KUALA LUMPUR: The government, despite targeting to collect over RM41 billion in Goods and Services Tax (GST), does not reduce the 24 per cent corporate tax under 2018 Budget because it has to balance the needs of all taxpayers.
The government expects to collect RM41.5 billion in GST this year, 0.7 per cent higher than last year's RM41.21 billion.
"Some people asked me why the corporate tax for next year is not coming down from the current 24 per cent," said Finance Ministry secretary general Tan Sri Dr Mohd Irwan Serigar Abdullah.
"We can't because we need to look at government revenue and what is affordable," he told some 300 participants at the Malaysian Economic Association 2018 post-Budget dialogue here today.
Irwan was responding to a query that despite the potential increase in government revenues resulting from GST, there was no reprieve for corporate income tax payers under the national budget.
This means businesses will continue to pay 24 per cent in corporate tax, the same rate as in 2017.
Irwan explained that the government had to maintain corporate tax at 24 per cent to compensate for forgone taxes from a section of working adults.
Last Friday, Prime Minister Datuk Seri Najib Abdul Razak announced taxpayers with income of between RM20,001 and RM70,000 per annum will get a two percentage point relief in personal income tax. This move will see 261,000 middle income earners cease to be taxpayers in 2018.
Also present at the dialogue was Dr Jomo Kwame Sundaram, who is former United Nations assistant secretary general for economic development.
He highlighted that the budget had allocated a total spending of RM280.25 billion while the government was targeting RM239.86 billion in tax revenue. This leaves a gap of RM40.39 billion or 16.8 per cent deficit that needs to be borrowed.
Jomo asked where would the government receive extra income to maintain its fiscal deficit at three per cent of gross domestic product (GDP).
Responding, Irwan said the government expects to collect RM10.9 billion in oil royalties from Petroliam Nasional Bhd following slight improvement in world crude oil prices at an average US$50 per barrel this year.
The government also benefits from higher export duty collection as petroleum sales are quoted at higher pricing than last year.