News › Weekly Alert Article

2012 Malaysian Budget Highlights

Malaysia

The Budget proposals for 2012 were tabled on 7 October 2011 by the Prime Minister who is also the Minister of Finance. The budget strategy focussed on addressing some key issues playing on the minds of Government policy makers. These include:
 

  • Accelerating investment
  • Enhancing human capital excellence through creativity and innovation
  • Changing the rural social and economic landscape
  • Strengthening the civil service
  • Dampening inflation with particular focus on its impact on the lower income group

The 2012 Budget's fiscal thrust is tax neutral in many respects - no new taxes were introduced and neither were there any substantive increases in tax rates in light of the policy commitment to reduce the fiscal deficit. There is a lack of a concrete tax rationalisation framework involving a review of the corporate tax, personal tax, tax concessions and the impending GST, so as to build a solid tax base for the future. There was no significant claw-back of tax incentives or re-alignment of tax reliefs other than a minor tinkering with the shipping tax exemption and the reinvestment allowance.

However, there will be greater reliance on the tax authorities carrying out more tax audits and enforcement and compliance-enhancing initiatives. The Government, notwithstanding a marginal expected increase in revenue, has undertaken to deliver a lower fiscal deficit of 4.7% in 2012. It would appear that the thrust of such achievement is underpinned by the slew of PFI projects to be implemented. Some of these projects are already underway and many public projects will be implemented in due course.

The services sector is expected to remain the key driver of growth and the further liberalisation of the services sector is a positive move. The social aspect of Government spending is another feature of this budget. It includes a slew of measures intended to benefit the less privileged and excluded segments of Malaysian society.

Taxand Malaysia explains the budget proposals in more detail
 

Taxand's Take


The 2012 Budget proposals are not specifically aimed at any one sector. Broadly, the 2012 Budget is wide-ranging in terms of the various sectors and components that were included and is basically seen as a people-friendly Budget. The positive aspect of the 2012 Budget proposals is that the projection of the country's economic growth is not dependent on trade with the traditional western economies. The many spending measures on social programmes have not made it necessary for the Government to abandon its commitment to reducing its deficit. It reflects the underlying strength of the Malaysian economy and its responsiveness to change, given the right policy measures. What is critical is that the various projects come to fruition as planned and achieve the desired results in terms of impact on the economy. The Government's real challenge lies in the implementation of its policies and the manner in which the Budget allocations are spent to ensure that the budget deficit continues to decline without impacting the overall economic growth.

Your Taxand contact for further queries is:
Veerinderjeet Singh
T. +603 2032 2799
E. vs@taxand.com.my

 

Taxand's Take Author