Fiscal Outlook 2021: Higher revenue as economy improves

Expectations of better performance by companies will see income tax – a major contributor to direct tax and total revenue – to rebound by 8.8% to RM64.6bil, according to the report.

KUALA LUMPUR: Federal Government revenue is expected to increase by 4.2% to RM236.9bil or 15.1% of GDP in 2021 underpinned by improving economic growth and business prospects.

According to the Fiscal Outlook report, the government expects tax revenue to increase by 13.8% to RM174.4bil due to higher direct tax and indirect tax collections.

Tax revenue constitutes 11.1% and non-tax revenue 4%, as percentage of GDP.

Income taxes from companies, petroleum and individuals are expected to increase and this would see direct tax collection increase by 14.6% to RM131.9bil or 55.7% to total revenue.

Expectations of better performance by companies will see income tax – a major contributor to direct tax and total revenue – to rebound by 8.8% to RM64.6bil, according to the report.

The government expects an improvement in earnings from companies to help increase collection while the Inland Revenue Board enhances auditing and tax compliance.

Petroleum Income Tax (PITA) is expected to rebound by 52% due to improved demand and slightly higher average crude oil assumption of US$42 per barrel.

Stable employment prospect and sustained wage growth are expected to push individual income tax collection higher at RM42.4bil.

Revenue from other direct tax consisting of stamp duty, RPGT and other taxes is expected to increase by 7% to RM8.8bil.

Indirect tax collection is expected to rebound by 11.4% to RM42.5bil. This will mainly be due to higher SST collection for 2021. The government expects it to increase by 13.7% to 27.9bil due to higher consumer spending.

An increased in demand for vehicles should see excise duties increase by 3.1% to RM8.8bil.

It said export duty to remain stable at RM900mil.

However, non-tax revenue is expected to decline by 15.5% to RM62.5bil in 2021 mainly due to lower proceeds from investment income. Dividends from Petronas and Khazanah are estimated to be RM18bil and RM1bil.

The government will continue to receive special payment of RM5bil from KWAP to partly finance retirement charges.

Collection from licences and permits is estimates to decline by 3.8% to RM12.7bil.

Petroleum royalty forecast to reach RM4.3bil due to higher average crude oil prices.

Petroleum-related revenue to decline to RM37.8bil or 2.4% of GDP compared with RM50bil or 3.5% in 2020.

As for non-petroleum revenue, it is expected to increase by 12.3% to RM199.1bil.