KUALA LUMPUR, Oct. 3 (Xinhua) -- Malaysia's upcoming budget is expected to be expansionary, but the country's fiscal consolidation remains on track as further revenue enhancement measures will be introduced, said UOB research Tuesday.
"Given that this is the final budget before the next general election, we expect an expansionary budget with focus on the lower and middle income segments, addressing cost of living, affordable housing issues, and new technology to spur growth," the research house's economist Julia Goh said.
She also believes the budget will sustain the momentum of core infrastructure spending as project awards and announcements are reaffirmed.
The Malaysian government is expected to announce tax incentives for industries to develop and adopt Industry 4.0, she said.
Meanwhile, the pipeline of awards for Malaysia's Kuala Lumpur-Singapore High Speed Rail is expected to step up as construction is slated to begin in 2018. The East Coast Economic Region has also attracted 14 local and foreign companies with 9.9 billion ringgit (2.34 billion U.S. dollars) of investments.
Goh also noted that the Malaysian government revenues will be enhanced by broadening the tax base to include foreign digital service providers and increasing tax compliance and enforcement efforts.
It is reported that Malaysian officials are mulling to tax companies with business in Malaysia but book their revenues abroad.
It is noted that the law amendments are being made to tax digital service providers based in other countries but offer services locally.
"Potentially the 6 percent goods and services tax (GST) would be imposed on purchase of digital services from providers based outside Malaysia. The additional revenue from income tax and GST is expected to be sizeable," Goh said.
With a combination of higher revenue and targeted spending, she believes that the Malaysian government is able to achieve narrower fiscal deficits, which represents a negative 2.9 percent of the country's gross domestic product in 2018, and a negative 3 percent in 2017.
