KUALA LUMPUR: Malaysia needs to address issues related to fiscal management urgently, especially in the area of tax revenue leakages, to ensure sustainable economic growth and avert debt dependency, think tank Datametrics Research and Information Sdn Bhd (Dare) said.
Dare managing director Pankaj Kumar said the government had raised its statutory debt ceiling to 65 per cent of gross domestic product to fund the record RM332.1 billion allocation for Budget 2022.
The ceiling is expected to be sustained in the future given the government's projected RM400 billion development expenditure for the 12th Malaysia Plan to take the national economy to the next level.
"While government spending of this scale and breadth is both necessary and timely in view of the devastation brought about by the Covid-19 pandemic, we cannot afford to be perpetually dependent on funding growth by going deeper into debt," he said in a statement.
According to Pankaj, it is now more critical than ever for the government to watch its spending wisely while plugging unnecessary revenue leakages such as the RM300 billion shadow economy that cost Malaysia at least RM33 billion annually in the form of uncollected taxes.
"Last year's 2021 Budget announced bold measures to curtail the illicit tobacco trade, which cost the government RM5 billion in uncollected tax losses a year. Laws curtailing transhipment and banning the use of small boats to export or import tobacco products have worked to bring down the level of illicit cigarettes for the first time since 2015."
"While 2022 Budget did not disclose any specific initiatives to curtail the shadow economy, a stay on sin tax excise is a clever decision to ensure criminal syndicates are not inadvertently incentivised."
He added that as borders were relaxed and inter-state travel is allowed once again, the government through its law enforcement agencies must be even more vigilant in containing black market trade like illicit tobacco trade, which are expected to increase further due to the income crunch faced by many households.
Dare's Winning The War On Tobacco Black Market report published in October 2021 highlighted the need to tackle the entry of contrabands at various landing points on the coastal lines of the nation.
As such, concerted efforts from enforcement agencies like the customs and navy are needed to tackle the trade.
The report also recommends taking steps in addressing corrupt practices that have limited Malaysia's ability to remain competitive.
"With this, it will not only help improve the country's international standing but also tackle illicit trade in the market," Pankaj said.