Budget 2018: What Do Economists and Politicians Say
Just a few hours ago Datuk Seri Najib Razak tabled Budget 2018 to much fanfare. For good reasons, all eyes are on this budget as it is the last one to be tabled before the 14th general election.
The budget also comes amid a rough year for Malaysians dealing with the rising cost of living, soaring house prices, a weak ringgit and fluctuating petrol prices. Adding to that is a litany of other problems such as higher prices for medication as well as education.
Najib, who is also finance minister, proposed an allocation of RM280.25 billion, an increase of RM19.45 billion more than the allocation for 2017. Of the total figure, RM234.5 billion is for operations, the remaining RM46 billion for development.
Malaysia’s income per capita is also expected to rise to RM42,777 by 2018 as median monthly income in the country has risen from RM4,585 in 2014 to RM5,288 in 2016.
Its theme this time was a little unique: “Prosper with inclusive economy, balancing duniawi (worldly) and ukhrawi (hereafter) excellence to better the lives of the rakyat towards TN50 aspirations.”
It also had eight core thrusts:
- To enhance investment, trade and industry.
- Achieving TN50 aspirations.
- Excellence in Education Development, Training, Skills and Talent
- Driving inclusive development
- Prioritising well-being of rakyat and income-making opportunities
- Preparing for the fourth Industrial Revolution and the Digital Economy
- Enhancing efficiency and delivery of government-linked companies (GLC) and public service.
- Balancing between the par excellence of the worldly and the hereafter.
So get an early start on what seems to be an important event for 2018, we decided to ask the opinion of experts, economists and seasoned politicians on their thoughts regarding the “mother of all budgets”:
Datuk Seri Abdul Rahman Dahlan, minister in the prime minister’s department, Economic Planning Unit
Truly I believe this is a very interesting budget, where we have seen an increase of 20 billion which we managed to do on the back of cutting income tax, abolishing tolls, and also increasing some goodies to the people, including bantuan khas, and also increasing allocation for health and education. The reason we could do this is because it is a disciplined budget.
We understand where the numbers come from. It is a remarkable feat to increase the allocation by RM20 billion and still be able to abolish toll and more importantly reducing the budget deficit to below 3%.
Firdaos Rosli, director, Institute of Strategic and International Studies (ISIS) Malaysia
As far as the M40 is concerned, the budget is addressing the whole idea of the rising cost of living and its effect on the group. It is also addressing the idea of homeownership by introducing something different on the rental side, so the budget is proposing a 50% tax exemption on rental income received by resident individuals not exceeding RM2,000 per month.
That’s something new. We had the Rent Control Act 1966 but that was repealed. I don’t think the government is going to do down that line but addressing the need for rental space is a good move.
Lim Phing Phing, director, personal tax, PricewaterhouseCoopers
In reducing tax rates for the RM20,000 to RM70,000 bracket, I think it’s very much in line with our expectations of a downward trend, particularly for the B40 and M40 categories. This eases the pressure because it increases disposable income due to rising living costs and it eliminates 261,000 individuals from the tax pool.
So it eases the administrative process for the government as well as the B40 and M40 groups. So now a portion of Malaysians are only paying goods and services tax (GST).
Lee Heng Guie, executive director, Socio-Economic Research Centre
I believe the budget is pro-growth and makes an impact where it matters while ensuring optimal deployment of public resources while preserving fiscal stability. It also sets the pact for economic growth while preparing for the future through digitalisation and innovation transformation.
Datuk Seri FD Iskandar, president, REHDA Malaysia
We are grateful to the government for taking heed of our call to extend the step-up financing scheme that was introduced for PR1MA last year to include private developers. The incentive will definitely assist homebuyers at their initial stage of purchase especially when deposit is a major issue among buyers today.
Julia Goh, economist, UOB
Budget 2018 outlines policies that target both near-term and long-term goals. With the coming 14th general election, it was no surprise there were generous giveaways including personal income tax cuts for middle income earners, sustained BR1M cash aid, cash for the civil servants, minimum civil servant pensions, school assistance, affordable housing schemes, funds for various race groups, aid for rural sector and farmers, Felda settlers, and allocations for Sabah and Sarawak.
Alleviating the burden of higher cost of living and improving housing affordability remain a constant feature and part of the government’s people-focused policies. Aside from BR1M aid, there were higher subsidies for cooking oil, electricity, gas and toll, incentives for farmers and agropreneurs to produce foods, efforts to shorten supply chains between producers and customers, and measures to enhance household disposable incomes through entrepreneurship.
Tony Pua, member of parliament, DAP
Despite the massive increase in government revenues resulting from the GST, there was no reprieve for individual and corporate income taxpayers. In fact, it has become increasingly painful for Malaysian income tax payers.
For individuals, income tax contributions increased by 4.7% from 2015 to 2016. However, for this year (2017), individual income tax contributions will increase by a massive 9.2% to RM30.1 billion. For 2018, individual income tax collection for the government will increase by another 7.1% to RM32.2 billion. This is in spite of the proposed 2% decrease in income tax rates for taxable income up to RM70,000 per annum.