Budget 2014 strengthens economic resilience

rime Minister Datuk Seri Najib Razak today set out the 2014 Budget, which aims to strengthen Malaysia's economic resilience, boost growth, continue the government's transformation programme and fulfil the government's promises.

In his keenly-awaited budget speech in Parliament, the Prime Minister announced the implementation of the Goods and Services Tax (GST), which will come into force on April 1, 2015, at the rate of six per cent.

"Replacing the existing sales tax and service tax, GST will improve public finances for the medium-and long-term benefit of the people," he said in a brief statement issued by the Prime Minister's Office.

The Prime Minister also announced the abolition of the subsidy for sugar, effective tomorrow.

To provide a further boost to businesses, corporate income tax will be reduced by one per cent from 25 per cent to 24 per cent from 2016.

Income tax for small and medium sized enterprises will also be reduced from 20 per cent to 19 per cent, from 2016.

Upon the implementation of the GST, individual income tax rates will be reduced by between one and three per cent for all taxpayers. With this measure, 300,000 people earning low income will no longer pay tax.

The measures will help the government meet its deficit reduction targets.

The government aims to cut the fiscal deficit to four per cent in 2013, 3.5 per cent in 2014 and three per cent in 2015.

"This budget ensures that the economy expands at a strong pace, the fiscal deficit is reduced and the nation and the people continue to prosper," the Prime Minister said.

The government predicts that in 2014, the Gross Domestic Product (GDP) will be between 5.0-5.5 per cent, up from 4.5-5.0 per cent in 2013.

Per capita income will rise to RM34,126, up from RM24,879 in 2009, an increase of 37 per cent over six years, while inflation will be between 2-3 per cent and unemployment at 3.1 per cent.

In keeping with the government's policy of shifting from general subsidies to those that target lower income households, Najib announced modest increases to the BR1M initiative.

He also highlighted new infrastructure projects that will boost growth and improve the ease of doing business, such as the West Coast Expressway, railway upgrades, new Petronas investments and improved broadband internet access.

Najib also said the government will do what is right for the country's economy.

"Some measures may not be popular now, but over the medium-term what is good for the economy is also good for the people," he added