#Economic Report 2011/2012* Higher individual income tax collection expected

KUALA LUMPUR: The Federal Government revenue — comprising tax revenue and non-tax revenue — is expected to increase 1.9% to RM186.906 billion in 2012 from RM183.375 billion in 2011 due to better prospects for the domestic economy.

The Economic Report 2011/2012, released on Friday, Oct 7, said the government expected income taxes from petroleum would be around the same level as in 2011 but it expected collection from individual income taxes to increase.

"Higher commodity prices, access to financing and firm corporate earnings as well as strong labour market conditions are expected to further strengthen private consumption and investment activity resulting in higher tax revenue," it said.

The report said of the RM186.906 billion expected to be collected as federal government revenue, a very large portion would comprise of tax revenue. Tax revenue is expected to be RM135.618 billion in 2012, comprising of direct taxes and indirect taxes.

It said the government expected to collect direct taxes totaling RM102.099 billion (up 5.8% from RM96.457 billion in 2011) with about half of the amount from companies which are expected to pay taxes totaling RM47.47 billion (up 8% from RM43.97 billion).

There will be a marginal increase in petroleum income tax at RM26.182 billion (up 0.7% from RM25.993 billion) as the country benefits from steady regional demand for crude oil from Australia, India, Thailand, the Philippines and South Korea.

Another major source of government revenue would continue to come from individual taxes, with revenue expected to increase to RM21.347 billion (up 8.4% from RM19.696 billion).

The report sees a 2.4% hike in indirect taxes to RM33.519 billion in 2012 (from RM32.725 billion). According to the breakdown provided, the government expects excise duties to increase by 6.4% to RM11.881 billion (from RM11.783 billion) and sales taxes to ecord a 4.8% increase to RM8.695 billion (RM8.605 billion).

Non-tax revenue was expected to decline by 5.4% to RM51.288 billion (from RM54.193 billion), due to lower investment income.

It said revenue from licences and permits was projected to increase by 5.1% to RM11.701 billion (fromRM11.137 billion), but investment income was expected to decline 10.2% to RM33.98 billion (fromRM37.832 billion).

The report said in the prospects for 2012, the fiscal policy would remain prudent and supportive of economic growth.

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