Budget 2025: Our Views
Prime Minister Datuk Seri Anwar Ibrahim tabled the third MADANI Budget 2025 on 18 October 2024, with three focus: reforming the economy, fueling change and bringing prosperity to the people.
Budget 2025 is projecting a narrower fiscal deficit of 3.8% of Gross Domestic Product (GDP) or RM79.9bn (2024: estimate 4.3%), but will still be expansionary with total expenditure projected at its highest ever at RM421bn or 20.2% of GDP. The higher expenditure will be made up of RM335bn of operating expenses, while development expenditure will remain flat at RM86bn, preferring to leverage on the private sector to implement key projects to ease fiscal constraints and debt burden as outlined in the newly launched Public-Private Partnership Master Plan 2030. RM9bn of Public-Private investments (PFI) are expected to be implemented, in addition to direct domestic investments by Government-Linked Investments Company (GLIC) companies worth RM25bn, bringing public investments for development in 2025 to RM120bn.
Revenue for 2025 is projected to be higher at RM340bn (+5.5%) or 16.3% of GDP, driven by higher direct tax collection (+6.6% to RM188.8bn) and indirect tax collection (+9.8% to RM70.2bn), supported by sustained economic growth, higher corporate earnings, higher personal income and spending, and continued rollout of e-invoicing in phases. Revenue increase is also supported by the following measures: a more progressive Sales and Service Tax (SST) to be implemented on 1 May 2025. Sales tax will not be imposed on basic food items but on premium imported items, for example salmon or avocado. Services tax will be expanded to cover commercial services such as fee based financial services. In addition, Budget 2025 proposes a 2% tax on dividends exceeding RM100,000 received by individual shareholders, although this is not applicable to distributions made by Employees Provident Fund (EPF), Lembaga Tabung Angkatan Tentera (LTAT), Amanah Saham Nasional Berhad (ASNB) and any unit trusts. Dividend income from abroad is also exempted. Oil-related revenues is expected to decline to RM62bn, following the assumption of lower global oil price forecast of USD75-80/bbl in 2025 (vs USD80-85/bbl in 2024); and lower non-tax revenue in 2025 to RM80.7bn from lower proceeds from investment income (although Petronas dividend committed is still unchanged at RM32bn). The revenue impact of carbon tax on steel, iron and utilities will only kick in the following year in 2026.
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