by BERNAMA / graphic by MZUKRI MOHAMAD
BUDGET 2022 is expected to be a combination of a pro-growth and inclusive agenda to ensure a sustainable economic recovery from the Covid-19 crisis, said CGS-CIMB Securities Sdn Bhd.
In a note today, it said the budget will focus on three objectives — protecting and driving the recovery of lives and livelihoods, rebuilding national resilience and catalysing reforms.
It said targeted fiscal support would be extended to protect vulnerable segments of society and businesses in sectors worst hit by the pandemic, such as tourism and retail.
Fiscal spending would also be directed to strengthening the public health system, continuing the development of physical infrastructure and enhancing digital and technological infrastructure, implying that development expenditure would likely remain sizeable next year.
“That said, we expect high vaccination rates, economic re-opening and targeted fiscal measures to mark the start of fiscal consolidation in 2022,” it said in a note today.
Given the need to sustain the economic recovery, there has been no indication of a major tax overhaul, such as the introduction of the Goods and Service Tax (GST).
“We think the first hints of a GST plan may surface in a comprehensive report on Medium-Term Revenue Strategies, which is targeted to be published in 2022,” said CGS-CIMB.
It said the government is looking to enhance tax revenue collection through increased tax compliance.
Measures under consideration include the implementation of a Special Voluntary Disclosure Programme for indirect taxes administered by the Customs Department, the introduction of a Tax Compliance Certificate as a pre-condition for tenderers to participate in government procurement, and implementation of the Tax Identification Number, as well as reviewing tax treatment to address revenue leakages.
Yesterday, the Ministry of Finance (MoF) issued its maiden Pre-Budget Statement, providing an update on the nation’s fiscal performance in 2021 and a preliminary view of the direction for Budget 2022 that is scheduled to be tabled in the Parliament on Oct 29, 2021.
For 2021, the MoF estimated the fiscal deficit to increase to 6.5-7.0% of the GDP, versus an initial target of 5.4%, led by tax revenue shortfall, continued fiscal support and a weaker-than-expected economic rebound due to the implementation of Movement Control Order.
The estimated target for tax revenue is RM162.1 billion — 12.3% lower than the initial target of RM174.4 billion.
Meanwhile, the direct fiscal injection under the four fiscal stimulus packages announced this year (Permai, Pemerkasa, Pemerkasa+, Pemulih) translates into increased Covid-19 funds of RM27 billion against RM17 billion previously.
The allocation for operating expenditure is reduced by 7.1% to RM219.6 billion, while development expenditure remains relatively steady at RM68.2 billion.