THE government may introduce a windfall tax on economic sectors which have reaped huge profits during the COVID-19 pandemic, under Budget 2021.
Maybank Kim Eng said a windfall tax was not unusual as there was a precedent during the Asian Financial Crisis in 1998.
“Budget 2021’s wildcard is a windfall tax on glove manufacturers. The government imposed the Windfall Levy Act 1998 during the recession on the plantation sector,” noted the research house in its Budget 2021 preview.
“It was also applied on the energy sector in 2008, particularly the independent power producers,” it said.
Finance Minister Datuk Seri Tengku Zafrul Aziz is scheduled to table Budget 2021 on Friday. Experts have said the budget will include measures to revive the economy that was ravaged by COVID-19.
To date, the government had announced six stimulus packages, amounting to over RM300 bil to keep the nation going while doing its best to keep the pandemic in check.
In general, Maybank Kim Eng said Budget 2021 would be an expansive budget, targeted on increasing spending on welfare and protecting social safety net, especially of those who are disadvantaged.
“The government may review the monthly welfare aid between RM200 and RM300, as well as COVID-19 related expenses, including the purchase of vaccines,” it said.
The research house added the government may include measures to spur domestic consumption, such as sales tax exemption for cars, more e-wallet credits and build more affordable homes.
“Budget 2021 may also include measures to protect food security and relocating foreign direct investments (FDI) to tap opportunities from supply chain security and resilience.
“The targeted FDI approach may include automation and digitalisation, in an effort to adapt to the new normal and boost productivity,” it said.
Welfare, infrastructure projects to get a boost
Maybank Kim Eng further expects Budget 2021 to have allocation for green technology to support sustainable economic growth and development.
In addition, the government may also speed up major infrastructure projects such as the East Coast Rail Line (ECRL) and the KVMRT 2 Line in Klang Valley.
“The government may also confirm other infrastructure projects such as the Penang Transport Master Plan, the Johor Bahru-Singapore Rapid Transit System and Putrajaya LRT/Monorail link,” it said.
The research house opined the Government may also provide substantial allocation to boost digital infrastructure.
“We are looking at the National Digital Network Plan (Jendela), spanning from 2021-2025, which will prepare us to transition to 5G connectivity,” it said.
However, it expects Budget 2021 to record a deficit of 6% of the gross domestic product or RM90 bil.” – Nov 2, 2020
