MALAYSIA needs to address issues related to fiscal management urgently, especially in the area of tax revenue leakages to ensure sustainable economic growth and avert debt dependency.
Such is the view of think tank Datametrics Research and Information Sdn Bhd (DARE) managing director Pankaj Kumar on the backdrop of the Malaysian Government having raised its statutory debt ceiling to 65% of gross domestic product to fund the record RM332.1 bil Budget 2022 allocation.
“This ceiling is expected to be sustained in the future given the Government’s projected RM400 bil development expenditure for the 12th Malaysia Plan (12MP) to take the national economy to the next level.” Pankaj pointed out in a statement.
“While Government spending of this scale and breadth is both necessary and timely in view of the devastation brought about by the COVID-19 pandemic, we cannot afford to be perpetually dependent on funding growth by going deeper into debt.”
According to Pankaj, it is now more critical than ever for the Government to watch its spending wisely while plugging unnecessary revenue leakages such as the RM300 bil shadow economy that cost the Government at least RM33 bil annually in the form of uncollected taxes.
“Last year’s Budget 2021 announced bold measures to curtail the illicit tobacco trade which cost the Government RM5 bil in uncollected tax losses a year. Laws curtailing transhipment and banning the use of small boats to export or import tobacco products have worked to bring down the level of illicit cigarettes for the first time since 2015,” he noted.
“While Budget 2022 did not disclose any specific initiatives to curtail the shadow economy, a stay on sin tax excise is a clever decision to ensure criminal syndicates are not inadvertently incentivised.”
As borders are relaxed and inter-state travel is allowed once again, Pankaj further reminded the Government through its law enforcement agencies to be more vigilant in containing black market trade like illicit tobacco smuggling which are expected to increase further due to the income crunch faced by many households.
DARE’s ‘Winning the War on Tobacco Black Market’ report published in October 2021 highlighted the need to tackle the entry of contrabands at various landing points of Malaysia’s coastal lines. Doing so requires concerted efforts from enforcement agencies like the customs and navy, among others.
The report also recommends taking steps to address corrupt practices that have limited Malaysia’s ability to remain competitive. “With this, it will not only help improve the country’s international standing but also tackle illicit trade in the market,” Pankaj concluded. – Nov 5, 2021
