KUCHING: The Budget 2024 is expected to allocate funds to support the New Industrial Master Plan 2030 (NIMP 2030) as it is crucial element within the “MADANI Economy: Empowering the People” framework.
Dr Deboshree Ghosh, who is senior lecturer at the School of Law and Governance, Faculty of Business and Law at Taylor’s University said this as NIMP2030 could steer the country towards a new growth trajectory.
“While the targeted action-oriented approach, coupled with support for a progressive wage model (PWM), holds promise, the substantial current government debt burden is a concern,” she said.
She also agreed that reintroducing the Goods and Services Tax (GST) can boost tax revenue and reduce the fiscal deficit by 50 per cent over a decade, restoring the tax-GDP ratio to 12.8 per cent.
“Given this complex economic situation concerning sustainable government debt and purchasing power, the timing of implementing the PWM and GST becomes pivotal.
“Stable economic growth of Malaysia currently is based on stabilising domestic demand since external demand remains low.
“Therefore, introducing a consumption tax like the GST could have significant repercussions given existing supply chain issues and low wages,” she said in her statement on the Budget 2024 which will be tabled today (Oct 13).
She then stated that the swift implementation of a PWM followed by a nuanced GST law is a crucial strategy for enhancing domestic demand, tax revenues along with SME growth in Malaysia.
“However, the lag between the two is of utmost importance, as the successful implementation of PWM would ensure that workers receive progressively higher wages, bolstering consumer spending, thereby igniting a series of positive economic effects.
“As consumers spend more, businesses experience increased sales, leading to higher revenues.
“In response, these businesses may expand their operations and therefore not only contributes to economic growth but also generates employment opportunities,” she added.
Deboshree then explained that any GST reintroduction must be carefully designed to minimise its impact on the underserved community and ensure efficient refund systems for businesses.
“Malaysians are already grappling with increased housing costs due to the recent rise in the overnight policy rate (OPR) to 3 per cent by Bank Negara Malaysia.
“Therefore, any proposed action plan must account for the ripple effect of this monetary policy tightening.
“Simultaneous implementation of the PWM and GST carries potential risks. While the PMW aims to enhance the ability to pay, implementing it alongside GST may counteract its intended benefits and harm SMEs, leading to further economic challenges,” she added.
