Ernst & Young Tax Consultants Sdn Bhd (EY) expects the government to continue to introduce stimulus measures in next year’s budget to address “the now” and “the next” for Malaysia.
Specifically, “the now” refers to the key issues pertaining to saving lives and livelihoods in the short term, while “the next” refers to issues relating to the country’s recovery in the medium and long term, reported The New Straits Times (NST).
EY described the 2021 Budget as a tough one since the government had to balance taking care of the rakyat, particularly the vulnerable, protecting and creating jobs and livelihoods, while paving the way for sustainable growth as well as positioning the country to be nimble to seize opportunities during the recovery phase.
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“At the same time, we are looking at a 5.8% to 6.0% budget deficit and debt levels above the statutory limit of 60%,” it said as quoted by NST.
“Hence, we also expect some immediate measures to increase the tax revenue of the country, including changes to existing tax provisions to broaden the tax base and tighten gaps.”
In the meantime, Malaysia should strive to be attractive to investors.
This comes as ASEAN is set to be the fourth biggest economy in the world by 2030 and Malaysia has to secure its fair share of the investment pie.
“We therefore expect some measures, including fiscal and non-fiscal incentives, to continue to help attract targeted foreign direct investments,” said EY.
Beyond the 2021 Budget and the Covid-19 pandemic, EY believes that Malaysia’s tax framework is in need of a comprehensive reform for it to be in a better fiscal position – one that is balanced in realising revenue growth and encouraging economic growth, while also alleviating the burden of those requiring support, namely the B40 group.
“There is no short cut in tax policy formulation. In isolation, changes introduced in an annual national budget will not be comprehensive enough,” it said.
“The government needs to look at these together with the country’s economic agenda and its focus on the engines of growth, in order to formulate holistic tax reform based on the above overarching goals.”
EY also sees a need for more engagement and consultation with stakeholders, particularly foreign investors and businesses.
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