SIMILAR to previous national budgets, observers predict that the 2024 Budget will be an expansionary one to help the federal administration achieve its target of eradicating extreme poverty by the end of the year.
Malaysia's economy is expected to grow between 5.0 per cent and 5.5 per cent annually for the remainder of the 12th Malaysia plan, with domestic demand as the key driver.
While the focus on attracting foreign investments is set to continue, developing domestic investments that have huge potential will be a priority.
The Malaysian government will be looking at enhancing SMEs (small and medium-sized enterprises) to generate growth and also to create more jobs.
The real estate industry is hoping that the government will include additional measures in 2024 Budget to assist developers, support homeowners, and strengthen the middle class, with a focus on housing affordability.
The reinstatement of the Home Ownership Campaign (HOC) is at the top of their wish list to assist prospective homebuyers and simultaneously encourage the sale of unsold properties in Malaysia's housing market.
The property industry has a significant multiplier effect on many industries which will have a spiraling effect on the overall economy.
Malaysia is expected to make subsidy cuts for the well-off and provide cash aid for the needy as part of its budget plan for 2024, prioritising support for low-income households amid a global slowdown and fiscal strains.
The government is expected to shift to targeted subsidies that will save at least RM4.73 billion to RM9.47 billion a year.
The outlay on subsidies has ballooned in recent years due to rising commodity prices. Malaysia expects to spend RM81 billion in subsidies this year.
It is quite unlikely that there would be tax cuts for individuals and companies in Budget 2024 with the tax rate for individuals maintained as it had already been amended in 2023 Budget.
Personal income tax collection in Malaysia is quite small, less than 10 per cent of the government budget.
The contribution by Petronas to the government coffers was greater than personal income taxes.
The T20 contributed about 85 per cent, with the M40 contributing 13 per cent and 2.0 per cent from other sources.
The T20 therefore pay the most amount of taxes because the income levels for the M40 and B40 groups are too low to tax.
The T20 also pay more through SST and other spending taxes, thereby contributing quite significantly when we combine the effective tax on T20 incomes and spending.
Therefore the call by certain quarters to raise taxes in 2024 Budget either through higher taxes on the rich or the introduction of capital gains tax (CGT) might seem unfair.
The rationale behind the introduction of CGT is of course to have a more equitable distribution of taxes as CGT will be imposed on the disposal of shares in unlisted companies, which would be typically owned by taxpayers that are better off.
With the introduction of CGT, this would provide some avenue for the government to somewhat reduce direct taxes and reduce the tax burden of the lower income group.
*The writer is managing partner at Harvey & Associates.
