KUALA LUMPUR • Malaysia will implement a new sales tax in September to replace the consumption levy that it is scrapping next month as Prime Minister Mahathir Mohamad looks for ways to temper concerns about the nation's budget.
The government is studying a 10 per cent rate for the sales and services tax, he told reporters in Putrajaya after a Cabinet meeting.
Tun Dr Mahathir is seeking more fiscal space to fulfil election pledges that include reducing living costs and fuel subsidies after finding the state saddled with debt and contingent liabilities exceeding RM1 trillion (S$336 billion). The government will satisfy one such promise when it sets the goods and services tax at zero tomorrow.
"We find that the situation is worse than we thought when we were preparing the manifesto," Dr Mahathir said. "That is why the promises will be fulfilled, but they must take into account the financial situation."
While Malaysia must take drastic short-term steps to restore fiscal strength, it will not set aside programmes to boost growth, Economic Affairs Minister Azmin Ali said in a statement. The government will revise development plans for the rest of the decade in line with election pledges and will continue projects that have a large impact on the economy, he said.
The government will also review the Bandar Malaysia property project conceived by the troubled 1Malaysia Development Berhad (1MDB) state fund, while the multi-billion-dollar high-speed-rail link to Singapore and other major projects will be revisited when the country is in a better financial position, Dr Mahathir said.
WORSE THAN FEARED
We find that the situation is worse than we thought when we were preparing the manifesto. That is why the promises will be fulfilled, but they must take into account the financial situation.
MALAYSIAN PRIME MINISTER MAHATHIR MOHAMAD, on the need to find more fiscal space to fulfil election pledges.
He added that civil servants will get a RM400 bonus payment, while road users will enjoy a 50 per cent discount on tolls in the two days leading up to Hari Raya Puasa, which is set to fall in mid-June. The government will keep prices for diesel and RON95 petrol unchanged, while the RON97 grade of petrol will move according to market prices.