By Editor -September 7, 2021

In formulating Malaysia’s economic recovery strategy, the Ministry of Finance (MOF) sees Development Financial Institutions (DFI) as having a strategic and important role in the country’s effort to restore and retain the capacity of businesses to provide various employment opportunities and support Malaysians’ livelihoods.

To that end and in line with the spirit of #KeluargaMalaysia, the Finance Minister urges DFIs to provide their full support to the country during this recovery period, particularly as the objective of DFIs is to help develop the Rakyat’s socio-economic well-being. 

Urgent support – for example in terms of financing – is required to prevent long term economic scarring, particularly for micro, small and medium enterprises in strategic sectors including tourism, retail, agriculture, infrastructure, maritime, export as well as high-technology technology and capital intensive industries. DFIs are, therefore, requested to formulate practical solutions such as more accommodative financing criteria to enable businesses to get back on their feet and restart operations as soon as possible.

This proposal will also be further examined in preparation for Budget 2022. Malaysia is trying to wiggle out of its most difficult economic period in history as the country tries to formulate a suitable formula for a recovery.

MOF To Release A Pre-Budget Statement for Budget 2022…Here’s What It Means

Ministry of Finance in its efforts to improve the annual budget preparation process will be publishing for the first time a Pre-Budget Statement (PBS) for Budget 2022.

The ministry has said this will be in line with international best practices, whereby a PBS is published to enhance the transparency of the budget process in formulating the annual budget, as well as increase public confidence – particularly among investors – in the country’s fiscal management.

Via the PBS, the public will be able to track specific metrics such as:

1. The economic outlook based on global economic scenario, performance review of the Gross Domestic Product and macroeconomic outlook for 2022 as well as fiscal targets for 2021/2022;
2. The tax revenue performance status and tax measures announced under Budget 2021 and stimulus packages in 2021. The PBS document also covers the management of revenue leakages, Malaysia’s international commitments as well as strategies to increase tax revenue and strengthen the tax system; and
3. The public expenditure status for 2021 and factors in optimising and controlling expenditure.

The PBS will also provide a preliminary overview on the direction, approach and expected benefits of Budget 2022, which will be crafted based on the following objectives:

1. Protecting and driving recovery of lives and livelihood: Budget 2022 will drive the national recovery process to ensure that the nation successfully exits from the COVID-19 crisis, as well as continue the post-crisis recovery agenda to help lives, livelihoods and badly-affected economic sectors. Efforts to help vulnerable groups and generate new job opportunities will continue to be prioritised;
2. Rebuilding national resilience: Budget 2022 will emphasise on rebuilding the resilience and capacity of the nation’s public health system, enhancing digital and technological infrastructure, especially within the education sector, and facilitating the nation’s transition to high productivity industrial sectors based on automated technology and high skills; and
3. Catalysing reforms: Budget 2022 will ensure that reform measures are implemented while focusing on achieving the Sustainable Development Goals, the Twelfth Malaysia Plan and the Shared Prosperity Vision 2030.

With the new government stating that opposition parties will be consulted on areas that concern the people, this will be a good start in formulating the Budget that will impact every person in the country. Lets just see if the feedbacks will be constructively addressed and applied during the actual tabling in October.

Budget 2022 Should Address Important Tax Issues

Budget 2022 should address important aspects of tax revenue collection such as plugging leakages and good management of tax revenue collection including timely refund of tax, says Chartered Tax Institute Malaysia President Farah Rosley in a Pre-Budget 2022 statement.

CITM says there is a need to continue monitoring tax collection and ensuring equitable treatment of tax. Good administration of taxes should continue and improvements made to ensure the tax system is transparent and easy to be implemented. “Use of new data and analytics could indeed support the tax administration initiative in managing tax leakages,” CITM says.

An effective tax administration and good revenue collection mechanism will enhance government performance. “There is a need to develop new approaches to increase voluntary compliance, manage non-compliance, minimise compliance costs and enhance overall trust in the tax system.

“Timely administrative support to taxpayers including timely refund of tax collected will build trust in the tax system,” it says.

CITM says that various economic stimulus packages being announced means more revenue is needed to sustain the stimulus packages. There is a bigger need to ensure businesses continue to be supported during this recovery period.