Govt taking steps to address unsustainable tax model

 

PARLIAMENT | The current taxation model in the country is not sustainable and will eventually need to be phased out, said Deputy Finance Minister Ahmad Maslan.

As such, the government is already looking at taking steps to improve the country’s tax revenue, he said.

“This model is certainly not sustainable. Eventually, at some point, we cannot continue with this model of 11.5 percent tax revenue of the GDP.

“That’s why, among the steps the government is taking is that we want to launch targeted subsidies.

“Another thing is we want to broaden the tax revenue base, improve and review the tax structure and legislation, and give tax incentives,” Ahmad (above) said during the question-and-answer session in the Dewan Rakyat today.

He said targeted subsidies for electricity from this January to June have already been started.

The government also plans to implement targeted subsidies for diesel and the system is expected to be completed in the second quarter of this year.

He was responding to Johari Abdul Ghani (BN-Titiwangsa) who pointed out that Malaysia’s tax revenue percentage from GDP is very low compared to other countries and asked whether the current system is sustainable.

Titiwangsa MP Johari Abdul Ghani

Ahmad acknowledged that of the Organisation for Economic Cooperation and Development (OECD) countries, most of which are in Europe, get about 30 percent in tax revenue from their GDP.

The deputy minister had earlier listed out the percentage of tax revenue from the GDP of Malaysia from 2018 up to 2023, which was an average of 11.5 percent.

Besides the other steps he mentioned, Ahmad said there are already some previously announced initiatives that will help in this matter.

He pointed to the Fiscal Responsibility Act (FRA) which will be tabled this year.

“Among others (in the FRA), our debt cannot be more than 65 percent of our GDP and our debt service must be less than 15 percent of our revenue.

“Operating expenses must come from our revenue and cannot be financed from debt. Development expenditure is the only one that can be financed by debt and our external debt cannot exceed RM35 billion,” he said. - Mkini