KUALA LUMPUR: The only reason the government was still able to project a “moderate” 3 per cent budget deficit for 2017 was because of an optimistic projection in tax revenues, said Petaling Jaya Utara MP Tony Pua in a statement.
“Budget 2017 proves the government was running out of cash,” said Pua who is also DAP National publicity secretary. “The situation will only deteriorate further, making 2017 one of the worst years for the people.”
Despite a significant drop in the Petroleum Income Tax (PITA) from RM11.6 billion in 2015 to RM8.5 billion in 2016, he said, the government expects higher oil prices and demand for 2017 and to collect RM10.6 billion.
The government also assumes an increase in Corporate Income Tax (CITA) despite no assumption in a higher economic growth rate, he added.
CITA actually declined marginally in 2016 to RM63.2 billion from RM63.7 billion in 2015, he pointed out.
However in 2017, he said, the government has projected it would receive RM69.2 billion.
Similarly, said Pua, despite declining Goods and Services Tax (GST) collection, the government expects an increase from RM38.5 billion in 2016 to RM40 billion in 2017.
All this proves the government is running out of cash very quickly, continued Pua. “It’s struggling to balance revenue and expenses.”
He attributed the worsening fiscal situation to the government’s excesses in the past. He cited increasing the civil service to reduce graduate unemployment, and excessive borrowings to finance inefficiency, corruption and wastage.
“All these have severely constricted the government’s ability to allocate expenditure today,” said Pua.
Hence, he reiterated, when the overly optimistic projections in government revenue collection fail to materialise, expect 2017 to be a very painful year.
Already, he said the Federal Government failed to meet 2016 revenue targets
Last year, he recalled that Prime Minister Najib Razak assured the government would collect RM225.7 billion for 2016. However, the 2016 revenue has now been revised to RM212.6 billion based on the latest estimates.
That represents a very substantial 5.8 per cent or RM13.1 billion shortfall for 2016.
To put things in perspective, and to highlight the severity of the situation, the government will “collect” more than they “projected”, said Pua.
The shortfall has in turn caused lower projected operating and development expenditure, he said.
The government now estimates the 2016 operating expenditure to drop from RM215.2 billion to RM207.1 billion, while development expenditure will drop from RM50 billion to only RM45 billion.