This article first appeared in The Edge Financial Daily on October 16, 2018

KUALA LUMPUR: The government will set off RM10.4 billion, or 61%, of the RM17 billion lost tax revenue for 2018 through additional oil revenue and dividends from government-linked companies (GLCs), Parliament was told.

Finance Minister Lim Guan Eng said there will be an estimated RM5.4 billion of additional petroleum-related income, thanks to the rise in crude oil prices to above US$70 (RM291) per barrel, against the US$52 average price used in Budget 2018.

“The additional dividends from GLCs, including Petroliam Nasional Bhd and Khazanah Nasional Bhd, are projected to be RM5 billion,” he said when replying to a question from Datuk Seri Ismail Sabri Yaakob (Barisan Nasional-Bera) who wanted to know the revenue lost from the scrapping of the goods and services tax (GST) and the measures taken to cover the shortfall.

Guan Eng said subsequent to the abolishment of the GST, the government’s tax revenue is expected to decline by RM21 billion for 2018.

“The expected collection from the sales and services tax between September and December this year is RM4 billion. Hence, the net impact on tax revenue for 2018 is RM17 billion,” he said.

On top of that, Guan Eng said the government will ensure tax compliance through auditing and investigation by the Inland Revenue Board and Royal Customs Department.

“The government will also explore new income sources, particularly from online transactions, and review tax incentives to generate economic activities while ensuring that the impact of the lower revenue does not get worse,” he said.

Guan Eng said the government had also rationalised public spending and streamlined government operations to increase efficiency and transparency.