Is Budget 2024 a “Cut and Paste” Exercise?

From a macro-economic point of view, the Finance Minster (FM) managed adroitly the fiscal deficit and borrowings going forward. Growth is within expectations, nothing spectacular; new taxes were neither here nor there; he skirted the issue of GST, used SST as his answer; didn’t talk of inequalities in the system; suggested some cash transfers; nothing on the informal sector; no mention of the “black” market economy which is reported to be 20% of GDP; and corruption or leakages – how will they plug it? Meanwhile, key highlights from PWC’s Budget 2024 Overview include:

Expanding revenue base

So, what’s new? Was this an inclusive budget? Did the FM address key issues? And what about PTPTN loans of M40 billion; EPF withdrawals and those with savings of less than RM10,000 in their accounts; infrastructure and maintenance of facilities; sufficient affordable housing and many others?

Of all the measures, I am unhappy as a small enterprise, the increase in Sales and Service Tax to 8% (from 6%) and the capital gains tax on unlisted shares – it’s usually on listed shares! How do you monitor this capital gains stuff on unlisted shares? Is he trying to “kill” the small entrepreneurs who may want to merge, scale-up or leave the industry? What about PLCs? Too big to tax?

Have you noticed that taxes are usually borne by the middle class and small companies – that’s a worldwide phenomenon. Large companies have lobby groups and have connected interests!

So, what could the FM do? Well, he could have increased the following:

• Tax on the top 1% (T1);

• Impose a wealth tax on assets exceeding RM100m;

• Tax on carbon emissions;

• Inheritance tax in excess of RM50 million; 

• Tax on financial/forex transactions (i.e. Tobin tax); and

• Widen the windfall tax.

SMEs need to move up in value though investments in R&D, and what’s the total for R&D? About RM510 million or 0.03% of forecasted GDP in 2024 (2023 budget: RM364 million or 0.02% of estimated GDP). Other countries are doing 3-5% and we ask ourselves why are we behind! The top ten countries with the highest R&D spending against proportion of GDP (%):

Then we have a whole lot of allocations, especially education and health. Both are led by inexperienced Ministers. Nothing will come of it – more money thrown at negative outcomes. Nothing on reforms or STEM (yes, there is a committee formed to coordinate this!)

I am disappointed, we have not addressed subsidies, inequality, productivity, APs, excise duties and the EV sector. Proton and Perodua are not leading the way even with their partnerships with foreign car companies. To me this was a “cut and paste” budget.

Reference:

Centre Stage: Budget 2024 Overview, PWC

Research and development expenditure as a proportion of GDP, https://w3.unece.org