IT will be a momentous moment for Tengku Datuk Seri Zafrul Abdul Aziz when he delivers the country’s Budget 2021 amid the most challenging of times.
The Finance Minister will have to balance the budget with reduced income, growing expenditure amid the Covid-19 pandemic and at the same time ensure there is more money in the rakyat’s pockets.
The budget is expected to cover four broad themes – caring for the people, steering the economy, sustainable living and enhancing public service delivery.Without doubt it will be another expansionary budget, albeit at a lower magnitude.
The budget allocation is forecast to be RM324bil.
This includes a gross development expenditure of RM60bil, 5.2% lower than the projected 2020 allocation of RM341.6bil, according to TA Research. This will lead to a fiscal deficit of 5.5% in 2021.
Revenue is expected at RM238.4bil in 2021,3.3% higher than 2020, supported by higher tax contributions from corporations and individuals but lower dividend payment from Petroliam Nasional Bhd at RM20bil from RM24bil each in the last two years because of lower oil prices.
The RM84.6bil deficit is expected to be financed through borrowings, which will raise the debt-to-GDP ratio closer to the self-imposed 60%, and disposal of assets, says TA.
To earn more, the plan is to expand the tax base via sales and service tax expansion, inheritance, capital gains or carbon tax, according to RHB Research.
A windfall tax on glove makers is being considered, so is gaining more from digital taxes.
Even number forecast operators’ draw replacement has been suggested, but vital to plug leakages across the entire government machinery to save cost.The shadow economy is thriving and measures may be introduced to de-incentivise it and address revenue leakages.
What Tengku Zafrul needs to be mindful of is that cash payouts must not be stopped and only meant for the deserving rakyat, jobs be created, and tax payers – especially the middle income earners – not be overly burdened.
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