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Free Malaysia Today
9 hours ago
- Business
- Free Malaysia Today
Plug leakages to ensure SST income not squandered, govt told
The government expects to generate an additional RM5 billion from the upcoming SST this year, and RM10 billion from 2026 onwards. (Bernama pic) PETALING JAYA : The government needs to plug inefficiencies in its departments and agencies to ensure the additional RM10 billion in yearly revenue expected from an expansion of the sales and service tax (SST) regime is spent wisely, an economist said. Ahmed Razman Abdul Latiff of Putra Business School said the government is currently prioritising procurement reform by introducing an open tender system to replace direct negotiations. Ahmed Razman Abdul Latiff. He said the open tender system offers a more structured approach which is essential to prevent wastage in public spending. 'Reforms to the procurement system are vital if we want to discourage graft and ensure that the additional RM10 billion in revenue earned from the expanded SST is not dissipated. 'Statistics show that a majority of cases involving wastage, leakages and corruption stem from a weak procurement system,' he told FMT. In a recent interview with FMT, Treasury secretary-general Johan Mahmood Merican said the government was in the midst of reforming the procurement system to ensure revenue is spent optimally and to curb leakages. Johan said the government was expected to generate an additional RM5 billion this year from the SST expansion which kicks in next month. The SST is expected to generate RM10 billion annually beginning next year. Earlier this month, the finance ministry announced that a 5% to 10% rate will be imposed on non-essential goods from July 1, including rent, lease, construction, financial services, private healthcare and education. However, basic necessities will retain its tax exempt status. With the expansion, the government expects the SST to generate RM51.7 billion in revenue this year. Afzanizam Rashid. Separately, Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid said the procurement reforms, being implemented alongside the SST, would help narrow the country's fiscal deficit. He said the dual initiatives would broaden fiscal space, enabling the government to enhance social assistance and allocate more funds for infrastructure development. Afzanizam said the increase in service tax to 8% in March last year bumped up SST collection by 30.3% in the first quarter of this year. Meanwhile, the implementation of targeted diesel subsidies has reduced spending on subsidies and social aid by 19.4%. 'The increased tax collection and reduced spending saw the fiscal deficit drop to 4.5% of the gross domestic product for the first quarter of 2024. 'This has allowed the government to increase aid for its Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) programmes to RM13 billion this year, up from RM10 billion in 2024.'
Free Malaysia Today
3 days ago
- Business
- Free Malaysia Today
Dip in inflation may reflect slowing demand, say economists
The 1.2% inflation rate recorded in the country last month reflects a similar trend observed in South Korea, Indonesia and the Philippines, according to the statistics department. PETALING JAYA : The low inflation rate recorded for the country last month should ease living costs, but may also reflect subdued consumer demand which could threaten economic growth, according to economists. Malaysia's inflation rate stood at 1.2% in May—down from 1.4% the previous month— driven by falling global oil prices, the statistics department said on Tuesday. It said similar trends have been observed in South Korea, Indonesia and the Philippines. Ahmed Razman Abdul Latiff. Ahmed Razman Abdul Latiff of Putra Business School told FMT that the low inflation rate was indicative of stability in the cost of living, with prices not rising at a rapid pace. 'But a lower inflation rate might also reflect weakening market demand, meaning that consumers are no longer spending as much they did as before,' he said. AmBank chief economist Firdaos Rosli said the current conditions resemble those of late 2019, when inflation eased amid heightened consumer caution. Firdaos Rosli. While the US-China trade war was the key issue then, today's concerns include US policy changes and global tensions, said Firdaos. However, he said the low inflation rate did not align with the country's low unemployment rate of 3.0% in April. 'Simply put, despite tight labour market conditions, subdued consumer demand suggests a low propensity to spend amid uncertainty,' he said. Sunway University economist Yeah Kim Leng said a low inflation rate would be 'a positive' if it was driven by declining supply costs in the form of cheaper raw material, better technology, or improved efficiency. Yeah Kim Leng. 'But if it's due to falling demand, it's a concern as it means reduced spending,' he said. He also said that price controls on 30% of the items in the consumer price index may be suppressing inflation artificially. Yeah said that while a low inflation rate would help with the cost of living and give the government room to adjust its policies, the recent increases in global crude oil prices could push inflation up in the coming months. He advised the private sector to stock up on goods before prices rise further in the wake of higher crude oil prices. Barjoyai Bardai. Meanwhile, Barjoyai Bardai of Malaysia University of Science and Technology said that May's inflation data did not reflect recent geopolitical developments. Barjoyai said that while the data looked positive, the Israel-Iran conflict would push prices higher, especially for food. 'In June—that's when we'll really see the impact. If inflation remains low beyond next month, then we can say the economy is on the right track,' he said.
Free Malaysia Today
17-06-2025
- Business
- Free Malaysia Today
SST expansion to have minimal impact on SMEs, say economists
Small and medium contractors are not expected to be burdened by the expanded scope of the service tax, thanks to the RM1.5 million threshold. PETALING JAYA : Exemptions for certain services and a higher threshold value will minimise the impact of the sales and service tax's (SST) expansion on small and medium-sized enterprises (SMEs), according to economists. Aimi Zulhazmi Rashid said this allows operators such as clinic owners and small contractors to ensure their businesses remain sustainable, even as the SST's scope expands from July 1. The Universiti Kuala Lumpur academic said customers, mostly from the B40 and M40 groups, will also benefit from the absence of any increase or only minimal increases in the service tax. 'Therefore, SMEs should not take advantage of consumers after July 1. Use this exemption to provide good and affordable services,' he told FMT. Ahmed Razman Abdul Latiff of Putra Business School agreed that the government's move would only impact large companies. 'It is more focussed on large private businesses, and the majority of their customers are not from the B40 group,' he said. Last week, the finance ministry announced that zero tax rates would remain for essential goods, while a rate of 5% to 10% would be imposed on non-essential items from July 1. However, services directly impacting Malaysians such as public and some private healthcare will continue to be exempted from the service tax. Effective July 1, the scope of the service tax will be expanded to cover rental, leasing, construction, financial services, and private healthcare and education services. Under the new tax regime, a 6% service tax will be imposed on construction services for infrastructure, commercial and industrial buildings if the taxable value exceeds RM1.5 million annually. AdChoices ADVERTISING The same rate applies to private healthcare, traditional and complementary medicine, and allied health services provided to foreigners, on service providers exceeding the RM1.5 million threshold. Malaysian citizens are exempt from paying service tax for public and private healthcare services, traditional and complementary medicine practices, homeopathy, chiropractic treatment and osteopathy. Treasury secretary-general Johan Mahmood Merican said the RM1.5 million threshold value will ensure that SMEs such as restaurant operators, contractors and clinics are not affected by the expansion. 'We can assist in terms of administrative management,' he said in an interview with FMT. Johan also emphasised that the SST's expansion is important to strengthen the country's fiscal position by increasing revenue to improve its social safety net without burdening the general public. Class F Bumiputera Contractors Association president Tukiman Radion said although his members are expected to be unaffected by the service tax's expansion, there are still concerns about ripple effects. 'We are worried that building material shops will take the opportunity to raise prices. If that happens, everyone will be affected,' he said. 'So we hope specific monitoring is carried out to prevent this.'
New Straits Times
24-05-2025
- Business
- New Straits Times
Bank Negara has policy space as inflation remains contained: Economists
KUALA LUMPUR: Bank Negara Malaysia may have room to ease interest rates in the coming months as inflationary pressures remain contained and external economic headwinds build, economists said. April's consumer price index (CPI) data showed that headline inflation held steady at 1.4 per cent year-on-year, unchanged from March, despite festive-season spending during Hari Raya. Core inflation, however, inched up to two per cent, the highest in 17 months, driven by firmer price pressures in services and durable goods. Putra Business School economic analyst Prof Dr Ahmed Razman Abdul Latiff said the benign inflation backdrop, coupled with rising global risks, supports the case for a potential 25 basis-point reduction in the Overnight Policy Rate (OPR) in the second half of the year. He pointed to geopolitical tensions and reciprocal tariff measures by the United States (US) as key threats to global trade, which could spill over into Malaysia's export-oriented economy. Still, Razman expects domestic growth to remain resilient. "Despite all the uncertainties caused by US tariffs, the economic outlook for the second half of the year remains positive, supported by stronger trade activity and expected higher foreign direct investments," he told Business Times. He added Malaysia's chairmanship of Asean this year is also expected to lift domestic demand through enhanced regional collaboration. According to the Department of Statistics' (DOSM) report on Wednesday, price increases in April were led by personal care and housing costs. Personal care saw the sharpest rise at 4.1 per cent, while education and housing expenses increased between 2.0 and 2.3 per cent. Food and beverage inflation eased slightly to 2.3 per cent from 2.5 per cent a month earlier, helped by lower vegetable and dairy prices despite festive demand. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said while inflation is largely under control, Bank Negara may soon need to pivot its policy stance if growth slows meaningfully. "The current economic environment is highly fluid, which necessitates a careful and well-calibrated monetary policy response," he said, adding that a rate cut of 25 basis points could be considered if signs of a slowdown persist. He said gross domestic product growth in the second half could dip below four per cent, warranting policy support. This outlook is consistent with Hong Leong Investment Bank (HLIB) economist Felicia Ling's view that the inflation environment remains relatively benign. "Recent data suggests a benign domestic inflation with minimal inflationary pressures, leaving Bank Negara more room for monetary easing," she said in a research note. HLIB has maintained its full-year CPI forecast at 2.7 per cent but cautioned that global demand weakness and subdued commodity prices pose downside risks. Maybank Investment Bank chief economist Suhaimi Ilias said broader inflation trends have remained muted despite policy changes. "Inflation remains subdued at sub-two per cent year-to-date even with the 13.3 per cent minimum wage hike in February," he said. He added that the limited price pass-through may be attributed to the hike's initial application only to large employers. Meanwhile, DOSM said deflation persisted in certain segments, led by a 4.5 per cent fall in information and communication and a 0.1 per cent dip in clothing and footwear. Public Investment Bank economist Sabrina Edora said while inflation will likely stay below three per cent for the year, risks could emerge from domestic policy shifts. These include fuel subsidy reforms and a wider service tax net. Still, she believes any inflationary impact will be manageable if such reforms are introduced gradually and supported by offsetting measures. "Given the backdrop of lower global commodity prices, the near-term inflation trajectory is expected to remain benign, even in the event of subsidy rationalisation," she said. Bank Negara's latest monetary policy statement projected headline inflation to average between 2.0 and 3.5 per cent this year, with core inflation between 1.5 and 2.5 per cent. With three policy meetings left in 2025, in July, September and November, economists say the central bank has policy space if conditions deteriorate. A 25 basis-point cut in the third quarter is still on the table, Edora said, assuming stable macroeconomic conditions and continued electricity tariff subsidies.
The Sun
22-05-2025
- Business
- The Sun
ASEAN urged to unite on US tariff response
KUALA LUMPUR: The ASEAN bloc should adopt a unified stance when negotiating retaliatory tariffs imposed by the United States (US) to ensure equitable benefits for all member states, said Putra Business School (PBS) MBA Programme Director Associate Professor Dr Ahmed Razman Abdul Latiff. He said Malaysia should take the lead in persuading fellow ASEAN nations to speak with one voice in negotiations over the tariffs introduced during the administration of US President Donald Trump. 'Individually, ASEAN countries lack the economic clout to counter US trade measures, but a united front would represent a formidable regional force,' he said during a special broadcast on the 46th ASEAN Summit aired on Bernama TV on Wednesday. Ahmed Razman said ASEAN needs a consensus-based strategy. 'Imagine a region aiming to strengthen ties with China, but if each country goes it alone, we are simply playing by the US's rules. 'There is a saying, 'united we stand, divided we fall' – and now is the time to make that real. This is something Malaysia, as ASEAN Chair, must fully embrace,' he added. Ahmed Razman also stressed that boosting intra-ASEAN trade must begin with increasing domestic demand across the region, home to about 700 million people. 'Demand stems from consumers' purchasing power. If people cannot afford goods, or demand is weak, trade cannot grow,' he said. Malaysia, as Chair and host of ASEAN 2025, will convene the 46th ASEAN Summit and Related Summits at the Kuala Lumpur Convention Centre from May 26. Two high-level meetings are also scheduled alongside the summit, the 2nd ASEAN-Gulf Cooperation Council (GCC) Summit and the ASEAN-GCC-China Summit, both seen as key platforms for strengthening regional and inter-regional cooperation.
