PETALING JAYA: Malaysian Rating Corp Bhd (MARC) sees the government’s expectation of slower growth in revenue-to-gross domestic product to 13.5% in 2025 from 15.9% in 2020 as outlined in the 12th Malaysia Plan (12MP) as a sign that taxation will remain as it is.
It surmised that falling oil revenue, limited revenue sources to draw on and revenue leakages are the reasons behind the projection.
“Furthermore, there is no specific mention of shifting the revenue share from direct to indirect taxes, contrasting past Malaysia plans, in light of changing demographics,” said the rating agency in a report. “This suggests that corporate and personal tax rates would remain while the return of the Good and Services Tax is uncertain.”
Nonetheless, it commended the three themes of resetting the economy; strengthening security, well-being and inclusivity; and advancing sustainability set forth in the 12MP as appropriate.
“Failure to follow through with long-term plans could lead to dire developmental consequences, especially in the post-pandemic environment considering a rapidly ageing population,” said MARC.
On the whole, the firm lauded the 12MP in reorganising Malaysia’s erratic development priorities caused by the pandemic and political instability.
However, MARC cited the plan’s “leave no one behind” principle is its strongest and weakest point.
“Greater clarity to development planning is not only necessary to reshape the economy in the post pandemic era, but more importantly, to tee up the private sector of things to come,” it said.
“Until we see greater details in the 12MP, we expect the private sector to remain timid, taking a wait-and-see stance.”
With regard to the lack of criticism of the past growth targets, the rating agency pointed out that the 11MP fell in between a political cycle, the historic fall of Barisan Nasional and other series of political dramas following the 14th General Election, thus the continuation of Malaysia’s development targets was disrupted.
As for the 12MP, it believes the downside to policy continuation remains as there will be another general election between now and July 2023.
“Given there will be around 5.6 million new voters in GE15, its outcome gets harder to anticipate than ever. It is premature to conclude whether future administration(s) will carry the 12MP targets into the next political mandate.”
MARC believes political uncertainties will linger for a while, although the 12MP assumes that everything remains linear and constant.