Friday, October 18, 2013

Malaysia needs to cut expenditure, increase tax revenue to reduce budget deficit — Economist

Posted on October 15, 2013, Tuesday

SINGAPORE: Malaysia needs to undertake a mix of expenditure restraint and increase tax revenue as part of efforts to reduce its budget deficit, says Dr Shane Oliver, head of Investment Strategy and chief economist at AMP Capital Investors.

“Ideally Prime Minister Datuk Seri Najib Tun Razak should aim to gradually lower the budget deficit over time, not so fast as to adversely affect economic growth but enough to provide confidence to investors that it is heading in the right direction.

“Ideally this should be undertaken by a mix of expenditure restraint and increased tax revenue,” he told Bernama.

In terms of the former, Oliver said the government should focus spending as much as possible on boosting infrastructure as this would boost long-term economic growth.

He was asked to comment on how Malaysia could reduce its budget deficit.

Najib, who is also Finance Minister, is scheduled to table Budget 2014 on Oct 25 that will focus on reducing the fiscal deficit and enhancing national resilience.

He pointed out that the implementation of the goods and services tax (GST) is an important reform on the expenditure side.

While its implementation can come with teething problems, Oliver said it was in the long term interest of the country because GST provide a broad base for revenue growth and have less negative impacts on economic activity than personal tax, company tax and various other levies and charges. — Bernama


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