Najib says government budget will be off target
(FMT) – Former prime minister Najib Razak says he is confident the government will miss its target of holding the budget deficit to 3% of the gross domestic product (GDP).
Speaking to FMT about his expectations for the 2020 national budget, Najib said the Pakatan Harapan (PH)-led government was still unable to fill the revenue gap caused by switching from the goods and services tax (GST) to the sales and services tax (SST).
The switch resulted in some RM21 billion less being collected every year.
“Even though the government has introduced a slew of new taxes, it is simply not enough,” he said.
The new taxes included a sugar tax on soft drinks; an airport departure levy; a 6% digital tax which comes into effect on Jan 1; and the indefinite extension of the real property gains tax.
Najib predicted that the Inland Revenue Board would now go after more individual taxpayers, including those who conduct small-scale online businesses from their homes, bloggers as well as internet personalities, in order to increase collections and meet a higher target. A greater number of tax audits could be expected, he said.
“To make matters worse, the government keeps borrowing money at an alarming rate despite having already taken RM82 billion from Petronas and selling numerous assets running into tens of millions.”
So, he said, he could not see how the government could achieve its target of a deficit amounting to 3% of GDP.
He said he expects Putrajaya to be again highly reliant on oil revenues, in view of the drop in tax collections.
“If we go back to relying too heavily on oil revenue, if there is a massive drop in oil prices, the government will struggle and when the government struggles, the people struggle.”
He said his administration had tried to lower Malaysia’s dependence on oil revenues, which was why the figure for this dropped from 48% to 12% between 2008 and 2017.
Last year, he also voiced concern that a greater reliance on Petronas money would affect the company’s credit ratings.
Earlier this year, international credit rating agency Moody’s downgraded Petronas, citing increased government dependency.
In 2020, Najib added, the government will likely be more reliant on dividends from government-linked investment companies which he said could affect the running of such entities, as well as the sale of more government assets.