Malaysia To Implement New Fuel Subsidies Next Year

by Mary Swire, Tax-News.com, Hong Kong

02 December 2009

Malaysia’s Second Finance Minister, Datuk Seri Ahmad Husni Hanadzlah, has said that the government would save around MYR2bn (USD600m) when it changes the country’s fuel subsidy arrangements next year.

By means of action both on government tax revenues and operating expenditure, Malaysia’s 2010 budget, announced in October, looked to reduce the country’s fiscal deficit to 5.6% of GDP next year, compared with 7.4% in 2009.

The government’s various subsidies, including fuel, are a major element within its spending – amounting to some MYR8,000 per capita annually. Apart from their cost to the government’s purse, they are also said to distort the market in many sectors of the economy.

It is planned that, from May 2010, fuel subsidies will be calculated according to a scale looking at vehicle engine capacity. At the same time, a smart card system using MyKad (the official compulsory Malaysian identity card) will be introduced for fuel purchases.

This move is also said to be part of the Malaysian government’s overall policy to target state subsidies on essential items, such as fuel, to the poorer people in the country.

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