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Categories
| Widening deficit not expected to downgrade credit rating |
| Politics & Government 2009 | |||
| Written by Yong Min Wei | |||
| Thursday, 12 March 2009 23:35 | |||
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Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak said the fiscal deficit was bound to increase following the RM60 billion mini-budget and noted that the proposal by several opposition MPs for a RM100 billion mini-budget would only cause the deficit to rise to an unmanageable level of above 10%.  "What is important for the short- and mid-term is to take steps to reduce the fiscal deficit," he said during the debate on the mini-budget.According to Najib, Malaysia had a good track record in facing economic challenges, and he pointed out that the fiscal deficit was successfully reduced from 5.3% in 2002 to 3.2% in 2007. He added that with the possible economic recovery given the prudent fiscal measures being taken, the government was confident that the deficit of 7.6% could be reduced to a much lower level. Najib told the Dewan Rakyat that the government did not announce tax cuts for the corporate sector and the small and medium enterprises (SMEs) during the tabling of the mini-budget as the current tax rates remained competitive. He said Malaysia's corporate tax rate had been gradually reduced from 28% in 2006 to 25% in 2009 and as such, the government felt the current level was reasonable and enabled reinvestment opportunities. "The SMEs are also enjoying a preferential tax of 20% for the first RM500,000 chargeable income," he said, adding that the current corporate tax level was lower than many countries in the region such as Thailand (30%), Indonesia (30%), Vietnam (28%), China (25%) and Taiwan (25%). He said Malaysia's corporate tax might be higher than that of Singapore (17%) and Hong Kong (16.5%) but the two countries were subject to the broad-based goods and services tax (GST) which Malaysia had chosen not to implement at the moment. "The mini-budget also has tax incentives and measures for the corporate sector which will see certain companies' effective tax rates reduced to between 3% and 7% only," Najib said. Earlier, Najib also assured the House that the RM60 billion under the mini-budget would be a reality as it was not a figure that was plucked from the sky. DAP Parliamentary Leader Lim Kit Siang during the debate questioned the finance minister why it had taken the government such a long time to implement the second stimulus package and if the reason was because Barisan Nasional (BN) was more preoccupied in seizing power in Perak. This raised hackles of some BN backbenchers and a shouting match ensued for a short while with several BN MPs accusing Lim of wasting time in the House before calm was restored by the Deputy Speaker Datuk Ronald Kiandee. Najib also said as of last month, some RM1.584 billion in terms of value of the projects had been implemented under the first stimulus package of RM7 billion. "The amount would be increased to RM2.8 billion by the end of this month," he added.
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