KUALA LUMPUR: Malaysia has gone "expansionary" again, unveiling a bigger budget for next year to expand the economy and government coffers amid global slowdown.
The 2024 Budget boasts higher allocation for operating spending, as well as handouts particularly for the low and middle-income groups, civil servants and small and medium businesses.
The national budget also features new taxes and revised rates for existing ones and, as expected, announcement of a gradual targeted subsidy for diesel to ease the government's financial burden.
At RM393.8 billion, next year's annual bill is larger than the previous all-time high of RM386.3 billion when Prime Minister Datuk Seri Anwar Ibrahim retabled the 2023 Budget in late February this year.
It is much higher than the RM372.3 billion under the original 2023 Budget tabled by Anwar's predecessor Datuk Seri Ismail Sabri Yaakob but was not passed last October.
Of the RM393.8 billion, a total of RM303.8 billion is for operating expenditure (OE) and RM90 billion for development expenditure (DE), besides RM2 billion as contingency fund.
The amount for DE is lower than the RM99 billion for 2023, which is the country's biggest development expenditure so far.
Next year's larger OE comes on the back of expectations that government revenue will increase to RM307.6 billion from RM303.3 billion this year.
The fiscal deficit is also expected to be reduced to 4.3 per cent next year, up from 5.0 per cent this year, as the government targets the economy to grow 4.0-5.0 per cent in 2024.
"The 2024 Budget cemented the prime minister's commitment to credibly strengthening Malaysia's fiscal position in the medium-term. The government stayed true to its fiscal consolidation agenda in setting the 2024 budget deficit at a narrower 4.3 per cent of GDP versus 5.0 per cent in 2023," said OCBC senior Asean economist Lavanya Venkateswaran.
Themed "Reformasi Ekonomi, Memperkasa Rakyat, the 2024 Budget represents a balancing act between the need to support the domestic economy and determination to continue with fiscal consolidation.
It walks the talk in terms of establishing the government's path to better fiscal health over the medium-term.
Anwar, clad in a light purple Baju Melayu when tabling the 2024 Budget, is trying to achieve this by, among others, enhancing tax collection effectiveness and plugging leakages as well as broadening the revenue base.
He announced a shift away from blanket subsidies to a system that mainly aids lower-income groups.
"Although subsidised goods help the people minimise the cost of living, the fact remains that subsidies benefit the rich more, and low prices have increased wastages and smuggling out of the country," Anwar said.
The government subsidises petrol, cooking oil and rice among other items. These expenses have climbed to record levels in recent years due to higher commodity prices.
Anwar said diesel subsidies will be cut in a phased manner, while temporary price controls on chicken and eggs will be lifted as supplies had stabilised.
Savings from subsidy cuts will be channelled to increase cash aid for the needy, given under the Rahmah Cash Aid scheme from RM8 billion to RM10 billion in total.
Malaysia is projected to spend RM52.8 billion on subsidies and social assistance in 2024, down from the RM64.2 billion expected this year, although Anwar said the 2023 figure could reach RM81 billion.
Logistics companies and certain groups will continue to enjoy subsidised diesel but other users will have to pay a higher price as part of the government's plans to restructure subsidies for the fuel.
The government currently pays RM1.60 for every litre of diesel to cap the price at RM2.15 per litre.
Inflation is expected to tick up due to the removal of some subsidies. The Malaysian government expects inflation at 2.1 per cent to 3.6 per cent in 2024, compared with this year's estimate of 2.5-3.0 per cent.
A number of taxation reform measures will be implemented next year to expand the country's revenue base and at the same time not burden the majority of the people.
Anwar, who is also Finance Minister, said the tax collected by the government is one of the lowest in Asean at 11.8 per cent of gross domestic product compared to Singapore (12.6 per cent) and Thailand (16.4 per cent).
The government plans to increase the service tax rate to 8.0 per cent instead of 6.0 per cent. Tthis does not include services such as food and beverages, and telecommunications.
"The government will also expand the scope of taxable services to include logistic services, brokerage, underwriting and karaoke," he said.
Capital gains tax on disposal of non-listed local companies will be enforced from March next year at a rate of 10 per cent net profit.
A global minimum tax will be implemented in 2025 on companies with a global income of at least 750 million euro.
E-invoicing will be mandatory for taxpayers with income or annual sales exceeding RM100 million from August 1, 2024.
The government also decided to ease the current conditions for Malaysia My Second Home applications to boost the arrival of foreign tourists and investors.
Logistics companies and certain groups will continue to enjoy subsidised diesel but other users will have to pay a higher price as part of the government's plans to restructure subsidies for the fuel.
The government currently pays RM1.60 for every litre of diesel to cap the price at RM2.15 per litre.
"This budget is a statement of the government's commitment to revitalise the economy in a challenging environment," Anwar said.