Malaysia mulling new taxes once economy recovers

[KUALA LUMPUR] Malaysia's government will pay more attention to economic sectors most affected by the pandemic such as tourism and retail, and will wait for the recovery to gain traction before considering any new taxes, the country's finance minister said Friday.

The Finance Ministry is studying the possibility of a consumption tax, but "we have decided this is not the right time to introduce any new form of taxation," Zafrul Abdul Aziz said in an interview with Bloomberg Television. "After the economy has recovered, we really need to relook at widening our revenue base."

Bank Negara Malaysia will disclose its gross domestic product forecast in its annual report due March 31, but Mr Zafrul said that for now the government is maintaining its expectation that the economy will grow 6.5 per cent-7.5 per cent this year after contracting 5.6 per cent in 2020.

"The focus of the government today is on the economy's revival, we would like to jumpstart the economy," he said. "We have to balance between short-term fiscal injection to the economy with medium- to long-term fiscal consolidation."

The World Bank in its regional projections released Friday said it expects Malaysia's economy to expand by 6 per cent in 2021, slower than the 6.7 per cent forecast previously, after factoring the recent spike in Covid-19 infections, political uncertainty and slower than expected vaccine rollout in developed economies.

Malaysia announced a US$4.8 billion package last week to revitalise the economy as the pace of new Covid infections slows and vaccines are rolled out. The plan included 11 billion ringgit (S$3.5 billion) in direct fiscal injection, which Mr Zafrul said would be funded through domestic borrowing.

BLOOMBERG