KUALA LUMPUR: The World Bank has suggested the government look into a fiscal policy that strives towards raising revenue and enhancing spending efficiency.
In terms of revenue, the government may consider strategies that prioritise increasing the progressivity of the personal income tax framework, it said.
The World Bank said the government could look into removing exemptions from consumption taxes on non-essential items; expanding capital gains tax; exploring other forms of progressive taxes, including wealth taxes; maximising gains from tax expenditures; and enhancing revenue administration.
Its suggestions were contained in its latest edition of the “World Bank Malaysia Economic Monitor: Sowing the Seeds” which was launched on Thursday.
In its report, the World Bank expects Malaysia’s economy to grow by 6.7% next year after a projected contraction of 5.8% this year due to the impact of the Covid-19 pandemic
“As health risks diminish and economic recovery is underway, the policy focus will need to shift towards facilitating necessary economic adjustments to enable new growth in the post-pandemic environment.
“This implies that temporary fiscal support to preserve existing jobs and firms should be gradually phased out as conditions improve, while measures to incentivize job creation and investment in expanding sectors and facilitate upskilling and reskilling of workers could be expanded.
"As the recovery becomes more entrenched, fiscal policy should refocus on rebuilding buffers to counter future shocks and on sustaining public financing to ensure higher levels of inclusive, long term growth, ” it said.
In terms of expenditure, the world Bank said the government may focus on containing the rising costs of public wage bill and pensions; improving the targeting of social spending; phasing out generalised subsidies; and strengthening public investment project selection and management.
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