Malaysia’s taxation model is unsustainable, says Deputy Finance Minister

Photo: Bernama

KUALA LUMPUR: Malaysia’s taxation model isn’t sustainable because its revenue is lower compared to other developed countries, the Dewan Rakyat was told.

Deputy Finance Minister Datuk Seri Ahmad Maslan said that Malaysia’s tax revenue is 11.5 percent to the country’s gross domestic product (GDP).

Ahmad said that the US tax revenue was 25.5 percent of its GDP, Japan was 31.4% of its GDP and the UK's tax revenue was 32.8 percent of its GDP.

Ahmad also said 38 countries under the Organisation for Economic Cooperation and Development (OECD), which is mostly in Europe, had tax revenues of more than 30 percent to its respective GDP.

“We are 11.5 percent and I agree with Titiwangsa MP (Datuk Seri Johari Abdul Ghani) that our model is not sustainable.

“It will come to a time where we can no longer continue with the (present) taxation model,” said Ahmad during Question Time in Parliament on Thursday (March 30).

Ahmad was responding to Johari, who earlier interjected and asked if Malaysia’s taxation model was sustainable.

Johari said many countries in the Asean region have higher tax revenues compared to Malaysia.

“Thailand had 14.1 percent (of tax revenue) to its GDP, the Philippines was 14 percent to the GDP, Singapore was 13 percent and Vietnam was 22.7 percent,” said Johari.

“Taking into account annual interest rates (of debts) and huge subsidies, I’m afraid that if we do not look into this model, the country’s debt will increase in future,” added Johari

Meanwhile, Ahmad said that among measures by Putrajaya to address the matter was the implementation of targeted subsidies on electricity this year, which saved about RM4bil for the government.

“Besides that, we will implement targeted subsidies for diesel and we will finalise the system by the second quarter of the year,” said Ahmad.

Ahmad also said the government plans to introduce the Fiscal Responsibility Act (FRA), which is set to stipulate that the country’s debt cannot be more than 65 percent of the GDP, debt servicing ratios must be less than 15 percent of the revenue, and among others.

“So these are among the matters under the FRA that we will table this year,” added Ahmad.