Will There Be New Taxes In The Upcoming Budget 2022?
When we welcome 2022 in less than three months, it will mark the third year of Malaysia grappling with the Covid-19 pandemic. The effects of the pandemic have been widely discussed and scrutinised, but one thing that can be said for sure is that Malaysia’s economy has experienced a significant downturn in fortunes due to it.
Which is why now as we’re rapidly approaching the end of the year, many people are looking forward to the tabling of Budget 2022, in hopes that the government will be announcing significant policy changes that will help overturn the problems the economy is facing.
In an effort to increase transparency before the impending budget, the Ministry of Finance (MoF) has released a Pre-budget statement.
In the Pre-Budget Statement, MoF stated that Budget 2022 will be drawn up revolving around three key tenets.
- Rakyat’s Wellbeing
- Business Continuity
- Economic resilience
The MoF Pre-Budget Statement also states that this will be the biggest ever budget ever tabled, with a budget of RM322.5 billion, which demonstrates the government’s commitment to safeguard the wellbeing of the Rakyat and business continuity in the face of the pandemic, and to complement the 12th Malaysia Plan (12MP).
Along with the Pre-Budget Statement, MoF also published four public consultation papers, which aims to gain public feedback on four main issues, which includes a review of tax incentives.
Will GST make a comeback?
In the debate on the 12th Malaysia Plan (12MP), former prime minister Datuk Seri Najib Razak called for the return of the Goods and Service Tax (GST), the service tax which was introduced during his administration, but then scrapped by the Pakatan Harapan government.
In his defense of GST, Najib stated that the tax would enable Malaysia to reduce income inequality, attract foreign investments and strengthen the government’s fiscal position.
“GST had caused the shadow economy to shrink from 25 per cent to 10 per cent. There was a serious leakage before the implementation of GST, which is why GST is beneficial to the nation and the people,” he said in the Dewan Rakyat.
So this calls for the question, in order to help the economy recover, does the government need to introduce new taxes?
Experts believe there will be no new taxes
According to an MIDF Amanah Investment bank’s research arm (MIDF Research), not necessarily.
When asked by Bernama, Abdul Mui’zz Morhalim, an economist from MIDF Research said that they believe that no new taxes will be introduced in Budget 2022, due to the reeling effects of the Covid-19 pandemic.
However, he added that the government may need to increase borrowing to finance the widening fiscal deficit.
“We don’t think it is the right time for the government to introduce any new taxes in 2022 because there is still uncertainty surrounding the Covid-19 situation locally and globally, which could affect Malaysia’s economic growth stability.
“However, the government may need to increase borrowings to finance the (widening) fiscal deficit. A possible increase in the statutory debt ceiling to 65 percent of GDP from 60 percent currently will provide a greater fiscal space for the government,” Abdul Mui’zz Morhalim told Bernama when asked to share MIDF Research’s Budget 2022 wish list recently.
CIMB’s investment arm, CGS-CIMB also shared their thoughts on the upcoming budget and said that there will be no major tax overhaul in Budget 2022.
In a note released by CGS-CIMB, they stated that the Budget will be more focused on three main objectives, protecting and driving the recovery of lives and livelihoods, rebuilding national resilience and catalysing reforms.
CGS-CIMB also stated that due to the need for significant economic recovery, there will be no major tax overhaul.
“That said, we expect high vaccination rates, economic reopening and targeted fiscal measures to mark the start of fiscal consolidation in 2022.
“We think the first hints of a GST plan may surface in a comprehensive report on Medium-Term Revenue Strategies, which is targeted to be published in 2022,” CGS-CIMB said.
Tax initiatives to be introduced in Budget 2022
Instead of a major tax overhaul, market analysts are leaning more towards the view that the government will enhance tax initiatives. Global business advisory group Tricor in its pre-budget statement stated that Budget 2022 will introduce tax initiatives, to help reduce issues such as leakages and to help taxpayers to manage their tax affairs, such as the Special Voluntary Disclosure Programme (SVDP) and the Tax Identification Number (TIN).
“The SVDP on indirect taxes will help taxpayers to manage and regularise their indirect tax affairs and to close any unresolved audit/investigation cases.
“With a proper mechanism in place, the SVDP will help the Government save substantial costs and time from carrying out audits and at the same time, help in revenue collection in the short-term.”
Regarding TIN, Tricor stated that the initiative was first introduced in Budget 2020, but proper financial acts will be introduced in this year’s budget to help implement TIN.
“As for the TIN, this suggestion was already mentioned in the 2020 Budget and was repeated in the 2021 Budget and it is expected that in the 2022 Budget, we will see the relevant legislative changes in the Finance Bill that will be tabled as part of the Budget.”
Meanwhile, current prime minister Dato Sri Ismail Sabri Yaakob announced that the upcoming Budget 2022 will be in line with the 12th Malaysia Plan (12MP) and its key themes of Keluarga Malaysia – Prosperous, Inclusive, Sustainable.
The 12MP was passed in the Parliament last week and Budget 2022 which is scheduled to be tabled in Parliament on October 29, 2021 will likely focus on recovery, rebuilding national resilience and catalysing reform, or the 3Rs namely Recovery, Resilience and Reform, which are key themes in the 12MP.