A challenging year of 2019 awaits all Malaysians

By admin-s On Aug 23, 2018

The government will start 2019 with a whopping RM35bil shortfall because refunds for income tax and GST will have to be paid off next year.

(The Star) – It is also going to be a challenging year with a lower tax revenue due to the reintroduction of Sales and Services Tax (SST), amid expectation of a slower economic growth.

On Wednesday, the Finance Minister Lim Guan Eng dropped another bombshell, claiming that the previous Barisan Nasional government has not refunded a total of RM16.046bil of excess income tax and real property gains tax to taxpayers.

The RM16.046bil is on top of the RM19.248bil GST refunds reportedly missing under the previous Barisan Nasional government, bringing the amount of debts the Government owes the rakyat to a whopping RM35.294bil.

“Most likely the Government may not be able to pay back in a lump sum. It may choose to refund through instalments within a period of five years,” said the chief executive officer of Tax Advisory and Management Services Yong Poh Chye (pic).

“Steps are being taken for taxes in 2017, 2018 or even 2019 to be deducted from the amount that the tax department ought to refund,” he said when contacted.

“Another suggestion would be to allow companies to offset their Sales and Services Tax (SST) dues in the coming year against Goods and Services Tax (GST) refunds,” Yong suggested.

The tax expert also pointed out that under the Income Tax Act, the Government is subject to pay an interest of 2% on the delayed refunds. With the reintroduction of SST to replace GST, the Government is expected to receive lesser tax revenue but Yong said the improved oil price can help.

“Malaysia is still a blessed country. The oil price has gone up since the beginning of the year. This can help to cushion some of the impact (of abolishing GST),” he added.

Bloomberg data showed that Brent crude price has improved more than 9% since the beginning of the year, trading at US$73.21 per barrel at the time of writing.

Socio-Economic Research Centre executive director Lee Heng Guie said the Government’s fiscal account will come under pressure as the Government may have to set aside allocations for the refunds.

“The Government will have to set aside allocations to refund tax payers as it is not known where these ‘missing’ amounts are. This is amid a lower tax collection with the implementation of SST replacing GST,” he said.

Next year will see the full impact of the shortfall of revenue of about RM21bil under the new SST tax regime compared with GST.

Lee said there will be a clearer picture when Budget 2019 is tabled in November on whether the Government will need to allocate funds and how it plans to manage its budget deficits.

“For the coming Budget, we should not expect a lot of goodies or tax breaks from the Government. The recent decision for the Government to cancel East Coast Rail Link (ECRL) and two gas pipeline projects shows that the country’s debt level is worrying,” he added.

AmBank Group chief economist Anthony Dass said it will be a challenge for the Government to repay on an immediate note on the “missing amount” at IRB given that there is also the GST money that has reportedly vanished.

“The possibility would be that the payment would be made when the Government is in a better financial position,” he said.

He expects Malaysia’s GDP to grow 4.8%-5% this year and slower at 4.2%-4.4% in 2019.