The government has provided clarification regarding the reporting method for High Impact and People’s Well-being Projects in the Federal Budget Estimate book.
Finance Minister II Datuk Seri Amir Hamzah Azizan, in the winding up speech on the Supplementary Supply Bill (2023) today (Mar 20) in the Dewan Rakyat, said the reporting method in the Budget Estimate book focuses solely on expenses and allocations for new and projects presently under taken.
Projects that have been completed without allocations in the budget year are no longer reported. As a result, the RM500 million project cost listed under detail 09200 in 2023 represents a one-off project for that year, with associated costs no longer reported in the 2024 Budget Estimate book.
This comes as a response to recent observations made regarding project details and budget allocations.
The minister said additionally, the government highlighted that the RM100 million project cost and allocation for detail 09200 in the 2024 Budget Estimate book signify new projects slated for 2024. The main objective of these projects is to address immediate needs and ensure timely completion within the current year.
Projects falling under this category include small-scale initiatives aimed at benefiting small contractors (G1 to G4) for maintenance, repairs, and upgrades. These projects encompass various areas such as streetlights, federal roads, low-cost public housing, community areas, and aging government quarters facilities requiring urgent attention.
The government aims to maintain transparency and accountability in reporting methods while ensuring that high-impact projects aimed at enhancing people’s well-being are efficiently implemented and completed within the designated timelines.
National Debt
The Government has inherited a high level of debt and liability which has now reached 1.5 trillion ringgit which represents more than 80% of Malaysia’s GDP.
In addition, the national tax base in 2022 is at 11.7 per cent of GDP, which is one of the lowest in the region.
Amir Hamzah said in managing the nation’s fiscal responsibly, the Government needs to expand the tax base as well as optimise spending, especially reducing leakages.
One of the leakages are in the form of bulk subsidy (blanket subsidy) to benefit people in need. The Government’s approach is to target subsidies so as to reduce leakage but at the same time, reduce the impact on the vulnerable.
For example, for electricity rate subsidies, in 2022, when subsidies are given in bulk, almost half of the electricity subsidies benefit the 10 percent of the largest commercial and domestic users. With that, in 2023, the Government retargets subsidies by reducing subsidies for the largest commercial and domestic users by achieving savings of over 4 billion ringgit but with tariffs maintained for 85 percent of users.
The government will continue to take a subsidy targeting approach in the future to further reduce the leakage of subsidy expenditure and help the people in need, he said.
Taxation
Although there are queries over the issue of taxation, even though this has nothing to do with the Supplementary Bill, Amir Hamzah said, the government continues to examine taxation carefully to ensure that the people are not burdened and at the same time have the fiscal space to remain sustainable.
The approach taken by the MADANI Government in considering the issue of national taxation is progressive in nature including the improvements made in the Service Tax.
The increase in the rate of Service Tax from 6 per cent to 8 per cent with effect from 1 March 2024 focuses more on activities related to discretionary services and activities between businesses that do not directly involve the people.
At the same time, the Government has also given various exemptions for the logistic sector
In implementing fiscal reforms, the Government takes a progressive approach in the context of targeted subsidies and taxation.
The government has not planned to implement GST yet because it is a broad-based consumption tax and therefore, it is not the right time to reintroduce it considering that some people, especially those with low incomes, are facing cost of living challenges.
The government will continue to prioritise improving the existing tax system and introducing taxation that does not affect the vulnerable before assessing the need to introduce new consumption taxes such as GST, Amir Hamzah added.
