The government is expected to announce major fiscal policy changes that may include the goods and services tax (GST) in the upcoming October budget to trim widening fiscal deficit that has hit RM14.9 billion.
Ministry of Finance secretary general Tan Sri Mohd Irwan Serigar Abdullah said a slew of fiscal reforms are being discussed to bolster the country’s monetary position.
“I am not ruling out (the GST), it is in the pipeline. But let us wait for the budget. It is a whole package for everybody,” Mohd Irwan told The Malaysian Reserve in an interview at his office in Putrajaya yesterday.
The GST, which was supposed to be implemented in 2011, is said to have far-reaching implications for businesses.
Economists see the GST as one of the most crucial methods to enlarge the government’s coffers but the idea, first mooted in 2009 and tabled in Parliament, has been repeatedly put off.
If implemented in the upcoming budget, the GST will replace the current sales and service taxes in the country. Up till now, there are about 146 countries which have imposed the GST. It is seen as a more efficient form of tax.
Separately, Second Finance Minister Datuk Seri Ahmad Husni Mohamad Hanadzlah said yesterday the government’s fiscal committee would meet next week to discuss ways to strengthen Malaysia’s financial position.
A Bernama report quoted the minister as saying the meeting would table for approval various initiatives and available options to ensure Malaysia’s economy would be strong and sustainable.
Ahmad Husni said Prime Minister Datuk Seri Mohd Najib Razak will announce the outcome of the meeting.
In an interview with The Malaysian Reserve, Mohd Irwan said the fiscal policy committee is exploring issues ranging from subsidy rationalisation, enhancement of revenue, prudent government spending, public procurement to open tender procedures.
“These are some measures that are in the pipeline. The prime minister will announce them in the coming days or in the budget,” he added. Najib, who is also the finance minister, is heading the special committee.
“We will do a lot of fiscal reforms to reduce the fiscal deficit and reduce our debt position to maintain it below 55% to gross domestic product (GDP) debt level, reduce fiscal deficit to 3% by 2015 and to go for a balanced budget by 2020. These are our biggest challenges,” added Irwan.
Ballooning fiscal deficit that touched 6% of the GDP in the first-quarter of 2013 (1Q13), dwindling current account surplus to RM2.6 billion in 2Q this year and government spending rising 9.8% to RM58.4 billion in the 1Q13, is bothering policymakers.
The fiscal condition is further compounded by weakening regional stock markets and currencies, as emerging economies faced sudden capital outflow last week.
Foreign investors started to abandon emerging markets and channelled their funds back to the US, as growth in the world’s largest economy showed signs of recovery. The ringgit was hovering at 3.32 to the US dollar yesterday.
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