A ‘responsible Budget’ is needed

 

All set: Anwar putting away the Budget 2023 documents in a bag with a Sarawak songket motif. With him are the two Deputy Finance Ministers – Datuk Seri Ahmad Maslan (right) and Steven Sim Chee Keong (second from left). Anwar will table the revised budget in Parliament at 4pm today. — Bernama

PETALING JAYA: The market has a long wish list ranging from tax cuts to economic reforms, assistance for vulnerable Malaysians and incentives for businesses.

There are also calls for increased assistance for the middle 40% (M40) group and small and medium enterprises (SMEs).

But, with a towering debt and liabilities of almost RM1.5 trillion, economists say the government led by Datuk Seri Anwar Ibrahim will have a tough time meeting these expectations.

Beyond dishing out “goodies”, Budget 2023 should be a “responsible and sensible” budget, said Socio Economic Research Centre executive director Lee Heng Guie.

“It should focus on coping with cost of living pressures, increasing income and employment opportunities as well as reskilling and upskilling of manpower.

“It should play a role in enhancing the domestic investment climate, driving greater adoption of environmental, social, and governance standards, as well as increasing digitalisation and automation,” he told The Star.

Budget 2023, which will be tabled today, is expected to incorporate significant changes compared with the version tabled by the previous government last October.

Economist Prof Geoffrey Williams said the budget should have a clearer idea of priorities to reduce leakages in government spending.

“We expect a lower deficit ratio and less borrowing, perhaps with lower development spending based on savings from procurement improvements such as the review of infrastructure projects,” he said.

Prof Williams, an economics professor at the Malaysia University of Science and Technology, also expects the budget to focus on improving the efficiency of tax collection and broadening the revenue base.

“We don’t expect major tax changes and, of course, no goods and services tax, but there may be some minor tax changes ahead of a full review of the tax system,” he said.

“We hope that the budget will provide a firmer footing for fiscal policy and a clear set of priorities for the structural reform agenda.”

Bank Islam Malaysia Bhd chief economist Firdaos Rosli also discounted the possibility of major tax changes, such as tax cuts.

However, to help businesses keep their heads above water, he urged the government to find ways to keep the cost of production low amid the prolonged supply-side constraints.

“I think Budget 2023 will still be expansionary, with the overall allocation being comparable to what was announced in October 2022.

“After all, the budget is a short-term fiscal plan; thus, the differences may be insignificant as the overall five-year allocation is set by the previous administration under the 12th Malaysia Plan (12MP).

“The bigger fiscal plan may come later when the government unveils its 12MP mid-term review in the third quarter of 2023,” he said.

Firdaos said the budget should include strategies to keep the economic growth momentum reasonably stable this year, following the higher-than-expected 8.7% growth in 2022.

Prof Williams said there would be less emphasis on ad hoc project-based schemes for specific interest groups, but there would be greater emphasis on providing a firmer basis for fiscal policy in terms of spending and revenue.

“On spending, there will be some emphasis on the cost of living issue, alternatives to the Employees Provident Fund withdrawals, and subsidy rationalisation,” he said.

He said there should be reforms for the SMEs to improve the ease of doing business, rather than just dishing out cash handouts.

Centre for Market Education chief executive officer Carmelo Ferlito said the rakyat should scale down their expectations.

He also said the budget is not a “miraculous tool”.

He is, however, hoping that the tax cuts introduced in the previous budget would be retained.

Under the tax cuts, those with chargeable tax income of between RM50,001 and RM70,000 will see their tax rate reduced from 13% to 11%, and those in the RM70,001 to RM100,000 bracket will have their tax rate reduced from 21% to 19%.

“I also hope to see a rationalisation strategy on government expenditure, which was badly lacking in the previously tabled budget,” he added. - Star