KUALA LUMPUR: The government’s fiscal deficit will not be greatly impacted by the recent decline in global crude oil prices as the price slump may not continue for an extended period of time, said Professor Datuk Dr Norma Mansor (pic), director of the Social Security Research Centre at University of Malaya.

There are also other sources from which the government can derive its income — one of them being the impending goods and services tax (GST), said Norma.

“The fiscal deficit does not wholly depend on the revenue received from Petroliam Nasional Bhd (Petronas). Pretty soon, when the GST is introduced, there will be a wider source of income,” she told The Edge Financial Daily on the sidelines of the Second International Conference for Social Security last week.

“The good thing the government has at the moment is the reduction of, and later, the withdrawal of subsidies. A big percentage of the government’s operating expenditure is [allocated] for that, so it [will] balance out,” she opined.

Her comments came on the back of the Ministry of Finance’s announcement on Dec 2 that the government’s efforts to narrow the fiscal deficit to 3% in 2015 could face a setback if crude oil prices remained below US$70 (RM242.90) per barrel.

Petronas group CEO Tan Sri Shamsul Azhar Abbas also said on Nov 28 that Petronas’ payments to the government could be 37% lower next year at RM43 billion.

The crude oil glut has been the main culprit for falling oil prices this year. The Organisation of the Petroleum Exporting Countries’ (OPEC) decision two weeks ago to maintain oil production further aggravated the plunge.

On the GST, Norma said it should have been introduced a long time ago. “We don’t have a general revenue, which is why the GST was suggested under the New Economic Model. GST and targeted subsidies have to come hand in hand. Take away the general subsidies because we cannot afford it over the long run.

“What we proposed to the government is have a general revenue base, but lower the income tax and corporate tax as well, which they are doing,” she added.

The impact of the broad-based tax would only be felt towards the third or fourth quarter next year, since it will only be implemented in April, she added.

She noted that consumer prices may see an increase after GST but if the downward trend in crude oil prices continues , then consumer prices may not see much of an increase after all.

“Many things are happening at the same time and policies need to be implemented during the good times, not during the bad times as a reactionary measure. We shall see how it works out, but thus far the policies seem to be supporting one another,” she said.

This article first appeared in The Edge Financial Daily, on December 8, 2014.