KUALA LUMPUR, October 13 — Malaysia’s upcoming 2024 budget reveals a significant reduction in the nation’s dependence on petroleum-derived revenues, with the figure set to decrease by 13.8 percent to RM64 billion. According to the Ministry of Finance’s Fiscal Outlook and Federal Government Revenue Estimates 2024 report, this represents only 3.2 percent of the country’s gross domestic product (GDP). This decline in petroleum-related income can be attributed to several factors, including reduced foreign investments and a smaller annual dividend from the state oil and gas giant Petroliam Nasional Bhd (Petronas).
In 2024, it is anticipated that Petronas will contribute around RM32 billion, while Bank Negara Malaysia (BNM) estimates this figure to be RM3 billion higher. Consequently, overall earnings from petroleum sources are predicted to fall short of the 2023 figures, totaling RM61.8 billion or 3.1 percent of the GDP, compared to RM69.8 billion or 3.8 percent of the GDP recorded in 2023. This decrease in petroleum-derived revenue persists despite an upward trend in global crude oil prices. In 2023, there was a gradual shift away from petroleum-based taxes and kickbacks, with collections from this sector making up only 23 percent of the overall revenue, down from 28 percent in the previous year.
This aligns with the government’s efforts to reduce the country’s reliance on petroleum-driven income streams. One contributing factor to this decreased reliance in 2023 is the ongoing downward pressure on crude oil prices. Non-petroleum revenue streams are expected to increase to 77 percent, up from the 72 percent recorded in 2022. With this shift, the government is expected to accumulate a substantial RM233.4 billion in revenue, a significant increase from the RM211.9 billion reported in 2022. These projections signify a crucial economic transition, highlighting Malaysia’s commitment to diversify its revenue streams and reduce dependence on petroleum-derived income in the coming fiscal year.
Direct taxes for the government are expected to increase by 6.9 percent to RM185 billion or 75.9 percent of the total tax collections for 2024. Individual taxes will contribute RM42.5 billion, while corporate income tax (CITA) will contribute RM106.4 billion. The increase in CITA taxes is attributed to improved company performances and government audit efforts. Individual taxes will increase by 6.9 percent, while petroleum income tax (PITA) is estimated to be around RM21.7 billion due to the price of a barrel of oil stabilizing at RM85.
Additionally, an extra RM8.6 billion is expected from stamp duties on land sales, further reducing the government’s reliance on petroleum-based revenue sources, a trend that has been gaining traction since 2022. In contrast, for the year ending 2023, indirect taxes are projected to increase by 4.7 percent, reaching RM58.6 billion, primarily driven by the sales and services tax (SST). Looking ahead to 2024, SST is expected to make a significant contribution, amounting to RM35.8 billion or 1.8 percent of the GDP.
Sales tax is predicted to bring in RM18.3 billion, while service tax is estimated to contribute RM17.5 billion. Excise taxes will further enhance the indirect tax revenue, generating RM13.6 billion, driven by higher import costs for cigarettes and products like liquid and nicotine gel used in vaping. In the broader context of government revenue, 2023 is anticipated to see a substantial increase, with the government eyeing a total of RM303.2 billion, equivalent to 16.4 percent of the GDP. This represents a three percent surge compared to 2022, primarily fueled by the surge in tax collections, which are projected to reach RM229 billion or 12.4 percent of the GDP.
In tandem with this, non-tax revenue is also on an upward trajectory, with expectations that it will reach RM74.2 billion, making up four percent of the GDP. This highlights the government’s diversified approach to revenue generation, minimizing its dependency on petroleum-related sources and bolstering its fiscal resilience.
