KUALA LUMPUR: EXPERTS believe that the 2024 Budget marks the first step by the unity government to restore the country's fiscal health by moving away from an overwhelmingly subsidy-based system to a more sustainable format.
They also believe that the move to increase the Sales and Service Tax (SST) instead of reintroducing the Goods and Services Tax (GST) offers a "soft landing" approach for the people.
Social Economy Research Centre executive director Lee Heng Guie said the budget, tabled by Prime Minister Datuk Seri Anwar Ibrahim on Friday, underscored the ultimate aim of withdrawing from a blanket subsidy approach to a targeted one.
Speaking at a webinar organised by the Associated Chinese Chambers of Commerce and Industry of Malaysia on Friday, Lee said this was seen in how only logistical companies and certain groups would benefit from diesel subsidies, which is one way to combat subsidy leakage.
"The government has yet to do that to the petrol subsidy, as it would affect the majority of Malaysians.
"However, the country has to be ready to embrace inflationary pressures during the transition period."
He said the government appeared to be making efforts to facilitate a smooth transition during this period of change
"The Rahmah Cash Aid (STR) quantum, increased from RM8 billion to RM10 billion, can be seen as a move by the government to reduce the impact on the B40 and M40 categories."
Lee, however, voiced his concern that the proposed Luxury Goods Tax and Capital Gains Tax (CGT) might turn away investors, also affecting the tourism and retail industries.
Echoing Lee, ACCCIM treasurer-general Datuk Koong Lin Loong said economic structure reform was necessary.
"Compared with the revised 2023 Budget in February, this budget indicates that we are working in the right direction in terms of structural reform."
Koong said while the GST was not mentioned in the budget, its undertone remained prevalent.
The GST, he said, could be a better option than the two new taxes.
"The government should take into consideration that the administration fee itself might
be higher than the tax mechanism they are trying to implement."
Anwar last month, when asked about the possibility of reintroducing the GST, said the government aimed to reduce subsidies for the wealthy before even considering its return.
He, however, acknowledged that the GST was a more "efficient and transparent" taxation system.
Putra Business School Associate Professor Dr Ahmed Razman Abdul Latiff said the decision to retain the SST and not reintroduce the GST was to avoid placing significant pressure on the people.
"Coupled with other forms of taxation mechanisms, such as the Luxury Goods Tax and CGT, I believe the increased SST rate will help the government boost its revenue and achieve its target of narrowing the fiscal deficit to 4.3 per cent."
Razman said reintroducing the GST would not be a popular move.
Asked if the two per cent SST increase would help the government strengthen its fiscal position, he said all parties needed to look at the budget in its entirety.
"Even though SST was raised by only two per cent, government revenue will be complemented by other income sources.
"Additionally, higher commodity prices, especially oil and gas, will serve as a bonus and help the government generate higher income without depending on SST alone."