the economic development of the country.

Any new taxes must be aligned with the objectives of continuing to encourage economic development and growing of specific sectors that are critical to the overall development of the country.

“Increasing tax rates or introducing new taxes without considering the intended outcome to be achieved from an economic growth perspective will not be beneficial for the country.

“The tax income generated should be sustainable in the long run. An Organisation for Economic Co- operation and Development study examining data from 63 countries concluded that corporate income taxes can be economically damaging if they are only intended to raise revenue,” she said.

She added that introducing a broad-based consumption tax such as goods and services tax (GST) might be useful to increase the government’s revenue.

She, however, said the issues faced by taxpayers such as the timely refund of input tax claims, rising costs and clarity of the tax system needed to be looked into and managed upfront.

“Compliance costs for businesses to comply with GST should be kept at a minimum. Under the current SST system, revenue collection was RM27.9 billion in 2021 compared to RM44 billion of GST collected in 2017,” she added.

NST