KUALA LUMPUR, Sept 25 — More light is expected to be shed on the subsidy rationalisation of RON95 and whether the government is looking to reintroduce the goods and services tax (GST) in Budget 2025, said RHB Investment Bank Bhd (RHB IB).
Analyst Alexander Chia said it has been almost two years since the 15th general election, and the stability of the unity government led by Prime Minister Datuk Seri Anwar Ibrahim appears rock solid.
“Despite some progress on reforms, we believe the government still has ample political capital to make further meaningful progress on subsidies and initiatives to broaden the tax base to narrow the fiscal deficit further, create headroom for infrastructure investments, and establish a pathway to contain the national debt.
“In this regard, the two key pending initiatives are subsidy rationalisation for RON95 petrol and reviving the GST that will dovetail with full implementation of e-Invoicing,” he said in a note today.
The investment bank expects RON95 subsidy rationalisation to occur towards the end of 2024.
Overall, RHB IB expects Budget 2025 – to be tabled on October 18 – to contain ingredients that encapsulate fiscal prudence, compassion for lower-income segments, commitment to reform, and clarity on initiatives to broaden the tax base.
Hence, it forecasts the fiscal deficit target for 2025 at 3.5 per cent of the gross domestic product, down from 2024’s target of 4.3 per cent.
On the high-value goods tax (HVGT), RHB IB said there is “a possibility” it will be brought up in Budget 2025. Its implementation was put on hold indefinitely. It was first announced in the revised Budget 2023.
How the proposed tax regime will be implemented is not yet visible, particularly the tax rate, item type to be taxed, and its set value threshold.
On the luxury tax’s impact on the automotive industry, RHB IB noted that while ultra-high-income earners may not be sensitive to such changes, their middle- to high-income counterparts looking for entry-level cars may feel the impact.
“Another thing that remains uncertain is whether electric vehicles (EVs) are also subject to HVGT, which we believe is counter-productive, considering existing policies to encourage EV adoption,” it said.
The investment bank also expressed concern over the HVGT’s impact on the real estate investment trusts (REITs), particularly on the higher-end retail REITs in the Kuala Lumpur city centre such as Suria KLCC and Pavilion KL.
The actual impact may be marginal, depending on the tax’s minimum threshold, RHB IB said.
— Bernama
