COLLECTION of the Goods and Services Tax (GST) is expected to rise to RM40 billion in 2017, 3.9% higher than this year’s forecast of RM38.5 billion.

GST will constitute 18.2% of total government revenue next year, nominally higher than 18.1% in 2016, according to the Economic Report 2016/17.

Meanwhile, GST collection for 2016 is expected to surge 42.5% compared with RM27 billion in 2015, partly due to a shorter collection period as the tax was imposed from April 1, 2015. The number of GST registered businesses has increased to 423,920 as at Sept 30 this year.

It is worth noting that 2016 GST collection has been revised downward from RM39 billion projected in last year’s Economic Report. However, collection of the tax is expected to contribute significantly to the forecast 5.5% increase in indirect tax to RM56.6 billion this year.

GST collection will cushion the federal government’s revenue, which is predicted to decline by 3% to RM212.6 billion this year, mainly due to lower petroleum-related revenue.

Export duties are projected to drop 21.7% to RM800 million, in line with lower commodity prices and smaller export volume.

Lower sales of motor vehicles will also cause a slide in revenue, shaving 0.7% or RM11.8 billion off excise duties.

Elsewhere, petroleum-related revenue is expected to drop 34.4% on the back of weak oil prices. Collection of petrol tax, which makes up 5.1% of total tax revenue, is estimated to tumble 26.3% to RM8.5 billion.

Figures are based on a lowered assumption of crude oil price at US$40 a barrel, from US$52 last year.

Lower receipts from investment income, mainly from Petroliam Nasional Bhd (Petronas), will also contribute to an expected 15.2% decline in non-tax revenue. Petronas’ dividend of RM16 billion forecast for this year is RM10 billion lower than the amount paid in 2015.

Petroleum royalties will also contribute a significant amount to receipts from licences and permits at RM3.7 billion.

Meanwhile, foreign worker levies and motor vehicle licences are expected to accrue receipts of RM2.8 billion each.

Tax revenue remains the main source of government revenue, accounting for 78.6% of total revenue. It is projected to increase by a marginal 1% this year to RM167.1 billion.

However, as a percentage of the gross domestic product, it is expected to continue falling to 17.2% in 2016 from 18.9% in 2015, and 16.6% in 2017.

Direct taxes are expected to fall 1.1% to RM110.5 billion, of which corporate income taxes (CITA) are set to slip 0.8% to RM63.2 billion. This is partly due to the reduction in the CITA, which makes up 37.8% of total tax revenue, from 25% to 24%.

Separately, individual income tax collection is projected to increase 7% to RM28.2 billion, underpinned by stable employment growth and income.

Also expected to offset the drop in direct tax revenue is the relaxation of tax penalty and an increase of 3.6% in revenue collection, mainly from stamp duty and real property gains tax.

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