Wednesday 07 Jun 2023
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This article first appeared in The Edge Malaysia Weekly on November 22, 2021 - November 28, 2021

It is easy for state-level politicians to come down hard on the gaming and brewery sectors. Kedah Menteri Besar Datuk Seri Muhammad Sanusi Md Nor is one of them as he recently banned the operations of number forecasting operators (NFOs) in the state.

It is easy to fathom why Muhammad Sanusi takes a tough stance on NFOs. Apart from religious reasons, whether the NFOs operate or not does not affect the state’s coffers.

But the same does not apply to the federal government’s revenue.

Direct tax collection from NFOs such as Genting group, breweries and dealers in hard liquor would easily come to more than RM10 billion. It is close to 5% of the amount that the government collects in annual taxes.

The three NFOs — namely Magnum, Berjaya Sports Toto and Pan Malaysia Pools — contribute no less than RM1.7 billion to the federal government’s coffers. Apart from corporate tax of 24%, the NFOs have had to pay gaming tax, pool betting duty and the Sales and Service Tax.

It is hard to put a finger on Genting group’s contribution to the federal government. However, based on figures published in its annual report, it is easily RM5 billion per annum.

The collection in excise duty from the sales and distribution of hard liquor is about RM1.7 billion per annum while the breweries contribute about RM200 million per month, which comes to RM2.4 billion per annum.

According to the Revenue Estimates of 2022, the total collection of direct and indirect tax is estimated at RM215 billion. Assuming that sin taxes are part of the collection, it means they make up about 5% of the total collection.

Since Kedah does not welcome NFOs, perhaps the state should seek a segregation of revenue collection at the federal level so that the proceeds from sin taxes are not channelled to the state.

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