Govt should institute bolder tax reforms to meet deficit target

KUALA LUMPUR: The government should institute bolder tax reforms and not just rationalise subsidies to achieve its deficit target of between 3.0 per cent and 3.5 per cent by end-2025, said RAM Ratings senior economist Woon Khai Jhek.

He said the tight fiscal space remains a key impediment to achieving ambitious goals, further exacerbated by the government’s intention to pursue fiscal consolidation, as it targets a somewhat steep fall in fiscal deficit to between 3.0 per cent and 3.5 per cent by end-2025.

“Assuming no substantial increase in revenue or fall in spending, should development expenditure still be steady at around RM90 billion in 2025, the fiscal deficit is likely to hover at circa 4.0 per cent in 2025, by our estimate,” he said in a commentary on how the New Industrial Master Plan (NIMP) 2030 and mid-term review (MTR) of the 12th Malaysia Plan (12MP) 2021-2025 hold a propitious future for Malaysia.

Meanwhile, he said the NIMP 2030 is a potentially transformative albeit ambitious plan to propel Malaysia and its manufacturing sector to its next stage of development.

The NIMP 2030 is complemented by the recently tabled 12MP MTR, which realigns the near-term action plans and key targets with the vision of the Madani Economy up to 2025.

The NIMP 2030’s mission-based approach, which leverages a whole-of-nation effort, will help focus and guide a more concerted effort to the country’s economic development.

“While there are arguably quite a few ‘moonshot’ targets in the NIMP 2030, these ambitions are absolutely necessary for Malaysia to catch up and remain relevant in this fast-developing and competitive global arena.

“All said, the key to any well-intentioned plan lies with implementation, a tall but not impossible task for the unity government to achieve,” he added. – BK