2021 Budget: ‘Resilient as One, Together we Triumph’.
On 6 November 2020, the Minister of Finance Tengku Datuk Seri Zafrul Abdul Tengku Abdul Aziz unveiled the annual budget speech for 2021, which is the first Budget tabled by Mr Muhyddin’s administration (the “Budget”). The expansionary Budget targets domestic activity amid the backdrop of the unprecedented economic challenge presented by the COVID- 19 pandemic.
The Budget 2021 represents the 5th R in the government’s 6R strategy, namely Resolve, Resilience, Restart, Recovery, Revitalise, and Reform. The new Budget 2021 therefore continues the previous 2020 Economic Stimulus Package (MYR 20 billion), PRIHATIN (MYR 250 billion), PRIHATIN for SMEs (MYR 10 billion) and PENJANA (MYR 35 billion).
The Budget 2021 is worth MYR 322.54, equivalent to 20.6% of the gross domestic product (“GDP”), and is the largest budget ever announced in Malaysia. The Budget is allocated as follows:
Despite the large fiscal deficit in 2020 (6% of the GDP) and the projected fiscal deficit for 2021 being 5.4% of the GDP, Malaysia’s economy is expected to respond positively to the government’s 6R strategy and see growth of 6.5 to 7.5% next year. In 2021, government revenue is expected to be MYR 236.9 billion (up 4.2%). The Malaysian government has therefore tabled this Budget 2021 as targeting the protection of the earnings, welfare and financial recovery of both individuals and businesses, without introducing any new taxes to bridge the 2020 deficit.
The Budget is formulated on the government’s prevailing approach to dealing with the pandemic and its economic consequences, which is summarised by three pillars: Rakyat’s well-being, businesses continuity and economic resilience. According to the Finance Minister, the Budget strives to balance healthcare capacity needs, while building upon the current economic recovery momentum and developing better resilience for the future. Among the proposals announced in the Budget Speech are the following significant measures:
Emphasis is placed on the well-being of the Rakyat and measures are aimed at helping individuals recover from the impact of the pandemic through tax relief, increased training, creation of job opportunities and financial aid. Notably, the Ministry of Education receives the largest allocation of MYR 50.4 billion or 15.6% of the total Government expenditure, thus enhancing access to quality education. Other key strategies include a reduction in personal income tax, targeted wage subsidies, MySTEP (a short-term employment programme), improving digital connectivity and providing significant funding for health (both physical and mental) programmes, such as MySalam and the Healthy Malaysia National Agenda.
The focus of the Government will be to build on the continuity of the now-evolved business environment through facilitating access to investment funds and financing, in addition to empowering key sectors, such as agriculture, commodity, tourism and technology. Key measures include encouraging the production of locally manufactured products, micro credit financing worth nearly MYR 1.2 billion and significant funding for the tourism sector infrastructure, including MYR 50 million to provide training and placements for airline company employees.
The third goal of the Budget is economic resilience and it will be aligned with the priorities of the Twelfth Malaysian Plan and the Shared Prosperity Vision 2030. Despite the lower revised revenue, the government has increased expenditure to finance the stimulus package and economic recovery. In addition to the expansionary budget, key strategies include focusing on sustainability of the government revenue (the Budget is aligned with the 17 Sustainable Development Goals) and allocating funding for regional development.
In the table within the PDF you will find some of the major tax measures announced in the Budget 2021 for businesses and individuals. These
tax measures are only proposals and remain subject to the vote of the Malaysian Parliament.
The Malaysian government have also proposed the following non-tax related measures in the Budget 2021, which are of particular interest for businesses and employers:
Eligible borrowers will only need to contact their banks to choose the options and complete the documentation.
The application process for repayment assistance for the middle 40% of income earners (“M40”) borrowers, will be simplified. Borrowers would only need to make a selfdeclaration of the reduction in income in order to secure the repayment assistance.
Furthermore, the Budget 2021 has also unveiled the allocation of the government’s revenue to specific sectors, including the agriculture sector, the commodity sector and the tourism industry: