The higher collection of Goods and Services Tax (GST) and additional revenue from measures announced during the budget 2016 recalibration is expected to cushion the federal government's reduced revenue in 2016.

According to the Economic Report 2016/17 issued by the Ministry of Finance, the GST collection for 2016 is expected to surge 42.5 percent to RM38.5 billion compared to RM27 billion last year, reflecting a full year implementation.

Federal government's revenue is expected to decline three percent to RM212.6 billion with total revenue as a percentage to GDP is estimated at 17.2 percent.

The decline in the revenue would be mainly due to the lower collection of petroleum-related revenue by 34.4 percent following lower crude oil prices.

Tax revenue also remains the main source of federal government's revenue accounting for 78.6 percent of total revenue and is projected to increase marginally by one percent in 2016 to RM167.1 billion as compared to RM165.4 billion in 2015.

Direct tax contributing 52 per cent to total revenue is projected to reduce by 1.1 percent to RM110.5 billion in 2016 while the corporate income tax (CITA), constituting 37.8 percent of the total tax revenue, is estimated to decline 0.8 percent to RM63.2 billion.

The report states that the decline in CITA was partly due to the reduction of the tax rate from 25 percent to 24 percent and 20 percent to 19 percent for small and medium enterprises (SMEs).

Meanwhile, individual income tax collection is expected to increase seven percent to RM28.2 billion, underpinned by stable growth of employment and income.

The collection of petroleum income tax (PITA) however, is estimated to reduce 26.3 percent to RM8.5 billion due to lower assumption of crude oil price at US$40 per barrel compared to US$52 in 2015.

For indirect tax, it is forecast to increase 5.5 percent to RM56.6 billion, mainly contributed by substantial GST collection.

Excise duties are estimated to decline 0.7 percent to RM11.8 billion following expected lower sales volume of motor vehicles from 666,674 units in 2015 to 580,000 units this year.

Similarly, export duties are also projected to drop 21.7 percent to RM0.8 billion from RM1 billion last year, in line with lower commodity prices and smaller export volume.

The non-tax revenue is anticipated to decline 15.2 percent to RM45.5 billion compared to RM53.6 billion in 2015 due to lower receipts from investment income mainly from Petroliam Nasional Berhad's (Petronas) dividend of RM16 billion compared to RM26 billion recorded last year.

- Bernama