Malaysia’s revenues well above target

Bank of America Merrill Lynch and CITI pointed out that revenue collections in the first quarter for Malaysia showed outperformance in both indirect tax and non-tax.

Malaysian’s fiscal deficit level to the gross domestic product

is likely to remain unchanged even with the tabling of the

RM13.8 billion supplementary budget in Parliament recently, says two foreign bank analysts.

Bank of America Merrill Lynch and CITI pointed out that revenue collections in the first quarter for Malaysia showed outperformance in both indirect tax and non-tax.

Judging from the first quarter revenue performance, full-year revenues may reach the RM200 billion mark, well above the budget

target RM186.9 billion and sufficient to cover the additional RM13.8 billion in spending, says CITI.

Both foreign analysts have maintained their deficit forecasts at 5 per cent to the GDP, slightly higher than the government’s 4.7 per cent forecast.

The Ministry of Finance tabled a supplementary budget, raising concerns whether the government will breach its fiscal deficit forecast of 4.7 per cent of GDP or 55 per cent statutory

debt ceiling.

Allocation includes RM11.2 billion for “treasury general services”, RM446 million for the Works Ministry, RM360 million for the Election Commission, and RM113 million for the prime

Minister’s Department.

Bank of America Merrill Lynch head of emerging Asia economics Dr Chua Hak Bin expects the government to fund most of the

additional RM13.8 billion spending.

He also does not expect it to pose a major upside shock to the fiscal deficit or breach the 55 per cent debt ceiling limit.

BofAML has maintained its fiscal deficit forecast at five per cent of GDP for 2012, slightly higher than the government’s 4.7 per cent forecast.

“The fiscal deficit will likely remain in check due to higher revenue, conservative budget forecasts and rebasing of nominal GDP.”

Rebasing of nominal GDP in 2011 to RM881 billion (from earlier estimate of RM853 billion) will lower the fiscal deficit by about 0.2 per cent point due to a larger denominator.

Tax revenue has come in ahead of expectations, due to improved tax efficiency, healthy income growth and conservative forecasts, remarked Chua.

Central government revenue was only projected to grow 1.4 per cent from 2011 but is already higher by some 20.5 per cent for first quarter, which included corporate taxes (19.2 per cent) and personal taxes (5.9 per cent).

Chua added that non-tax items are also coming in better than expected and these include petroleum royalty (34.1 per cent) and interest & investment return (304 per cent ).

BofAML expects direct taxes to increase 5.1 per cent and indirect taxes to increase by 4.8 per cent in 2012.

CITI economists Kit Wei Zheng and Brian Tan estimated that revenue for the first four months of 2012 totalled RM63 billion, which is about 33.7 per cent of the full year budget estimate of RM186.9 billion.

In the case of oil revenue, they were confident that the full-year revenue targets could still be met. For example, the Ministry of Finance assumes an average annual Tapis price of $110 (RM351) per barrel, but year-to-date Tapis crude has already averaged $125 (RM399) per barrel.

As at the first quarter, petroleum income tax collections were 17.5 per cent of the full-year target, compared to the historical average of around 9.3 per cent.

http://www.btimes.com.my/Current_News/BTIMES/articles/20120624235548/Article/index_html

 

Category: Malaysia