Malaysia Budget 2024: What you need to know

The 2024 budget will amount to RM393.8bn — the highest ever tabled.

Prime Minister and Minister of Finance, Anwar Ibrahim, announced Malaysia's Budget 2024 on 13 October 2023 (Friday), what he said would be the highest ever tabled budget, amounting to RM393.8bn. 

Of this amount, RM303.8bn has been allocated for operating expenditure, RM90bn for development expenditure, and RM2bn for contingency savings. The expenditure involves adding another RM15bn to the RMK12 ceiling, making the total amount RM415bn for a period of five years.

As shared by PM Anwar, all the efforts drawn up in this Budget will follow every priority and benchmark of the MADANI Economy which is broken down into three main focuses:

1. Best governance for service agility;
2. Restructuring the economy to boost growth; and
3. Improving people's living standards.

Key announcements are detailed below.

To start, as a measure to improve the quality of services and assistance to the people, the Unity Government is responsible for expanding the revenue base. Starting next year, several taxation reform measures will be implemented to broaden the national revenue base, while at the same time not burdening the majority of the people.

First, the government plans to increase the Service Tax rate to 8%, up from 6%. However, this increase will not affect services such as food & beverages and telecommunications. The government will also expand the scope of taxable services to include logistics, brokerage, underwriting, and karaoke services.

Second, after taking into account the input of stakeholders through an engagement session, the Government will enforce the implementation of the Capital Gains Tax for the disposal of unlisted shares by local companies based on net profit at a rate of 10% from 1 March 2024. The government is also considering the exemption of Capital Gains Tax Capital on the disposal of shares related to certain activities such as approved Initial Public Offering (IPO), internal restructuring, and venture capital companies, subject to set conditions.

The government will enact new legislation to implement the High Value Goods Tax at a rate of 5% to 10% on certain high value goods such as jewelry and watches based on the threshold value of the goods.

"Malaysia needs to keep pace with international taxation standards, especially in curbing tax base erosion activities and transferring profits to countries with low tax rates. Taking into account the feedback from the industry and the latest international developments, the government is expected to implement a global minimum tax in 2025, and this will only apply to companies with a global income of at least 750mn Euros.

"The government will also continue to monitor the development of the global minimum tax at the international level."

Regarding the implementation of e-invoicing by the Inland Revenue Board of Malaysia (LHDNM), the government has taken into account the feedback received and to give enough time to taxpayers.

• The government agreed to enforce mandatory e-invoicing for taxpayers with annual income or sales exceeding 100 million ringgit from 1 August 2024.
• Meanwhile, tax payers according to other income categories will be made in phases with a comprehensive implementation target from 1 July 2025.
• Tax Identification Number (TIN) will be expanded to support the implementation of e-invoicing. This can widen the net of taxpayers following voluntary tax compliance which further reduces revenue leakage.

At the same time, enforcement agencies will continue to intensify joint efforts to deal with revenue leakage. Measures to control cigarette smuggling, for example, have contributed to a decrease in the percentage of illegal cigarettes in the local market to 56.6% in 2022 compared to 63.8% in 2020. Since the number of illegal cigarettes is still high in the market, cooperation between agencies will be enhanced including tightening the control of liquor smuggling.

From 1 January 2024, the Government will tighten smuggling control measures and expand to liquor products.

• Transshipment activities for liquor products will be limited to certain ports only.
• Bukit Kayu Hitam Immigration, Customs, Quarantine and Security Complex will be used as a single exit for the northern region.
• Import activities for cigarettes for the domestic market must be carried out in a full container load.

PM Anwar also touched on subsidy targeting.

While the 2023 budget allocates RM64bn for subsidy and aid expenditure, this year's needs are expected to reach RM81bn. This increase is a result of the government's move to maintain the price of subsidised goods for the people despite being faced with an unexpected increase in world commodity prices, PM Anwar said. Although subsidised goods help the people to minimise the cost of living, he added, the fact is that subsidies benefit the rich and the cheap prices have increased leakage and smuggling abroad. 

Therefore, starting next year, the subsidy retargeting approach will be implemented in phases. Part of the subsidy savings will be chanelled directly to increase the allocation of cash assistance through the Rahmah Cash Contribution, from RM8bn to RM10bn.

Chicken and eggs

Since February 2022, the Government has borne RM3.8bn for egg and chicken subsidies. The original purpose of this temporary subsidy was to control the skyrocketing prices of chicken and eggs and address the shortage of supply. With supplies now stabilising, and the current market price now below the control ceiling price, the temporary price control set will be released.

Electricity

In 2022, the trend showed that 10% of customers with the highest electricity consumption will enjoy 50% of electricity subsidies, while 50% of customers with the lowest electricity consumption will only enjoy 10% of the subsidy provided.

As such, starting this year, the government has implemented targeted subsidies by releasing part of the subsidy for the highest 10% of electricity consumption but at the same time, maintaining the same subsidy for 90% of consumers. This targeted approach has been able to save more than 4.6bn ringgit from the projected electricity subsidy of 20bn ringgit. However, the Government still bears an electricity subsidy of 16bn ringgit for 2023, especially for home users and micro, small and medium enterprises (PMKS).

The government will continue to improve the targeted electricity subsidy approach according to the level of electricity consumption. The government agreed to continue giving electricity bill rebates of up to 40 ringgit per month to extreme poor households with an allocation of RM55mn. In addition, the Government has also agreed to exempt electricity bill account deposit payments in its own name.

Diesel fuel

Diesel fuel also faces serious leakage issues. The current subsidised diesel price is set at RM2.15 per litre, compared to the market price of RM3.75 per litre — with the government absorbing RM1.60 per litre of diesel (about RM1.5bn in total).

According to consumption data, subsidised diesel sales have increased by up to 40% since 2019, while the number of vehicles using diesel only increased by less than 3%.

"This means, there is a possibility of serious smuggling activities due to the price of Malaysian diesel being too cheap."

To prevent leakage and smuggling, the government intends to target diesel subsidies in phases. Conceptually, subsidised diesel prices will continue to be enjoyed by selected users such as goods transport companies. While other users will be charged a higher price. With that approach, it can reduce subsidy leakage but at the same time, reduce the impact on the price of goods for the people.

Institutional reform agenda

PM Anwar also spoke more on the institutional reform agenda.

In moving the reform agenda, the Special Task Force on Agency Reform (STAR) chaired by the Chief Secretary has succeeded in speeding up the implementation of projects, particularly involving the issue of overcrowding in hospitals and the improvement of poor schools and clinics. Next year, the STAR Team is given the responsibility to speed up the implementation of the elevator maintenance project/91mn and Government quarters/170mn.

A total of RM2.4bn has been allocated to build, maintain, and refurbish the quarters of civil servants, teachers, hospitals, policemen, soldiers, and firefighters.

With the passing of the Public Finance and Fiscal Responsibility Bill (RUU) 2023, the Unity Government's next commitment is to table the Government Procurement Bill in Parliament next year. Malaysia has allocated RM18mn to launch legal reform affairs. This includes the preparation of the Bill for the Implementation of Alternative Punishment Against the Mandatory Death Penalty.

A total of RM38mn has been provided to increase the productivity of the country's judicial institutions. This allocation includes the priority of repairing infrastructure and upgrading outdated and damaged court ICT facilities. This also includes RM20mn for the Malaysian Judicial Academy and the Malaysian Syariah Judicial Academy in training higher court judges in a more planned and effective manner.

Further, PM Anwar elaborated on the reform of public institutions. Based on several studies carried out to improve revenue sustainability, social protection, governance of Government-linked companies (GLC), and national debt management, the recommendations received will be implemented as follows:

• improving the imposition of stamp duty as well as coordinating the administration of tax incentives to reduce the leakage of revenue collection;
• strengthening tax administration including simplifying tax returns and centralising tax collection efforts;
• expanding the coverage of the social protection system, especially involving the elderly and the informal sector;
• restructuring development financial institutions (DFIs) through the merger of Bank Pembangunan Malaysia Berhad, SME Bank and Exim Bank; as well as
• strengthen the venture capital environment through the centralization of venture capital agencies such as Penjana Kapital and MAVCAP under Khazanah Nasional.

Empowering PMKS

Budget 2024 will continue to support PMKS in line with the intentions of the MADANI Economic Framework. The priority is to support the increase of business capacity and competitiveness in increasing the income growth of the people and the country.

Business Loan Facility

The total value of loans and financing guarantees available for the benefit of PMKS for the next year amounts to up to RM44bn. Micro-entrepreneurs and small traders will be provided with small loan facilities, with a total fund of RM2.4bn under agencies such as BNM, BSN, and TEKUN.

• RM1.4bn under the BSN micro loan is to help provide business capital, purchase of equipment, premises and marketing to hawkers and small entrepreneurs.
• RM330bn under TEKUN is also to provide financing facilities to small traders such as batik and craft operators, Orang Asli entrepreneurs and Bumiputeras of Sabah and Sarawak; 30mn ringgit of which is provided specifically to finance businesses run by the Indian community.
• Out of this total, RM720mn is set aside to encourage women and youth to venture into business.

Developing local talent 

Efforts announced also included the development of local talent.

"In this era, the complexity of the economy demands new talents who are highly skilled and constantly adapt to the rapidly changing world. Because of that, the development of local talent needs to be done immediately through precise refinement so that it is in line with the needs of employers and the industry, PM Anwar highlighted.

Next year, the total allocation involving TVET education will amount to RM6.8bn. The First MADANI Budget announced in February 2023 has piloted efforts to revamp the country's TVET education through collaboration with GLCs and private companies. As of 5 October, 17 GLCs and 44 private companies have been involved in the signing of 61 memorandums of understanding covering cooperation through curriculum development as well as the donation of equipment and expertise.

In 2024, RM100mn will be allocated to provide industry-recognised professional certification to TVET graduates and as an incentive for the industry to collaborate with public TVET institutions.

At the same time, Pembangunan Sumber Manusia Berhad (HRD Corp) will use a RM1.6bn fund to provide 1.7mn training offers. HRD Corp will also re-allocate special funds using 15% of the total levy collection to implement the MADANI Training Programme, which will include retraining and skill improvement programmes for PMKS entrepreneurs and vulnerable groups such as ex-convicts, the disabled, the elderly, and retirees.

Additionally, efforts to produce more future talents that meet the needs of the industry will be streamlined and expanded through close cooperation between government agencies and industry. To curb the lack of local talent and skills mismatch, the Academy in Industry Programme will be implemented to provide skills to working individuals for a period of up to 18 months, with an allocation of RM70mn.

Apart from that, RM180mn will be allocated to educational loan facilities for 12,000 trainees who follow the Skills Certification Programme. This includes those pursuing maritime, arts at ASWARA, and aerospace MRO.

Finally, RM17mn will be allocated to the Tahfiz TVET programme, to open up opportunities for Tahfiz students to diversify their skills in addition to continuing their memorisation studies.

PM Anwar also addressed efforts for more meaningful income. As part of this, the People’s Income Initiative (IPR) launched this year has managed to increase the monthly income of more than 2,000 participants. Under the INSAN programme, the participants managed to earn an average sales revenue of up to RM14,000 per month.

Following this, RM500mn will be provided next year to increase the participation of more hardcore poor in the IPR programme to increase their income.

Based on the latest data as shared by PM Anwar, efforts to tackle extreme poverty continue to reflect progress, with the extreme poverty rate falling from an estimated 1% in 2020 to 0.2%,or 18,000 households, at present. 

The government also agreed to enable the skills improvement programme under the MyFutureJobs platform accessible to all MySTEP appointments. This platform will provide matching jobs that will build their future career and generate higher income. This initiative will offer 50,000 jobs opportunities on contract basis in the public sector and GLCs starting January 2024.

At the same time, Malaysia will continue to encourage the vulnerable people such as the disabled, former inmates and senior citizens to secure jobs with meaningful salaries.

• To encourage private employers to employ the vulnerable, SOCSO will provide a special incentive of RM1,500 per month for the period of six months to support the entry of more than 3,300 job seekers with an allocation of RM30mn.
• The One Percent Policy on Employment Opportunities for the disabled will be extended to former inmates and senior citizens via the MYFutureJobs job-matching and MySTEP programme. Vulnerable group participating in the MySTEP programme will be offered contractual placements with an allowance of RM1,500 for a period of six months in various ministries, GLICs and GLCs as well as government’s strategic partners.

Lastly, the government will continue the Career Building Programme through SOCSO to ensure informal workers, especially in the gig economy, are given the opportunity to participate in career development and microcredential skills training programmes. RM35mn will be provided to bear the cost of training fees and income replacement incentives for 9,000 gig workers to attend training programmes.

Other than that, Malaysia is improving social protection programmes to ensure that the focus group continues to receive the appropriate protection.

First, the government’s contribution under the Self-Employment Social Security Scheme (SKSPS) will be increased to 90% with an allocation of RM100mn. PM Anwar urges the operating company of gig workers to cover the remaining 10% of the contribution. 

The government’s matching contribution limit under the EPF’s i-Saraan programme will be increased to RM500 per year, limited to RM5,000 for life. Similarly, the government’s matching contribution limit under the EPF’s i-Suri programme will be increased to RM300 per year, limited to RM3,000 for life.

The Housewives’ Social Security Scheme will also be continued with an allocation of RM50mn involving more than 400,000 housewives registered under e-Kasih.

Lastly, on the basis of love and care, the EPF’s i-Sayang programme will be expanded to allow wives to transfer 2% of their EPF contributions to their husbands.

Apart from the above, the Government will increase the monthly salary ceiling for SOSCO contributions from RM5,000 to RM6,000. This increment will expand cash benefits at a rate of 20.2% to benefit 1.45mn workers and their dependents.

The accounts of EPF members will be restructured to strengthen retirement savings. The new EPF Flexible Account will be introduced to allow accessibility to members at any time.

Lead image / Prime Minister and Minister of Finance Malaysia Anwar Ibrahim Facebook