2018 Malaysian Budget
Highlights & GST Updates
Moderator: Dr Veerinderjeet Singh
Panel Speakers:
• Datuk Noor Azian Abdul Hamid
• Dato’ Sri Subromaniam Tholasy
• Mr. MA Sivanesan
• Mr Saravana Kumar
Backdrop to the 2018 Budget
International
geopolitical uncertainty
Dependence on
unskilled foreign labour
Low innovation and
skills development
Stabilising global
crude oil prices
Slow pace of technology
adoption & automation
Fiscal discipline
Sovereign downgrade
and drop in rankingsCulture that resists change
and performance development
StrategiesPrimarily involving:
Invigorating investment
Developing the future generation
Prioritising the wellbeing of the People
Driving inclusive development
Fortifying the 4IR and digital economy
Enhancing efficiency and delivery of GLCs and public service
Basically consistent with previous Budgets
Budget Theme:
Inclusive economy
Wellbeing of the People
Towards National Transformation 2050
Budget OverviewKey Economic Indicators:
2018 (RM bil) 2017 (RM bil) 2016 (RM bil)
Revenue 239.9 225.3 212.4
Operating Expenditure 234.3 219.9 210.2
Net Development Expenditure 45.4 45.3 40.6
GDP Growth 5.0% - 5.5% 5.2% - 5.7% 4.2%
Deficit 2.8% 3.0% 3.1%
Source: Economic Report 2017/2018
Malaysia’s Budget Deficit
Year 2014 2015 2016 2017* 2018**
Deficit as % of GDP 3.4 3.2 3.1 3.0 2.8
Source: Economic Report 2016/ 2017
(2017* = Revised estimate, 2018** = Budget estimate, excluding 2018 Budget measures)
3.4%3.2% 3.1% 3.0%
2.8%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
2014 2015 2016 2017 2018
Defi
cit
as
perc
en
tag
e o
f G
DP
Year
The 2018 Federal Government Budget
Borrowings and
Use of
Government's
Assets
14.4%
Income Taxes
42.6%Non-Tax
Revenue
15.0%
Indirect Taxes
22.8%
Other Direct Taxes
3.0%Where it comes from
RM280.251
million
1 Includes revenue, borrowings and use of Government’s assets.
Source: Ministry of Finance, Malaysia
The 2018 Federal Government Budget
Emoluments
28.2%
Debt Service
Charges
11.0%
General
Administration
1.1%
Subsidies and
social assistance
9.5%
Other
Expenditure
11.2%
Economic
Services
9.2%
Social Services
4.3%
Security
1.8%
Supplies and
Services
12.0%
Retirement
charges
8.8%
Grants and
Transfer to State
Governments
2.9%
Where it goes
Source: Ministry of Finance, Malaysia
RM280.251
million
1 Excludes contingency reserves.
Federal Government Revenue2016
(RM million)
2017
(RM million)*
2018
(RM million)**
Income taxes 102,308 111,906 119,442
Other direct tax (RPGT / Stamp
duty)7,300 7,793 8,271
Export duties 980 1,222 1,400
Import duties 2,905 3,008 3,022
Excise duties 11,705 11,806 12,334
Sales tax and service tax 206 - -
Goods and services tax 41,206 41,500 43,800
Other indirect taxes 2,733 2,959 3,300
Non-tax revenue 43,078 45,143 48,291
TOTAL 212,421 225,337 239,860
Source: Ministry of Finance, Malaysia2017* = Revised estimate, 2018** = Budget estimate, excluding 2018 tax measures
Comparison of Corporate Tax Rate
– ASEAN countries
1718.5
20 20 20
24 24 25 25
30
0
5
10
15
20
25
30
35
Co
rpo
rate
Ta
x R
ate
(G
en
era
l)
(%)
ASEAN countries
Comparison of Top Corporate Tax Rates
1718.5
20 20 20
24 24 25 25
30
25
30
20
25 25
3028
35
0
5
10
15
20
25
30
35
40
To
p C
orp
ora
te T
ax R
ate
(%
)
Comparison of Top Personal Income
Tax Rates
0
2022
24 2528 30
32 3335.5 35 35
39.6
45 45 4548
52
0
10
20
30
40
50
60
To
p P
ers
on
al
Inc
om
e T
ax
Ra
te
(%)
2018 Budget Outlook
01Fiscal thrust
Reliance on direct tax revenueNo reduction in corporate taxesReduction in personal taxes
08Encourage growth in
manufacturing sector
Enhancing CA on automation equipment
02Increase disposable
incomeReduction of tax rate for middle income groupContinuation of BRIM handout
05Health
tourismTax exemption on export of health services
06Implementing of
Malaysia’s Digital Policy
CA on development of customisedsoftware (consultation fee, licensing fee, etc.)
04Empowering women who
return to workTax exemption on employment income
07Transfer
Pricing
Guidelines
updated in
stages in line
with BEPS
03Stimulate venture capital activities
Various tax benefits available
2018 Budget OutlookFiscal discipline
Reliance on GST but total revenue to increase by 6.4% over
2017.
Targeted growth 5 – 5.5% for 2018 despite economic
uncertainty and subdued growth across the global economy
Domestic demand and private investment are the key drivers
for 2017/2018
People centric Budget—certainly an election budget!
Pro-business strategies – focus on SMEs, etc
No new tax incentives
Personal tax rate reduction of 2% aimed at the M40 group but
all benefit
2018 Budget Outlook (cont’d)
Digital economy – only the DFTZ mentioned….
Compliance burden will be increased for all businesses with more
tax audits
Rumours on estate duty/inheritance tax,
Personal tax reliefs – no further consolidation or increases
Reiteration of Government’s commitment to OECD tax initiatives
such as the Base Erosion & Profit Shifting project
Usual allocation of funds for various initiatives – effectiveness in
managing the process?
Nothing substantive given the constraints
Challenges / Concerns
High Income
Nation by
2020 is
unlikely
Global
Competition
for FDI
Efficiency in
Tax CollectionMore tax audits
Oil Price
VolatilityImpact revenue
Inadequate
Governance
of Funds
Global
Economic
OutlookStill face downgrade
risks
Balanced
Budget by 2020
is unlikelyChallenge in
reducing fiscal deficit
Earnings
Stripping
Rule
Inadequate
Governance
of Funds
Review of the
Incentives
Regime neededSimplicity, certainty
& transparency
Holistic Review
of the Tax
System is
neededHigh income
/developed nation
status
Thank You
