In less than three months, we will welcome 2022. This will be the third year that Malaysia has been dealing with the Covid-19 pandemic. Although the effects of the pandemic are still being discussed extensively, one thing is certain: Malaysia’s economy has suffered a substantial downturn due to it.

Many people look forward to Budget 2022 being presented as we approach the end of the year. They hope that significant policy changes will be announced by the government that will address the economic problems facing the country.

The Ministry of Finance (MoF), in an effort to improve transparency prior to the impending budget, has published a Pre-budget Statement.

MoF stated in the Pre Budget Statement that Budget 2022 would be based on three core tenets.

Your financial parachutes

Because we always have a reserve chute and a parachute, we enjoy skydiving. It’s our favorite experience! The moment you lose your parachut, the once-happy feeling of freefalling through air becomes a frightening suicide jump.

Skydiving requires two parachutes. This badass jumped 25,000ft without one. Legend has it that he was able to fall so quickly to the ground because he had steel balls.

You will also need two parachutes if you plan to invest. Why? Because the stock market is unpredictable and volatile, particularly in the short-term. Parachutes will be there if the stock market plunges into freefall so that you are not forced out of your stocks in the worst case scenario.

Which parachutes should you use?

  • Rakyat’s Wellbeing
  • Business Continuity
  • Economic resilience

MoF Pre-Budget statement also stated that this budget would be the largest ever, at RM322.5billion. This demonstrates government’s commitment in safeguarding the Rakyat as well as business continuity in the face the pandemic.

MoF published four papers for public consultation in addition to the Pre-Budget Statement. These papers were created to get public feedback on four major issues.

Is GST making a comeback?

In the 12th Malaysia Plan (12MP) debate, former prime minister Datuk Seri Najib Razak demanded the return of Goods and Service Tax (GST). This was the service tax that was first introduced under his administration but was then repealed by the Pakatan Harapan government.

Najib, in his defense of GST, stated that it would allow Malaysia to reduce income inequality and attract foreign investment. It also strengthens the government’s fiscal position.

“GST had caused shadow economy to shrink from 25% to 10%,” he said. He stated in the Dewan Rakyat that there was serious leakage prior to GST’s implementation. This is why GST is good for the nation and people.

This begs the question: Does the government need new taxes to boost the economy?

Experts predict that there won’t be any new taxes

Not necessarily, according to a MIDF Amanah Investment bank research arm (MIDF Research).

When asked by Bernama about his views on the Covid-19 pandemic, Abdul Muizz Morhalim, an economist at MIDF Research, stated that they don’t believe any new taxes would be added to Budget 2022.

He said that borrowing may be necessary to finance the growing fiscal deficit.

“We don’t believe it is the right moment for the government in 2022 to introduce new taxes because there is still uncertainty around the Covid-19 situation both locally and globally. This could impact Malaysia’s economic growth stability.

“But, the government may have to borrow more to finance the (wideningly) fiscal deficit. Abdul Muizz Morhalim, Bernama’s spokesperson for MIDF Research, stated that a possible increase in the statutory ceiling to 65 percent of GDP (from 60 percent at the moment) will give the government more fiscal space.

CGS-CIMB, the investment arm of CIMB, also shared their views on the budget. They stated that Budget 2022 will not see a major tax overhaul.

CGSCIMB released a note stating that the Budget would be more focused on three objectives: protecting and driving recovery of lives, livelihoods, building national resilience, and catalysing reforms.

CGS-CIMB stated, in addition, that there won’t be a major tax overhaul due to the necessity of significant economic recovery.

“That being said, we anticipate high vaccination rates, economic opening, and targeted fiscal actions to mark fiscal consolidation in 2022.

CGS-CIMB stated that they believe the first hints of a GST Plan may be found in a report on Medium-Term Revenue Strategies. This report is expected to be published in 2022.

Budget 2022 to include tax initiatives

Market analysts now believe that the government will increase tax initiatives, rather than a complete tax overhaul. Tricor, a global business advisory firm, stated in its prebudget statement that Budget 2022 would introduce tax initiatives to reduce leakages and help taxpayers manage their tax affairs. These include the Special Voluntary Disclosure Programme, SVDP, and Tax Identification Number (TIN).

“The SVDP for indirect taxes will assist taxpayers in managing and regularising their indirect tax affairs, and to resolve any outstanding audit/investigation cases.

“With a properly implemented mechanism, the SVDP will allow the Government to save significant time and money on audits, and also help with revenue collection in the short term.”

Tricor explained that TIN was introduced first in Budget 2020. However, proper financial acts will now be included in the budget for this year to implement TIN.

“As regards the TIN, this suggestion has already been mentioned in 2020 Budget. It was also repeated in 2021 Budget. It is expected that we will see relevant legislative changes in 2022 Budget.

In the meantime, Dato Sri Ismail Sabri Yaakob , the current prime minister, announced the 12th Malaysia Plan (12MP), and its key themes, Keluarga Malaysia: Prosperous. Inclusive. Sustainable.

Last week, the 12MP was passed by the Parliament. Budget 2022, which will be presented in Parliament on October 29th, 2021, will likely focus on rehabilitation, rebuilding national resilience, and catalysing change. The 3Rs, Recovery, Resilience, and Reform, are key themes of the 12MP.

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