OCTOBER 26, 2013
|A man watches a live television broadcast of Prime Minister Datuk Seri Najib Razak |
tabling Budget 2014 in Parliament in Kuala Lumpur October 25, 2013. — Picture by Choo Choy May
KUALA LUMPUR, Oct 26 — Prime Minister Datuk Seri Najib Razak took steps for a shift toward fiscal prudence, scrapping sugar subsidies and unveiling plans for a consumption tax in 2015 while softening the impact with handouts to the poor.
The government will implement a goods and services tax of 6 per cent in April 2015, while corporate and personal income tax rates will be lowered after the new levy comes into force, Najib said in his 2014 budget speech yesterday.
The fiscal deficit will shrink to 3.5 per cent of gross domestic product next year from 4 per cent in 2013, meeting targets set previously, the finance ministry said in a report.
Having earlier given handouts and pay increases for civil servants to woo voters, Najib is adjusting his focus to improve government finances and avert a credit rating downgrade after cementing his leadership of the country in a May general election.
The prime minister will give tax breaks to middle- income earners and spend RM4.6 billion on aid for the poor to reduce the impact on consumer spending.
“When you announce these kinds of tax changes you’ve got to provide certain offsets and we got that,” said Euben Paracuelles, a Singapore-based economist at Nomura Holdings Inc.
“Fiscal consolidation will obviously have an impact on growth but again this is a price that they are now willing to pay because the fiscal priorities are now more pressing.” – Bloomberg
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