KUALA LUMPUR (June 3): Malaysia expects its tax revenue collection for 2022 to be better than initially estimated, thanks to improved economic recovery, said the Ministry of Finance (MoF).
Budget 2022 had estimated tax revenue collection of RM171.4 billion or 10.5% of gross domestic product (GDP) this year. This includes collection of RM127.3 billion direct taxes and RM44.1 billion indirect taxes.
As of April, the government’s direct tax collection stood at RM45.6 billion or 35.8% of its target, while indirect tax collection was RM17.3 billion or 39.4% of target, the MoF said in its pre-budget statement issued on Friday (June 3).
“Revenue collection up to April 2022 was higher than expected and subsequent collection is expected to be better than the Budget 2022 estimate, in line with improved economic recovery and higher business and leisure activities,” said MoF.
The pre-budget statement is issued for the second time this year, in accordance with the government’s commitment to improve transparency and governance of the budgetary process.
MoF said the pace of economic recovery in Malaysia is projected to gather further momentum amid the reopening of the economy and international borders.
The ministry kept the 2022 GDP growth forecast at the 5.3%-6.3% range, driven by the government’s expansionary budget, resumption of projects with higher multiplier effects, cash handouts, special withdrawals from the Employees Provident Fund and strong external demand from major trading partners.
“With better Covid-19 management and higher vaccination rates, the government expects less disruption to domestic economic activity and spending in the event of resurgences,” said MoF.
Nonetheless, as a highly open economy, the ministry said the pace of Malaysia’s economic recovery is susceptible to geopolitical tensions, which have caused economic pressures on multiple fronts, most notably an increase in global inflation as commodity prices continue to rise.
“Furthermore, the risk of tighter global financial conditions, labour shortages and rising cost of living may pose a challenge to the nation’s economic recovery efforts,” it said.
Having said that, MoF said Putrajaya’s medium-term priority to implement structural reforms should help to further improve policy certainty and investors’ confidence, thus strengthening the country’s economic resilience for Malaysia to continue becoming an attractive investment destination.