KUALA LUMPUR, Sept 19 (Bernama) -- RHB Research Sdn Bhd expects major changes for Budget 2019, with significant cuts to certain areas as the government streamlines its procurement process and introduces open tenders for all public procurement.

In a note today, Economist Vincent Loo Yeong Hong said the areas that would likely see significant cuts of up to 10 per cent include supplies and services, which was allocated RM33.6 billion or 12 per cent of the total 2018 budget, as well as grants and transfers, which received RM38 billion or 13.6 per cent previously.

He said other areas that could be affected include development expenditure as indicated by recent government actions of cancelling or deferring infrastructure projects, as well as the emoluments of civil servants after the termination of 17,000 political appointees.

“Subsidies (RM26.5 billion or 9.5 per cent of expenditure) could likely see moderate reductions of three to five per cent as the government indicated that fuel subsidies will be targeted for cars with engine capacity below 1,300cc and motorcycles below 125cc,” Loo said.

 Furthermore, the economist said the government would have to tighten its expenditure as it was experiencing a shortfall in revenue from the replacement of the Goods and Services Tax (GST) with Sales and Services Tax (SST), as well as allowing companies to offset income tax returns owed in previous years against taxes payable in coming years.

“This will result in lower tax collection in the coming years,” he said.

Loo said the government had reported RM19.2 billion of delayed GST refunds and another RM16 billion in unreturned companies and individual tax refunds, which spanned back six years and owed to 1.65 million individuals and companies.

“The government has subsequently allowed taxpayers who have been owed tax refunds to apply to offset this against income tax that is payable for the current year. On the GST refunds, it reassured companies that they will receive their GST refunds starting next year.

“Even if the payback period is stretched out three to five years, the annual payment of GST and income tax refunds would still be substantial between RM7.1 billion and RM11.8 billion,” Loo said, adding that the 2019 budget deficit would likely be maintained at 2.8 per cent.

-- BERNAMA