PETALING JAYA: With Covid-19 weighing heavily on the country, Budget 2021 could see targeted cash assistance for vulnerable groups and social protection schemes being extended alongside new measures to restore the battered economy.
The stimulus measures introduced this year such as wage subsidies, cash aid for the B40 and M40 groups, plus the automotive sales tax exemption could potentially be extended into 2021.
Along with these, there could also be new measures to support consumption, stimulate investments, accelerate digitalisation, improve job creation and wages, UOB economists Julia Goh (pic) and Loke Siew Ting said in a report.
In their preview of Budget 2021, the economists do not expect new taxes to be introduced, except for a possible pollution tax or carbon tax and a streamlining of the existing tax system to further reduce leakages.
Budget 2021, which will be the first since the pandemic outbreak, and also the first under the 12th Malaysia Plan (2021-2025) will be tabled on Nov 6.
“As such, it will present short- and medium-term initiatives to elevate the country’s economic development while addressing the negative lingering effects of the pandemic.
“We expect it to be expansionary with a projected fiscal deficit of 5.7% of gross domestic product (GDP) and the debt-to-GDP ratio capped below the new ceiling of 60%, ” the bank said.
In September, the government announced an additional RM7bil cash assistance with the second tranche, estimated at RM2.7bil, to be distributed in January 2021. UOB said the cash assistance may be extended further, albeit being more targeted.
Where taxes are concerned, the budget could potentially see a widening of tax relief programmes to spur consumption and ease the burden of individuals and households.
“This could cover tax relief for individual and dependent relatives, medical treatment, education, lifestyle, domestic tourism (for airlines and hotel stay), and insurance.
“Given the higher usage of household internet for work or study from home, perhaps a separate tax relief for broadband subscriptions and allowing tax exemptions for up to three purchases of computers within three years, ” UOB said.
As for steering the economy, the report sees the possibility of an extension of the wage subsidy programme (WSP), which has helped save 2.6 million jobs.
“As unemployment rates are expected to stay elevated even in 2021 amid lingering post-pandemic effects, some consideration may be given to extending the WSP for another six months, ” it said.
The programme ends on Dec 31. Support rates may be reduced for certain industries and maintained for the hardest-hit sectors.
Other measures could include the extension of the current job creation incentives, besides the introduction of a targeted skills programme to meet industry needs.
It noted that under the government’s Penjana hiring incentive programme, RM600-RM1,000 a month was given to support companies to expand employment, but this is also due to expire at the end of 2020.
The Penjana initiative also introduced the reskill and upskill programme for the youth and unemployed worth up to RM2bil.
To support the small and medium-sized enterprises (SMEs), consideration may be given to granting tax relief for landlords that continue to provide rental discounts to SMEs apart from potential tax reliefs or rebates for companies investing in digital or technology capabilities.
According to the bank, Budget 2021 could also address the overhang in residential properties and this could include lowering the threshold for foreign buyers for leasehold properties and reducing the applicable real property gains tax rates for companies and individuals to previous levels before 2014.
For construction, UOB anticipates some signalling from the government on the revival of infrastructure projects.
The Malaysian economy contracted 8.2% year-on-year in the first half and although economic indicators have improved since May, conditions are nowhere near pre-pandemic levels.