Cut unnecessary spending in Budget 2019: UOB Research
PETALING JAYA: For Budget 2019, which will be tabled next month, UOB Research opined that it will be more productive for the government to trim unnecessary expenditure as opposed to introducing new taxes, which are deemed unpopular and likely to raise the cost of doing business at this juncture.
“The introduction of zero-based budgeting across the ministries and government could help yield savings of up to RM20 billion or 9% of total revenue. However, the savings are more likely to materialise over a few years given that certain components that the government spends on particularly supplies and services are quite rigid,” UOB Research’s senior economist Julia Goh said in a note today.
She expects the new government to stay the course of fiscal and debt consolidation, while the size of the budget deficit will depend on a large extent on the sales and services tax (SST) revenues collected, size of goods and services tax (GST) input tax credits, income tax and RPGT refunds are repaid, asset monetisation, higher oil revenues, and degree of cuts in operating expenditure.
She said the cash aid and fuel subsidies are likely to be reviewed to make them more targeted.
On the tax side, Goh does not foresee any adjustments in the corporate and individual income tax rates. She noted that the proposed inheritance tax and capital gains tax on share transactions should only be considered under a comprehensive tax reform programme, rather than as piecemeal stop-gap measures.
“New taxes such as soda or digital economy taxes are possible but we think bulk of efforts would focus on trimming unproductive spending.”
Given lingering risks on the global front and signs that the domestic economy is moderating, Goh expects the new government to announce measures to spur investments and growth. This includes initiatives to incentivise automation and modernisation, industry 4.0 and higher value-added segments. Areas of focus are likely to be affordable housing, automotive, transportation, tourism, e-commerce, and renewable energy.
Goh is projecting a higher fiscal deficit of 3% of GDP for 2019 from the estimated 2.8% for 2018, premised on the real GDP growth of 4.8% in 2018 and 2019.
“This year’s fiscal deficit is likely to meet the budgeted RM40.3 billion or -2.8% of GDP, given the cumulative fiscal shortfall at RM32.9 billion or 2.3% of GDP in Jan-Aug 2018.”
Source: TheSunDaily