by NURUL SUHAIDI / pic TMR FILE

INDUSTRY players welcomed the Budget 2024 approach in reducing the fiscal deficit of the country, viewing it as a positive stride towards strengthening the nation’s financial health.

President of the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) Tan Sri Datuk Low Kian Chuan (picture) commended the government’s commitment to fiscal consolidation and economic growth. He also praised the investment-enabling measures, facilitation funds, and outcome-driven fiscal incentives.

“The 2024 Budget’s measures and initiatives focus on strengthening macroeconomic resilience, driving DDI and FDI investments in emerging sectors,” he said in a response to the Budget announcement.

Prime Minister cum Minister of Finance Datuk Seri Anwar Ibrahim yesterday announced the government’s ambition to achieve a fiscal deficit of 3%. The projected 2024 fiscal deficit of 4.3% marks a significant decrease from the current year’s target of 5% and 2022’s 5.6%.

These sectors include E&E, aerospace, chemicals, technology, talent development, food security, clean energy, infrastructure, SMEs, and tourism.

In the pursuit of fiscal consolidation, the government addressed fuel subsidies, introduced luxury taxes, and expanded service tax scope and rate.

Low said ACCCIM supports targeted subsidies, emphasising the need for clear processes and the completion of the centralised data hub (PADU) by January 2024.

However, he cautioned against complete subsidy removal, citing potential short-term inflationary effects.

“Subsidies may be popular, but they have drawbacks such as encouraging over consumption, strain public finances and encourage smuggling and black market dealings).  Hence it supports better targeted and better alternatives for  protecting the low-income households.

“The chamber believes a complete removal of subsidies will have inflationary effects in the  short-term, therefore a well-targeted and adequately social safety nets will be needed to  cushion the impact of price increases on the vulnerable group,” he said.

ACCCIM also advocates for the reintroduction of the Goods and Services Tax (GST) at an appropriate time, aiming to enhance governance and efficiency in public spending and address the high pension bill.

Regarding the implementation of capital gains tax (CGT) on non-listed companies, Low urged caution, emphasising that measures applied elsewhere may not directly apply to Malaysia’s economic and capital market context.

He expressed concerns about potential impacts on entrepreneurship, private equity, and corporate M&A activities.

Meanwhile Professor in the Department of Economics at Universiti Malaya Dr. Goh Lim Thye, viewed the 2% increase in SST as crucial for boosting government revenue.

He believes this adjustment is vital for economic stability, foreseeing positive impacts on the tax-to-GDP ratio and fiscal capacity but advises vigilant monitoring of potential inflationary pressures and advocates for a targeted approach to minimise adverse effects on vulnerable segments of the population.

Overall, Goh sees Budget 2024 as a promising prospect, projecting robust economic growth and improved revenue collection.

“While some may be concerned about its impact on inflation, this adjustment is vital for the country’s economic stability.

“The additional tax revenue generated by this increase will not only enhance the tax-to-GDP ratio but also strengthen the nation’s fiscal capacity. This, in turn, will enable the country to better withstand external economic shocks, ultimately ensuring a more robust and resilient financial future,” he told TMR.

For the Director of Economic Studies Programme at the Jeffrey Cheah Institute on Southeast Asia,Prof Yeah Kim Leng, the centrepiece of Budget 2024 are fuel subsidy rationalisation and enhanced social protection.

He noted that this approach allows the government to avoid imposing painful tax measures while strengthening both fiscal and household income positions.

“The budget embodies the government’s gradual fiscal consolidation approach whereby through the shift from blanket to targeted subsidies it is able to avoid the imposition of painful tax measures that typically characterised fiscal retrenchment exercises,” he said.

“By removing subsidies from those who can afford to pay higher fuel prices, and using the subsidy savings to provide cash aids to the bottom 60 % of the population, both the country’s fiscal and household income positions are strengthened,” he added.

Yeah also noted that the fuel subsidy rationalisation also brings long term benefits such as lower carbon footprint, cleaner environment, quicker transition to renewable energy, higher energy efficiencies, among others.

The Budget 2024 allocates a record-breaking RM393.8 billion, with RM303.8 billion for operating expenses, RM90 billion for development spending, and RM2 billion in external savings.