Govt to better target spending

Publication: NST

Date of publication: Aug 29, 2013

Section heading: Main Section

Page number: 002

Byline / Author: By Khairah N. Karim

KUALA LUMPUR: THE implementation of the goods and services tax (GST) and other measures to strengthen the country's economic position will be discussed at the government's Fiscal Policy Committee (FPC) meeting on Monday.

Second Finance Minister Datuk Seri Ahmad Husni Mohamad Hanadzlah said the meeting, to be chaired by Prime Minister Datuk Seri Najib Razak, would deliberate on three areas: revenue enhancement, expenditure management and improving governance and work processes.

GST, a broad-based consumption tax initially scheduled for implementation in the third quarter of 2011, was postponed following calls for consumers to be educated first on how it worked before its implementation. It will be imposed on the sale of goods and services, and replace the sales-and-service tax of between five and 10 per cent.

GST will allow the government to reduce corporate and income taxes to encourage investments.

It is also an option to be considered by the government to raise revenue in the wake of a challenging external economic environment.

The rate has yet to be determined but is expected to be included in the 2014 Budget. However, the implementation may take take place 12 to 15 months later, possibly on Jan 1, 2015, to give time to industries and consumers to understand how it is implemented.

Apart from GST, the real property gains tax will also be reviewed at the FPC meeting to rein in rising property prices and curb speculation.

RPGT was raised last year to 15 per cent from 10 per cent for properties sold within two years of purchase. The government had also raised RPGT to 10 per cent from five per cent for properties sold between two and five years after they were bought.

Husni said the committee would discuss the need for subsidies rationalisation. Subsidies rationalisation, coupled with the implementation of GST and hike in RPGT, are expected to reduce the fiscal deficit.

He said the government was committed to achieving three guiding principles of fiscal policy: the government's debt would not exceed 55 per cent of the gross domestic product, revenue would always exceed operating expenditure and the fiscal deficit for this year would not exceed four per cent of the GDP.

He said the government was exploring measures to rationalise and better target expenditure, including subsidies, "to ensure value for money spending".

"Projects that will have a big impact on public finances will also be reviewed and sequenced properly to avoid putting a strain on the budget."

At the same time, he said, the government was committed to continuing the 1Malaysia People's Aid (BR1M) payments to the lower-income group.

"In the long term, the government plans to introduce a social safety net for vulnerable groups in 2015."

Following the narrowing of the current account surplus, Husni said all future public sector projects would be carefully considered.

"Those with low import content and high multiplier effects will be given priority."