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Malaysia's 1998 Budget was announced on October 17, 1997 at a time when the country
together with its neighbouring ASEAN nations face the challenges of both currency
and stock market turmoil. Despite the current crisis, the fundamentals of the economy
are sound. The country experienced its tenth consecutive good year of GDP growth
in 1997, estimated at 8% (1996 : 8.6%). The CPI measure of inflation showed a 2.6%
year todate increase, against 3.6% during the corresponding period in 1996. The balance
of payments situation although narrowing, remains the perennial dark cloud, with
a current account deficit of RM13.1 billion or 5% of GNP (1996: RM12.3 billion; 5.2%
GNP).
Overall, the Budget is somewhat painful and may appear unpopular compared to those
of the last few years. However, it reflects the Government's ability to respond speedily
to address current major concerns. Measures introduced are intended to consolidate
the country's buoyant growth over the last ten years and address the pressing problem
of the weak ringgit and the widening current account deficit. The 1998 Budget Strategy
is to :-
- strengthen economic fundamentals and stabilise financial markets;
- maintain sustainable growth;
- continue the process of deregulation and liberalisation of the economy; and
- continue the social agenda for further overall development.
Underlying the Budget is the Government's determination in addressing the current
account deficiency. Strict measures in an effort to reduce imports and incentives
to increase exports have been introduced. As expected, custom duties on imported
motor vehicles have been increased, with some categories facing increases of up to
800% of existing tariffs.
This report covers the 1998 Budget tax proposals, based on the Finance (No. 2) Bill
1997, the 1998 Budget Speech and other instruments in respect of indirect taxation.
The proposed changes herein are subject to enactment.
As this publication has been prepared for clients and associates by way of general
information, further details may be required. Readers are kindly advised to consult
with us at any of our offices before acting on any material
contained in this publication.
Kassim Chan Tax Services Sdn Bhd
Deloitte Touche Tohmatsu Tax Services Sdn Bhd
Kuala Lumpur, Malaysia
October 17, 1997
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