KUALA LUMPUR – Putrajaya is expecting a turnaround next year with higher revenue, citing improving economic growth and business prospects, but will not extract a higher dividend from national oil company Petroliam Nasional Bhd (Petronas).
The government is expected to net RM236.9 billion, or 15.1% of gross domestic product, said the Finance Ministry in its Fiscal Outlook and Federal Government Revenue Estimates 2021 today, marking a 4.2% increase from this year.
The higher revenue is largely attributed to better tax collection, which is estimated to increase by 13.8% to RM174.4 billion, and as a percentage of GDP, tax revenue will constitute 11.1%, and non-tax revenue, 4%.
Direct tax collection is forecast to increase by 14.6% to RM131.9 billion, constituting 55.7% of total revenue, with the corporate income tax being the main driver with RM64.6 billion, an 8.8% rebound.
“This is in tandem with improving economic activities and a higher earning expectation, coupled with continuous efforts by the Inland Revenue Board to enhance auditing and tax compliance.”
The petroleum income tax is expected to skyrocket by 52% on the assumption of improved demand and a slightly higher-than-average crude oil price assumption at US$42 per barrel.
Individual income tax collection is also expected to register higher at RM42.4 billion due to stable employment prospects and a sustained wage growth. Revenue from other direct tax, consisting of stamp duty, real property gains tax and other taxes, is expected to increase by 7% to RM8.8 billion.
Indirect taxes are expected to climb by 11.4% to RM42.5 billion, contributed mainly by higher sales and services tax (SST) collection. The ministry is forecasting an SST collection of RM27.9 billion, an increase of 13.7%, on the back of higher consumption spending.
Excise duties are estimated to expand by 3.1% to RM8.8 billion in tandem with higher demand for motor vehicles.
This is premised on Malaysia Automotive Association data showing that the total industry volume for vehicles will increase by 17% next year, following the introduction of new models and ongoing promotional campaigns by the automotive sector.
Export duty is expected to remain stable at RM900 million.
Meanwhile, non-tax revenue is projected to decline by 15.5% to RM62.5 billion in 2021, primarily due to lower proceeds from investment income, with dividends from Petronas and sovereign wealth fund Khazanah Nasional Bhd estimated at RM18 billion and RM1 billion, respectively, said the ministry.
This year, Khazanah and Petronas paid RM2 billion and RM34 billion, respectively.
But, the government is expected to continue receiving a special payment from Retirement Fund Inc, amounting to RM5 billion, to finance retirement charges.
A dividend payment will not be required from Bank Negara Malaysia in 2021. The central bank paid RM3.5 billion to the government this year.
For licences and permits, they are estimated to decrease by 3.8% to RM12.7 billion. But, petroleum royalty is forecast to reach RM4.3 billion, in consonance with the higher average for crude oil prices.
Likewise, collection from motor vehicle licences is anticipated to record RM3.1 billion, in line with the higher estimated vehicle registration.
However, petroleum-related revenue as a share of total revenue is forecast to decline further to 16% next year at RM37.8 billion, or 2.4% of GDP, compared with RM50 billion, or 3.5%, in 2020, while non-petroleum revenue is anticipated to rise by 12.3% to RM199.1 billion. – The Vibes, November 6, 2020
