2017 Malaysian Budget Highlights & GST Updates

Transcription

1 2017 Malaysian Budget Highlights & GST Updates Panelists: Dr. Veerinderjeet Singh Dato Noor Azian Abdul Hamid MA Sivanesan Dato Sri Khazali Haji Ahmad S. Saravana Kumar

2 Backdrop to 2017 Budget Global economic uncertainty Subdued oil prices Concern about sovereign downgrade Drop in rankings for global competitiveness High dependence on unskilled foreign labour Slow pace of industrial deepening, technology adoption and automation Low innovation and skills development Culture that resists change and performance development Need for fiscal discipline

3 Strategies Five strategies: Rakyat first Accelerating economic growth Empowering human capital Strengthening inclusive development Improving public service delivery Basically consistent with previous Budgets Budget Theme: Unity Economic growth Prudent spending Wellbeing of the People

4 Key Economic Indicators: Budget Overview 2017 (RM bil) 2016 (RM bil) 2015 (RM bil) Revenue Operating Expenditure Net Development Expenditure GDP Growth 4.0% - 5.0% 4.0% - 4.5% 5.0% Deficit % 3.2% Source: Economic Report 2016/2017

5 Deficit as percentage of GDP Malaysia s Budget Deficit 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 3.8% 3.4% 3.2% 3.1% 3.0% Year Year * 2017** Deficit as % of GDP Source: Economic Report 2016/ 2017 (2016* = Revised estimate, 2017** = Budget estimate, excluding 2017 Budget measures)

6 The 2017 Federal Government Budget Indirect Taxes 22.9% Other Direct Taxes 3.2% Where it comes from RM260,800 1 million Borrowings and Use of Government's Assets 15.8% Non-Tax Revenue 15.0% Income Taxes 43.1% 1 Includes revenue, borrowings and use of Government s assets. Source: Ministry of Finance, Malaysia

7 The 2017 Federal Government Budget Supplies and Services 12.3% Security 2.0% Retirement charges 8.3% Where it goes RM260,800 1 million Grants and Transfer to State Governments 3.1% Emoluments 29.7% Social Services 4.7% Economic Services 9.9% 1 Excludes contingency reserves. Other Expenditure 9.3% Source: Ministry of Finance, Malaysia Subsidies and social assistance 8.6% General Administration 1.0% Debt Service Charges 11.1%

8 Federal Government Revenue 2015 (RM million) 2016 (RM million)* 2017 (RM million)** Income taxes 103, , ,373 Other direct tax (RPGT / Stamp duty) 7,785 8,062 8,366 Export duties 1, Import duties 2,732 2,736 3,008 Excise duties 11,890 11,801 13,111 Sales tax and service tax 8, Goods and services tax 27,012 38,500 40,000 Other indirect taxes 2,736 2,605 2,991 Non-tax revenue 53,649 45,494 39,146 TOTAL 219, , ,726 Source: Ministry of Finance, Malaysia 2016* = Revised estimate, 2017** = Budget estimate, excluding 2017 tax measures

9 RM billion Petroleum Revenue in Malaysia Year Year * 2017** RM billion Source: Economic Report 2016/2017 (2016* = Revised estimate, 2017** = Budget estimate, excluding 2017 Budget measures)

10 Corporate Tax Rate (General) (%) Comparison of Corporate Tax Rate ASEAN countries ASEAN countries

11 Top Corporate Tax Rate (%) Comparison of Top Corporate Tax Rates

12 Comparison of Top Personal Income Tax Rates Top Personal Income Tax Rate 60 (%)

13 2017 Budget Outlook Fiscal discipline Reliance on GST but direct tax revenue to increase by RM10billion Targeted growth 4-5% for 2017 despite economic uncertainty and subdued growth across the global economy Domestic demand and private investment are the key drivers for 2017 Pragmatic and People centric Budget Always a pre-election Budget.. Pro-business strategies focus on SMEs Tiered corporate tax rate reduction scheme innovative measure to incentivise but.. Amending the Income Tax Act to nullify Court decisions and strengthening tax administrative provisions Transfer pricing rules to be amended country-by-country reporting

14 2017 Budget Outlook (cont d) Digital economy widen definitions of public entertainer and royalty to include online/digital activities Widen the income tax base for withholding tax on technical services cost of business to increase New Collection Intelligence Arrangement to centralise tax collection and compliance underground economy? Compliance burden will be increased for all businesses with more tax audits Power of DG of Customs to install a device to provide information on GST Rumours on estate duty, widening of capital gains tax and a tax on luxury goods Personal tax reliefs consolidate but. Usual allocation of funds for various initiatives effectiveness in managing the process? Nothing substantive given the constraints

15 Challenges/ Concerns Global economic outlook remains challenging Oil price volatility affecting government s revenue Rising global competition for FDI There is a need to review the incentive regime simplicity, certainty and transparency Need for a holistic review of the entire tax system to prepare for high income/ developed nation status Push for innovation / creativity in the context of the vision of a knowledge economy and developed nation status hampered by weaknesses in the education sector On-going challenge of reducing the nation s fiscal deficit balanced budget by 2020 looks unlikely!! Groups having international operations need to be aware of the OECD s Base Erosion & Profit Shifting package continue to have an impact

16 Thank You