Malaysian federal budget

In Malaysia, federal budgets are presented annually by the Government of Malaysia to identify proposed government revenues and spending and forecast economic conditions for the upcoming year, and its fiscal policy for the forward years. The federal budget includes the government's estimates of revenue and spending and may outline new policy initiatives. Federal budgets are usually released in October, before the start of the fiscal year. All of the Malaysian states also present budgets. Since state finances are dependent on money from the federal government, these budgets are usually released after the federal one.

The federal budget is a major state financial plan for the fiscal year, which has the force of law after its approval by the Malaysian parliament and signed into law by the Yang di-Pertuan Agong.

Revenue estimates detailed in the budget are raised through the Malaysian taxation system, with government spending representing a sizeable proportion of the overall economy. Besides presenting the government's expected revenues and expenditures, the federal budget is also a political statement of the government's intentions and priorities, and has profound macroeconomic implications.

Budget process

The budget is announced in the Dewan Rakyat (House of Representatives) by the Minister of Finance, who traditionally wears baju Melayu while doing so. The Budget is then voted on by the House. Budgets are a confidence measure, and if the House votes against it the government can fall, although never happened to Prime Minister to date. The governing party strictly enforces party discipline, usually expelling from the party caucus any government Member of Parliament (MP) who votes against the budget. Opposition parties almost always vote against the budget. Since 2008, the opposition bloc used to prepare a complete alternative budget and present this alternative to the Malaysian people along with the main budget. In cases of minority government, the government has normally had to include major concessions to one of the smaller parties to ensure passage of the budget.

Malaysia follows the conventions of the Westminster system. For example, the prime minister must have the support of a majority in the Dewan Rakyat (House of Representatives), and must in any case be able to ensure the existence of no absolute majority against the government. In relation to the budget, that requires that if the House fails to pass the government's budget, even by one ringgit, then the government must either resign so that a different government can be appointed or seek a parliamentary dissolution so that new general elections may be held to re-confirm or deny the government's mandate.

The process of creating the budget is a complex one which begins within the working ranks for the Federal Government. Each year, the various departments and agencies that make up the Government submit what are called 'The Main Estimates' to The Treasury Board Secretariat. These documents identify the planned expenditure of each department and agency, linking these proposed expenses to programs, to objectives and ultimately to the priorities of the current ruling Government. The Treasury Board Secretariat combines these budget estimates and compile an initial proposed budget. From there, the Cabinet and Prime Minister's Department adjust the budget based on a series of economic, social and political factors. In reality, decisions are usually made with the primary intend of re-election and so often include advantages for key regions and lobby groups.

The government reserves the right to submit "supplementary supply bills", which add additional funding above and beyond what was originally appropriated at the beginning of the fiscal year. Supplementary supply bills can be used for things like disaster relief and to update its agencies' spending totals for the current financial year and report any governmental re-organisations.

Classification of revenue

The Federal Government’s revenue is classified into four general categories, namely tax revenue, non-tax revenue, non-revenue receipts and revenue from the Federal Territories.

Tax revenue

Tax revenue is classified into direct tax revenue and indirect tax revenue.

Direct tax revenue includes revenue from:

  • income tax and supplementary income tax (individual, company, petroleum, withholding and cooperatives);
  • estate duty;
  • stamp duty;
  • real property gains tax (RPGT);
  • Labuan offshore business activity tax; and
  • miscellaneous direct taxes.

Indirect tax revenue includes revenue from:

  • Goods and Services Tax (GST);
  • export duties;
  • import duties;
  • excise duties;
  • levies; and
  • miscellaneous indirect taxes.

Non-tax revenue

Non-tax revenue consists of:

  • licences, registration fees and permits: inclusive of all charges imposed on the granting of rights to individuals, corporations, businesses including petroleum royalty, and other enterprises as well as motor vehicle licences for purpose of regulation or control and levy on foreign workers;
  • service fees: inclusive of receipts from services rendered by the Federal Government to the public;
  • proceeds from sales of goods: inclusive of receipts from the sales of physical assets owned by the Government including lands, buildings, office equipments, storage facilities and the sale of miscellaneous goods to the public;
  • rentals: inclusive of rentals from land, buildings, vehicles and machineries;
  • interests and proceeds from investments: inclusive of proceeds from sale of investments, dividends earned from bonds or shares (PETRONAS dividend, Bank Negara dividend, Khazanah dividend), bank interests and interests on loans granted by the Government;
  • fines and penalties: inclusive of out-of-court settlement fees as well as fines and forfeitures;
  • contributions and compensations received from home and abroad;
  • income from exploration of oil and gas: income from petroleum operation Malaysia-Thailand Joint Authority (MTJA); and
  • other non-tax revenue.

Non-revenue receipts

Non-revenue receipts include:

  • refunds of expenditures: inclusive of payments in previous years and refunds of salaries arising from resignations and training expenses, trust fund refunded and unclaimed funds; and
  • inter-departmental credits: inclusive of transfer of funds between ministries or departments for services rendered between Government agencies, reimbursements of the Government’s contributions under the Employees Provident Fund Scheme and contributions from Government departments, statutory bodies or Government owned enterprises.

Revenue from the Federal Territories

Revenue from the Federal Territories consist of tax and non-tax revenue including receipts from licences and permits, premiums, quit rent, sale of assets, rentals, service fees and entertainment duties.

Example Budget

Projected revenues

Revenue estimates for 2016 Budget, excluding 2016 tax measures

  Companies income tax (33.0%)
  Goods and services tax (17.3%)
  Individual income tax (13.4%)
  Interests and proceeds from investments (9.5%)
  Licenses, registration fees and permits (6.0%)
  Excise duties (5.5%)
  Petroleum income tax (4.1%)
  Stamp duty (3.0%)

Official sources

(In million MYR)

Source Revenues[1]  % of
Total Revenues
Direct tax
Income tax
Companies
Individual
Petroleum
Withholding
Co-operatives
Others
Other direct taxes
Stamp duty
Real property gains tax
Others
 125,566
116,558
74,381
30,266
9,331
2,473
84
23
9,008
6,766
2,163
79
 55.6%
51.6%
33.0%
13.4%
4.1%
1.1%
0.0%
0.0%
4.0%
3.0%
1.0%
0.0%
Indirect tax
Goods and services tax
Local goods and services
Imported goods and services
Excise duties
CKD and CBU vehicles
Others
Import duties
Others
CKD and CBU vehicles
Spirits and malt liquor
Tobacco, cigarattes and cigar
Other indirect taxes
Export duties
Crude petroleum
Processed palm oil
Crude palm oil
Others
 57,987
39,000
21,729
17,271
12,408
7,259
5,149
2,791
2,234
424
94
39
2,776
1,012
900
52
43
17
 25.7%
17.3%
9.6%
7.7%
5.5%
3.2%
2.3%
1.2%
1.0%
0.2%
0.0%
0.0%
1.2%
0.4%
0.4%
0.0%
0.0%
0.0%
Non-tax revenue
Interests and proceeds from investments
Licenses, registration fees and permits
Other non-tax revenue
Service fees
Fines and penalties
Proceeds from sales of goods
Rentals
 39,648
21,452
12,626
2,506
1,510
1,223
211
120
 17.6%
9.5%
6.0%
1.1%
0.7%
0.5%
0.1%
0.1%
Non-revenue receipts1,5040.7%
Revenue from Federal Territories9510.4%
Total Estimated Revenue225,656

Projected expenditures by object

Official sources

These tables are in million MYR.

Description Expenditures
Operating expenditures
Emoluments70,466.1
Supplies and services36,315.1
Assets761.0
Fixed Charges and Grants106,648.2
Other Expenditures1,033.5
Total Operating Expenditure215,224.0
Development expenditures
Direct Grant47,178.1
Loans2,821.9
Contingencies Reserve2,000.0
Total Development Expenditure52,000.0
Total Estimated Expenditure267,224.0

Projected expenditures by budget function

Official sources

These tables are in million MYR. The budget for the 2016 fiscal year (also demonstrating the basic budget structure) can be found below.

Function Description Expenditures Operating
Expenditures		 Development
Expenditures[2]
1Parliament131.1131.1—
2Office of the Keeper of the Rulers' Seal2.12.1—
3National Audit Department163.8163.8—
4Election Commission150.6150.6—
5Public Services Commission47.447.4—
6Prime Minister's Department20,309.95,984.214,325.7
7Public Service Department2,515.42,436.678.9
8Attorney General Chambers185.4185.4—
9Malaysian Anti-Corruption Commission251.8251.8—
10Treasury4,477.23,626.0851.3
11Treasury General Services25,885.925,885.9—
12Contribution to Statutory Funds1,883.81,883.8—
13Ministry of Foreign Affairs710.5595.1115.4
20Ministry of Plantation Industries and Commodities650.4234.8415.5
21Ministry of Agriculture and Agro-based Industry5,353.83,487.91,865.9
22Ministry of Rural and Regional Development10,831.25,379.95,451.3
23Ministry of Natural Resources and Environment2,670.91,008.11,662.8
24Ministry of International Trade and Industry1,914.4539.31,375.2
25Ministry of Domestic Trade, Co-operatives and Consumerism797.4730.167.3
27Ministry of Works5,775.92,223.33,552.6
28Ministry of Transport3,954.71,194.12,760.6
29Ministry of Energy, Green Technology and Water2,262.0125.32,136.6
30Ministry of Science, Technology and Innovation1,527.0661.1865.8
31Ministry of Tourism and Culture1,221.0973.2247.8
32Ministry of the Federal Territories1,316.3358.3958.0
40Education Service Commission16.816.8—
42Ministry of Health23,031.121,430.81,600.3
43Ministry of Urban Wellbeing, Housing and Local Government4,173.12,477.11,696.0
45Ministry of Youth and Sports931.8473.9458.0
46Ministry of Human Resources1,376.8836.1540.7
47Ministry of Communications and Multimedia1,806.11,288.4517.7
48Ministry of Women, Family and Community Development1,986.91,873.3113.6
60Ministry of Defence17,304.413,457.33,847.1
62Ministry of Home Affairs840.9
63Ministry of Education41,359.739,315.92,043.8
64Ministry of Higher Education13,378.311,767.11,611.2
70Contingency fund2,000.0—2,000.0
Total215,448.0163,448.052,000.0
DependentDescriptionExpendituresOperating
Expenditures		Development
Expenditures
(1)Royal spending for the Yang di-Pertuan Agong13.513.5—
(2)Royal allowances1.51.5
(3)Chief Justice, Chief Judges, Judges9090
(4)Auditor General0.70.7
(5)Speaker of the Dewan Rakyat1.61.6
(6)President of the Dewan Negara1.81.8
(7)Election Commission2.32.3
(8)Law Services Commission0.050.05
(9)Public Services Commission10.710.7
(10)Education Services Commission55
(11)Police Force Commission1.71.7
(12)Treasury6,072.16,072.1
(13)Payment for public debt26,639.426,639.4
(14)Pensions, retirement allowances and rewards18,954.018,954.0
Total51,77651,776—
Total Estimated Expenditure267,224.0

List of Malaysian budgets by year

Supply Bills - Second Reading
1960s
1960 · 1961 · 1962 · 1963 · 1964 · 1965 · 1966 · 1967 · 1968 · 1969
1970s
1973 · 1974 · 1975 · 1976 · 1977 · 1978 · 1979
1980s
1980 · 1981 · 1982 · 1983 · 1984 · 1985 · 1986 · 1987 · 1988 · 1989
1990s
1990 · 1991 · 1992 · 1993 · 1994 · 1995 · 1996 · 1997 · 1998 · 1999
2000s
2000 · 2001 · 2002 · 2003 · 2004 · 2005 · 2006 · 2007 · 2008 · 2009
2010s
2010 · 2011 · 2012 · 2013 · 2014 · 2015 · 2016 · 2017 · 2018 · 2019 ·
2020s
2020

See also

International:

References
  1. "www.treasury.gov.my" (PDF). Archived from the original (PDF) on 10 July 2019. Retrieved 24 October 2015.
  2. "www.treasury.gov.my" (PDF). Archived from the original (PDF) on 4 March 2016. Retrieved 23 October 2015.

Further reading
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