Revised 2021 budget needed by year-end

The Parliament must approve the remaining 80% of the budget, which includes operations of public services, says finance minister

A REVISED or a new budget for 2021 can be tabled in Parliament by next month should the current Budget 2021 fail to get the necessary support of Dewan Rakyat members tomorrow.

In a dialogue with Maybank Investment Bank Bhd (Maybank IB), Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz (picture) said the finance minister does not have the power to “overrule” Parliament if Budget 2021 is rejected.

If the Supply Bill is rejected, Tengku Zafrul explained that only the “charged expenditure” portion of the budget can be spent, which is essentially pension and debt servicing accounting for 20% of the overall budget.

The Parliament must approve the remaining 80% of the budget, which includes operations of public services like healthcare, education, as well as law and order, he told the investment bank.

“In the event of Budget 2021 not passed by the Parliament, a revised or new Budget 2021 needs to be tabled and approved before the end of this year to avoid delay into next year,” the report quoted Tengku Zafrul as saying.

To note, the Dewan Rakyat’s current sitting ends on Dec 15.

Tengku Zafrul added that the use of Section 102(a) of the Federal Constitution to pass a partial budget is allowed when there is insufficient time to approve a budget before the start of the new financial year.

However, there is no precedent to approve a partial budget after the rejection of a budget, he added.

Budget 2021 has been a hot topic in the august house as MPs debated on the allocations for the biggest budget ever presented in the country which stands at RM322.5 billion.

The vote on the budget at the policy stage will be held tomorrow. When asked by Maybank IB on the risk of a larger budget deficit for next year if the GDP turns out to be weaker than expected, Tengku Zafrul stated that the government has funds and reserves in other government entities that “can be tapped if needed”.

The federal government can also be flexible and dynamic in managing its spending to accommodate any revenue shortfalls, which are done this year, he added.

The report also noted that the government decided not to impose a windfall tax on glove manufacturers to avoid potential “opportunity costs or losses”, such as glove manufacturing companies making investment overseas instead of in the country, which will send wrong signals to existing and potential investors in other industries.

“Contributions by glove manufacturers are voluntary and are on top of the glove manufacturers’ record corporate income taxes of RM2.8 billion in 2020 and RM4.7 billion in 2021,” the finance minister said when asked if the RM400 million contribution from glove manufacturers will be one-off.

The issue was raised in Parliament last week when Muar MP Syed Saddiq Syed Abdul Rahman called for the government to impose windfall tax on profitable glove manufacturing companies to assist in recovery after the Covid-19 pandemic.

On Petroliam Nasional Bhd’s (Petronas) dividend, Tengku Zafrul said the company’s dividend to the government is based on its performance and taking into consideration its funding needs for operation, obligation and capital expenditure.

Petroleum-related revenue is forecast to be at 16% of total revenue in 2021, down from 22% in 2020 and 32% in 2019.

“Forecast of lower Petronas dividend in 2021 of RM18 billion versus RM34 billion in 2020 acknowledges the adverse impact of Covid-19 on the oil and gas (O&G) industry and Petronas.

“Going forward, the government will continue with efforts to diversify revenues away from the O&G sector,” Tengku Zafrul told Maybank IB.

Tengku Zafrul said the ministry has set up a committee to study “various revenue-enhancing measures” including the possible return of the Goods and Services Tax.

The committee will analyse the weakness of the current tax regime and the impact of new taxation on the economy. It will also study options for new taxes such as carbon tax and digital tax.

The minister told Maybank IB there is a need to coordinate revenue and spending capacities, and timing is important especially with regards to imposition of any new taxes so as not to disrupt the economic recovery process.

“2021 is a transition year from crisis to recovery, so fiscal consolidation will resume when the economy is back on growth trajectory,” the investment bank report stated quoting him.

THE MALAYSIAN RESERVE

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