This article first appeared in The Edge Malaysia Weekly, on October 26 - November 1, 2015.

Oil-related revenue will only make up 19.7% of total government revenue in 2015 from 30% last year on sharply lower oil prices, according to the Economic Report 2015/16.

This would see oil-related revenue decline to about RM44 billion this year from about RM66 billion in 2014. For 2016, oil-related revenue is only expected to be RM31.7 billion, Prime Minister Datuk Seri Najib Razak said when tabling Budget 2016.

That puts oil-related revenue’s contribution at 14.1% of total government revenue next year.

Direct tax, which constitutes 52.5% of total revenue, is also estimated to decline by 7.9% to RM116.8 billion in 2015 from RM126.7 billion due to lower crude oil prices, which averaged US$55 per barrel this year compared with US$99 per barrel in 2014.

Of the direct taxes, petroleum income tax is projected to fall from RM26.96 billion in 2014 to RM9.53 billion in 2015 and RM9.33 billion in 2016.

In May this year, the Economic Planning Unit said Malaysia’s dependence on oil-related revenue will decline to 15.5% by 2020. The contribution of oil-related revenue declined from 41.3% in 2009 to 30% in 2014, though average crude oil prices remained high at US$95 per barrel during the period, as the country expanded its revenue sources, the government said.

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