KUALA LUMPUR: The government is likely to expand the scope of sales and service tax (SST), increase sugar tax and introduce two new taxes under Budget 2025, in the absence of the reintroduction of goods and services tax (GST).
KSI Strategic Institute for Asia Pacific Economic advisor and former Ambank Research head, Dr. Anthony Dass said SST's scope is likely to be widened considering that SST currently only covers 41 per cent of all goods and services.
This is compared to GST, which covered 67 per cent.
He expects sugar tax to be raised to 20 per cent, the introduction of high-value goods tax and a global minimum tax based on Global Anti-Base Erosion (GloBE) rules.
Companies affected by the global minimum tax will be imposed with 15 per cent tax effective Jan 1, 2025, aligning with international taxation standards, especially in curbing tax base erosion activities and transferring profits to countries with low tax rates.
Anthony said revenue from tax will continue to be the primary source of government funds.
"A conservative projection of a 3-4 per cent increase in tax collection would be supported by higher corporate and individual tax revenues from a more optimistic economic outlook; broadening of the tax base; further improvement in tax compliance, and collection via the phasing in of "e-invoicing" starting June 1, 2024 for full implementation on July 1, 2025, " he said.
On the non-tax revenue, the dividend payout from Petronas will be lower than 2024's RM32 billion following the decline in oil price.
It is consistent with the 12th Malaysian Plan Mid-Term Review where the government highlighted their commitment to widen the tax base structure.
Anthony said the Madani government is expected to remain firm on its continued commitment to fiscal consolidation.
He expects the fiscal deficit/gross domestic product (GDP) target for 2025 tolikely to be around -3.5 per cent.
Anthony said the potential rationalisation of the RON95 fuel subsidy could lead to higher fuel prices and a direct impact on the cost of transportation as well as indirectly affect the price of goods and services.
"The budget should also address the current issue of pressuring cost of living, rising healthcare costs and provisions for skills development", Anthony said in Budget 2025 Breakdown today.
He also noted that in order to tackle the issue of cost-of-living pressure, further enhancements could be made to Sumbangan Asas Rahmah and Sumbangan Tunai Rahmah, estimated at RM8 billion to RM10 billion, focusing on helping households with the cost-of-living problems.
Anthony said the budget is expected to include fiscal reforms which are in line with the Fiscal Responsibility Act to manage the deficit and debt sustainably, while still supporting private sector growth.
He believes Budget 2025 will focus on developing the private sector, especially small and medium enterprises (SMEs), by increasing their contribution to GDP and exports together with enhancing productivity through technology.
Additionally, Anthony expects there to be tax benefits for companies investing in renewable energy, electric vehicles and other green technologies.