KUALA LUMPUR (Oct 16): The government expects to raise an additional revenue of RM3 billion through the increase in the service tax to 8% next year from 6% currently, according to Treasury secretary general Datuk Johan Mahmood Merican.

“We clearly see that there is a need to broaden the tax base. In fact, even [for] an increase [from] 6% to 8%, it does not include food and beverages, telecommunications, [and] things that are more consumer-based,” said Johan on Monday during the 2024 Post-Budget Debate organised by the Malaysian Economic Association.

Although there was no mention of the goods and services tax (GST) in the newly announced Budget 2024, Johan said the broad-based consumption tax is not off the table.

“We are studying what is the best way to do this (implementing the GST). But, obviously, there are some areas that we need to improve, how do we ensure the efficiency of refunds and so on,” he told the audience here.

In regard to the scant details of rationalisation of fuel subsidies, particularly for RON95, Johan said this is because implementation details are still in the works, and the government intends to adjust the system in a gradual manner.

“I think the logic of why the subsidies cannot be removed all at once is that if implemented all at once, it will affect families, the cost of living, and have an impact on businesses,” he said.

“As with every year, the government always will ensure that there is sufficient revenue to cover operating expenditures, because by law, we are not allowed to borrow for operating expenditures,” he added.

Johan also said Budget 2024’s focus on basic amenities like schools, roads and talent development to increase Malaysians’ competitiveness instead of megaprojects is because Prime Minister Datuk Seri Anwar Ibrahim does not want to leave a legacy of building large white elephant projects.

“The prime minister has often said that he doesn’t want to be the prime minister that [is being] associated with tall skyscrapers. He wants to get the basics done,” he said.

Last week, Anwar announced the RM393.8 billion Budget 2024, of which RM303.8 billion are estimated to be operating expenditures, and will be covered by the government’s projected revenue of RM307.6 billion.

Anwar also targets to reduce the fiscal deficit to 4.3% of gross domestic product next year, part of Putrajaya’s efforts to narrow it to 3.2% by 2025.

Go here for our comprehensive Budget 2024 coverage.