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OECD SENIOR BUDGET OFFICIALS MEETING
15th December 2016
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Various Fiscal reforms: to achieve fiscal sustainability and enhance nation's net worth
GST Implementation (1 April 2015)
The GST provides the government with a more comprehensive, transparent and efficient source of revenue
The GST is also likely to improve tax compliance, broaden and diversify the Government’s revenue base
Phase-by-phase rationalisation to better target allocation of subsidies towards more vulnerable groups
Subsidy Rationalisation Programme
Creation of a Fiscal Policy Committee (FPC)
High-level, strategic decision-making executive committee comprising key economic policymakers
Reviews regularly the Government’s fiscal performance, parameters used in the Medium Term Fiscal Framework (MTFF) and tracking to targets
Supported by a Fiscal Policy Office, set up concurrently to guide fiscal decision-making
Adopting Outcome-Based Budgeting (OBB)
An integrated performance framework with focus on detailed planning and outcome of budget initiatives
Emphasis on improving data quality across all ministries and federal agencies
2 Sources: Ministry of Finance
Adoption of the Medium Term Fiscal Framework (MTFF) for fiscal projections beyond annual budget horizon
Strategy include medium term rev-exp projections which is based on existing & new policies to achieve deficit targets.
Adopting Medium Term Fiscal Framework (MTFF)
Accrual accounting is essential to systematically determine the full costs of the government’s initiatives. Hence enhancing accountability and transparency of public financial management
Government will also be able to account for and assess all assets and liabilities and cost savings relevant to the overall stance of fiscal policy and sustainability
Shift from cash-based to accrual accounting is in line with requirements under the International Public Sector Accounting Standards (IPSAS)
Implementing Accrual Accounting Practices
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Prudence in public finances have helped to narrow fiscal deficit over the years. Total expenditure in 2016 is lower than the original budgeted expenditure, underscoring a tightening in budgetary discipline.
Demonstrable results of fiscal prudence
Consistently delivering deficit reduction
Improvement in government finances
% of GDP
Source: MoF
Source: MoF
Budget 2017: Prudent and Productive spending
MYR bn 2015 2016B 2016R 2017B
Revenue 219.1 225.7 212.6 219.7
Operating expenditure 217.0 215.2 207.1 214.8
Current balance 2.1 10.4 5.5 4.9
Development expenditure
40.8 50.0 45.0 46.0
Less: Loan recoveries 1.5 0.8 0.8 0.7
Overall balance -37.2 -38.8 -37.7 -40.3
% to GDP -3.2 -3.1 -3.1 -3.0
30.8% 32.4% 35.7% 36.0%
15.7% 17.2% 14.3% 14.9%
15.2% 12.3% 11.9% 10.4%
10.3% 11.4% 12.9% 13.4% 7.6% 8.5% 9.2% 10.1%
20.4% 18.2% 16.1% 15.0%
2010 2015 2016R 2017B
Development expenditure by sector
Operational expenditure by object
Others
Retirement charges
Debt service charges
Subsidies
Supplies & services
Emoluments
49.5% 39.4%
7.5%
3.6%
56.2%
26.5%
11.5%
5.8%
Economic Social Defence General administration
2010
2017B
(5.3) (4.7)
(4.3) (3.8)
(3.4) (3.2) (3.1) (3.0)
(0.6)
(3.4) (2.7) (2.3)
(1.7) (1.3) (1.1) (1.0) (0.9)
1.2
2010 2011 2012 2013 2014 2015 2016R 2017Budget
2020under11MP
Fiscal balance Primary balance
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Alongside cuts in recurrent spending, fiscal consolidation will be led by increased revenue generation from more diverse sources as well as enhanced tax efficiency and compliance – a strategy which will further ensure fiscal sustainability
Revenue sources have moved away from reliance on the oil sector
Share of oil-related and non-oil revenues, %
Diversification away from oil-related revenues as part of an ongoing long-term strategy
Incremental government revenues despite reduced dependency on oil sector reflects effectiveness in policies
Source: Ministry of Finance
41.3 35.4 35.8 33.7 31.2 30.0 21.5 14.6 13.8
58.7 64.6 64.2 66.3 68.8 70.0 78.5 85.4 86.2
2009 2010 2011 2012 2013 2014 2015 2016R 2017B
Oil-related Non-oil
Composition of total revenue
29.0 11.5 8.5 10.6
6.5
5.1 3.7 3.7
29.0
26.0 16.0 13.0
2014 2015 2016R 2017B
PITARoyaltiesDividend
65.2 63.7 63.2 69.2
24.4 26.3 28.2 29.8
17.2 35.2 38.6
40.0
2014 2015 2016R 2017B
CITA PIT SST / GST
66.3 bn
47.2 bn
106.9 bn
125.2 bn
35.3% 37.6% 42.6% 45.2% 45.7% 48.0% 50.1%
15.0% 15.0% 13.9% 12.2% 5.3% 4.0% 4.8%
13.1% 10.4% 9.1% 9.2% 8.4% 8.5% 9.0%
7.8% 7.4% 7.5% 7.8% 3.8%
12.3% 18.1% 18.2% 22.7% 23.3% 19.4% 18.3% 17.3% 12.7% 9.7% 6.1% 6.3% 7.5% 7.3% 7.2% 8.7% 8.2%
2005-08 2009-12 2013 2014 2015 2016R 2017B
Direct taxes (excl. PITA) Petroleum income tax Indirect taxes (excl. SST / GST) SST GST Petroleum royalties and returns on investments Others
132.4 bn 177.9 bn 213.4 bn 220.6 bn 219.1 bn 219.7 bn
30.9 bn
130 bn
212.6 bn
30.2 bn
139 bn
WHERE IT COMES FROM WHERE IT GOES
CHANNELLING RESOURCES TOWARDS PRODUCTIVE SPENDING
Income tax 43.1%
RM260.8 bil
Other direct tax
3.2% Indirect tax
22.9%
Non-tax revenue
15.0%
Borrowings & use of Government’s assets
15.8%
Debt service charges
11.1%
Emoluments
29.7%
General admin
1.0%
Security
2.0%
DEVELOPMENT EXPENDITURE
Economic
9.9%
Social
4.7%
Supplies & services
12.3%
Retirement charges
8.3%
Grants & transfers to
state govts
3.1%
Subsidies & social
assistance
8.6%
Other expenditure
9.3%
RM260.8 bil
2017 Budget Touchpoints
• 1Malaysia People’s Aid (BR1M) • Spurring Economic Growth
• Subsidies and Incentives • Inclusivity
• Generate additional income for B40
• Safety and Security
• Increase Home Ownership • Health and Sports
• Rakyat Centric Projects • NBOS and Transport
• Lifestyle Tax Relief • Human Capital
• Public Servants
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Appendix
