KUALA LUMPUR, Oct 13 ― The indirect tax and non-tax revenue on production and imports is projected to expand further at 4.5 per cent in 2024 in tandem with the continued efforts to increase revenue collection and strategies to implement a wider tax base.

The Ministry of Finance (MoF) said the expenditure for subsidies and incentives is expected to decrease by 24.8 per cent in line with the government’s move to rationalise subsidies and implement a more targeted assistance.

“Thus, income from net taxes on production and imports is projected to contribute 3.1 per cent to gross domestic product (GDP),” it said in the Economic Outlook 2024 report released today.

Meanwhile, the MoF said the share of gross operating surplus (GOS) to GDP is forecast to decline to 63.8 per cent in 2024 compared to 64.9 per cent in 2023, with capital owners continuing to receive a sizable share of GOS.

It said mixed income for the self-employed or independent entrepreneurs is expected to improve by 8.9 per cent as the rising demand for gig work will create more earning prospects for this group.

“Efforts to enhance social protection among all self-employed workers, including those in the informal sector, may also attract more participation from youth to choose self-employment as the main source of income.

“As a result, the share of mixed-income to GDP is projected to rise to 15.5 per cent,” it said.

The MoF said an encouraging economic growth anticipated in 2024 will stimulate higher income prospects for the workforce.

Besides, the ministry said the existing initiatives will be intensified by adopting advanced technology in production activities, improving productivity through retraining and upskilling, as well as reducing reliance on low-skilled foreign workers.

Hence, the MoF said the share of compensation of employees (CE) to GDP is projected to improve to 33.1 per cent in 2024 compared to 32.4 per cent in 2023.

“Nonetheless, the share is still relatively low compared to other advanced economies and the CE target of 40 per cent in 2025.

“Thus, the transformation from a low-wage labour market structure to a decent wage standard is vital in achieving a more equitable distribution of economic growth between employees and capital owners,” it added.

The MoF said employers must also consider paying higher wages as a source of growth, which would alleviate the prolonged structural issues in the labour market and contribute to higher business growth.

For the 2023 period, the MoF said the share of CE is expected to sustain at 32.4 per cent in 2023, an increase of 3.5 per cent to RM599.9 billion in line with the expectation of continuous encouraging growth prospects.

The MoF explained that the share would be attributed mainly to income from the services (61.7 per cent) and manufacturing (24.4 per cent) sectors, particularly in electrical, electronic and optical products and tourism-related industries.

Meanwhile, it said the share of GOS to GDP is projected to record 64.9 per cent in 2023, with most of the profit will be owned by capital owners.

“Mixed-income is expected to expand by 10.4 per cent in 2023 as vigorous economic activities and increasing domestic demand will provide more employment and income prospects for the self-employed group,” it said.

The MoF said income from taxes on production and imports is expected to improve in 2023, following a lower expenditure on subsidies and incentives. ― Bernama