Higher taxes are inevitable

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PRIOR to the presentation of Budget 2022, this column ran a series of three articles discussing issues as to whether we should be worried about debt, why debt dependency can be a ticking time bomb and measures the government can take to address our current low tax to gross domestic product (GDP) ratio. Well, Budget 2022 was presented last week, and in short, an opportunity was missed by not addressing the elephant in the room.

Instead, Budget 2022 was a record of sorts. It is now the biggest expansionary budget that Malaysia has ever seen with a total allocation of RM332.1bil which came with the largest allocation for gross development expenditure of RM75.6bil.

Going into the details of the budget itself, it shows Malaysia is expected to continue to run a budget deficit of RM98.8bil for this year and RM97.5bil for 2022, translating to a budget deficit to GDP of 6.5% and 6.0% respectively. This would also mean that Malaysia will be raising its overall federal government debt from RM879.7bil as at end of 2020 to as much as RM978.3bil this year and as much as RM1,075.8bil in 2022.

The table summarises Malaysia’s financial position based on data presented in the Fiscal Outlook 2022 report, with the exception of the federal government debt for 2021 level of RM978.3bil as that is based on the full year’s forecast and not based on the current level of RM958.4bil, which is the end-June 2021 figure.