KUALA LUMPUR (Nov 2): The federal government’s total revenue collected in 2018 is expected to increase by 7.3% to RM236.5 billion, according to the Ministry of Finance’s Economic Report 2018/19, titled Fiscal Outlook 2019.

The increase is contributed by higher direct tax collections and non-tax revenue, offsetting the withdrawal of the goods and services tax (GST) in September.

Overall, tax revenue constitutes 73.9% of total revenue, or 12.2% of Malaysia’s gross domestic product (GDP), while non-tax revenue represents 26.1% of total revenue, or 4.3% of GDP.

According to the report, direct tax collection in 2018 is expected to increase by 15% to RM133.5 billion, contributed mainly by better corporate profitability and higher crude oil price averaging US$70 per barrel.

The main contributors to the higher direct tax collection are income taxes from companies (expected to increase by RM6.1 billion), followed by individual (RM5.9 billion), and petroleum (RM5.1 billion).

Other direct tax collection such as stamp duties and real property gains tax (RPGT) are estimated to increase by RM500 million, reflecting higher property market values.

Meanwhile, indirect tax collection in 2018 is anticipated to significantly reduce by 33.1%, to RM41.2 billion.

This follows the abolition of GST, and a three-month tax holiday — which altogether results in RM21 billion in revenue forgone — as well as the additional RM4 billion allocated for verified and audited GST refunds.

However, the reintroduction of the sales and services tax (SST) in September is expected to contribute RM4 billion.

This brings net consumption-based tax to an estimated RM23 billion, nearly half of the initial estimate of RM44 billion.

As for excise duties, collection is estimated to increase to RM10.7 billion from the higher sales of vehicles in 2018, despite continued tax exemption for energy efficient vehicles.

On the non-tax revenue front, collection is estimated to surge 44.5% to RM61.8 billion, primarily contributed by higher dividend from Petronas (amounting to RM26 billion), in tandem with the better financial performance and higher crude oil price.

Khazanah Nasional Bhd is also expected to contribute a higher dividend, amounting to RM2 billion.

Additionally, a one-off contribution of RM4 billion is expected to be received from retirement fund Kumpulan Wang Persaraan Diperbadankan to partly finance the current year’s retirement changes.