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KUALA LUMPUR: The Federal Government’s revenue collection is envisaged to decrease by 4.4 per cent in 2023 to RM272.6 billion or 15 per cent of Gross Domestic Product (GDP) due to anticipated lower non-tax revenue collection.

The non-tax revenue in 2023 is expected to decline by 23 per cent year-on-year (Y-o-Y) to RM67 billion due to lower dividends from government entities, the Ministry of Finance (MoF) said in its Fiscal Outlook and Federal Government Revenue Estimates 2023 report released today.

“Tax revenue remains as the major contributor (75.4 per cent of the total share) and anticipated to grow moderately by 3.7 per cent to RM205.6 billion, in line with the projected slower economic recovery,” the ministry said.

It said direct tax is estimated to increase by 3.5 per cent to RM152.4 billion, representing 74.1 per cent of total tax revenue with the bulk of the increase is attributed to better collection expected from companies’ income tax (CITA) and individual income tax.

“The higher CITA, estimated at RM88.9 billion, is in line with stable corporate earnings prospects as well as the Prosperity Tax due to be collected in 2023.

“Similarly, individual income tax is expected to grow by 9.8 per cent to RM33.6 billion on account of steady wage growth and anticipated further strengthening of the job market,“ it said.

Besides that, it said revenue from other direct tax comprising of stamp duty, Real Property Gains Tax (RPGT) and other taxes is expected to register RM9.9 billion consistent with the continuous growth of residential building subsector, increased supply of affordable houses and the government’s initiatives to address property overhang.

The ministry said revenue from indirect tax is estimated to increase by 4.3 per cent to RM53.2 billion in tandem with steady consumption and trade growth.

It said sales and service tax (SST) is forecast to record RM32 billion or about 1.8 per cent of GDP of which, sales tax and service tax are projected to increase to RM16.3 billion and RM15.7 billion, respectively, while excise duties are expected to improve to RM12 billion or 0.7 per cent of GDP.

MoF said the expected increase in service tax would be mainly from the tourism sector in anticipation of higher tourists arrival in 2023 supported by the implementation of the Tourism Recovery Framework.

It said the lower collection for non-tax revenue in 2023 is due to lower proceeds from investment income, particularly dividend from Petroliam Nasional Bhd (Petronas), which is projected to be lower at RM35 billion.

However, it said licences and permits is expected to increase steadily by 3.4 per cent to RM13.8 billion despite lower contribution from petroleum royalty and the increase is mainly driven by motor vehicle licences and levy on foreign workers.

Meanwhile, it said the annual dividends from Bank Negara Malaysia and the Retirement Fund Incorporated (KWAP) are projected at RM5 billion and RM3 billion, respectively.

In 2023, it said petroleum-related revenue is expected to register RM58.9 billion or 21.6 per cent of total revenue in line with the assumption of lower global crude oil prices averaging at US$90 per barrel.

It said non-petroleum revenue is also projected to increase by three per cent to RM213.7 billion supported largely by CITA, individual income tax and SST, in tandem with sustained trade and economic activities.

The ministry said as a percentage of GDP, non-petroleum revenue is expected to remain resilient at 11.8 per cent.

“The government is committed to accelerate efforts to execute the Medium-Term Revenue Strategy (MTRS), rationalise tax incentives, diversify revenue resources and enhance tax compliance,” it said.

It said the planned fiscal reforms, including the enactment of the Fiscal Responsibility Act, would ensure the country’s fiscal and debt sustainability in the medium and long term.

“These reforms will improve revenue generation, which will facilitate the government to pursue the national aspiration of becoming a high-income nation,” the ministry added. – Bernama

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