THE government is tapping into Petroliam Nasional Bhd’s (Petronas) reserves to pay off some of its outstanding tax refunds amounting to RM37bil.
The move is expected to spur economic growth from the improvement in the cash flow of businesses and households.
According to the new government’s inaugaural publication – Fiscal Outlook and Government Revenue Estimates – Petronas will pay RM30bil in special dividends to the federal government next year.
The special dividend, it said, would be a one-off payment from Petronas and is to be utilised to pay the outstanding tax refund to improve the cash flow of businesses and households, thus helping to stimulate economic activities.
The outstanding tax refund is estimated at about RM37bil, of which RM18bil is for income tax while RM19bil is for the goods and services tax (GST).
The source to fund the special dividend will be from the accumulated retained earnings of Petronas.
The government has assured that the usage of the earnings would not affect the funding of Petronas’ investment activities, as the funds for the activities have been accounted for in its capital expenditure plan.
In total, Petronas is expected to pay out RM54bil in dividends to the government in 2019, which would boost the government’s non-tax revenue in 2019 significantly.
Additionally, the collection from licences and permits is to increase 6% to RM15.6bil in 2019, driven by higher petroleum royalty, motor vehicle licences and levy for foreign workers.
The government expected the petroleum royalty to be at RM5.6bil based on a modest assumption of crude oil prices.
The report pointed out that the government’s non-tax revenue is estimated to surge 38.8% to RM85.7bil next year compared with RM61.8bil in 2018.
In the medium term of between 2019 and 2021, non-petroleum revenue is expected to remain the largest revenue source for the government, representing 76%, while petroleum-related revenue will contribute the remaining 24%.
Crude oil price was expected to range between US$60 and US$70 per barrel. Based on the crude oil assumption, the government estimates its tax revenue to grow 0.8% to RM176.15bil in 2019, mainly contributed by higher collection from the PITA (petroleum income tax) of RM18.1bil compared to RM16.8bil estimated in 2018.
Overall for 2019, the federal government revenue, including the special dividend by Petronas, is forecast at RM261.8bil, which is 10.7% higher than this year’s estimated revenue of RM236.5bil.
This is despite the three-month tax holiday from the abolition of the GST, which has resulted in a revenue shortfall of about RM21bil.