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Economy

Malaysia inflation an declining trend

BMI, a Fitch Solutions company, predicts Malaysia’s headline inflation will continue to ease due to high base effects from last year’s surge in global food and energy prices. Malaysian Government subsidies and price-control measures will also cap further price increases.

The research arm expects no further rate hikes by Bank Negara Malaysia in 2023, given the 3.1% core inflation.

The recent decline in inflation aligns with a historical average of 2.0%, reducing the pressure for immediate monetary policy actions. BMI also revised its forecast, expecting inflation to fall back to 2.0% by year-end and an average of 2.7% for 2023.

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1 year ago

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MALAYSIA： Malaysia’s headline inflation will continue to ease due to high base effects from last year’s surge in global food and energy prices triggered by the Russia-Ukraine war, according to BMI, a Fitch Solutions company.

In addition, government subsidies and price-control measures will also help to place an implicit cap on further price increases.

Overall, inflation in Malaysia has been lower compared to regional peers as inflation in Indonesia, the Philippines, and Singapore came in at 3.5%, 5.4%, and 4.5%, respectively in June.

The research arm does not expect the central bank of Malaysia, Bank Negara Malaysia (BNM) to hike rates further in 2023 even though core inflation is at 3.1% year-on-year (y-o-y), higher than the five-year average of 1.6%.

“Meanwhile, since the 25bps surprise hike in May this year, real interest rates in Malaysia have turned slightly positive (see right-hand-side chart above) and we believe the current policy stance is sufficient to keep inflation in check,” it said in a statement today.

In addition, unlike some other central banks, BNM does not have a specific inflation target. However, the headline inflation number is moving closer to the 10-year average of 2.0%, which means inflationary pressures are not escalating significantly and are aligning with the historical average.

As a result, it reduces BNM’s pressure to take immediate monetary policy actions to address inflation concerns.

The research house said BNM is not likely to reduce interest rates at a time when the US Federal Reserve (US Fed) is still increasing interest rates.

“The reason behind this cautious stance is the concern that cutting rates while the US Fed is tightening could lead to a weakening of the Malaysian currency,” it said.

Given the faster-than-expected easing of prices, the research arm lowered its forecast for inflation to fall back to the 10-year average of 2.0% by year end, which is lower than our previous forecast of 2.5%.

“Consequently, we also revised our forecast for average inflation for 2023 down from 2.9% to 2.7%, which is much lower than the 2022 average of 3.4%.”

“As BNM navigates the end of the global rate hike cycle, falling inflation, and persistent growth headwinds, we expect the central bank to stand firm in the upcoming meeting in September 2023.“

“We expect BNM to revise their current forecast for headline inflation in 2023, which is currently projected to be in the range of 2.8% to 3.8%. The anticipation is that BNM will likely lower this forecast in the coming months,” it said.

In line with consensus estimates, Malaysia’s inflation eased from 2.8% y-o-y in May to 2.4% in June, registering the lowest inflation rate recorded since the beginning of the year.

“The decline was driven by slower price increases in ‘food & non-alcoholic beverages’ category, which rose by 4.7% y-o-y in June, lower than the 5.9% increase recorded in May.

“In month-on-month terms, inflation increased by 0.2% which was influenced by the “communications” category, which went from deflation of -2.3% in May to a slight increase of 0.1% in June.”

“Core inflation, which excludes volatile items and those with government-administered prices slowed as well, from 3.5% y-o-y in May to 3.1% in June,” it said.

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Economy

IRAS reports S$80.3 billion in tax revenue for FY2023/24, a 17% increase from the previous year

The Inland Revenue Authority of Singapore (IRAS) collected S$80.3 billion in tax revenue for FY2023/24, a 17% increase from the previous year. The rise reflects strong corporate earnings, higher wages, and increased consumer spending, contributing to essential services and economic development.

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2 weeks ago

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4 September 2024

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The Inland Revenue Authority of Singapore (IRAS) reported a total tax revenue collection of S$80.3 billion for the Financial Year (FY) 2023/24, marking a 17% increase from FY2022/23.

The rise is attributed to the country’s strong economic growth and nominal wage increases in 2022.

This revenue constitutes approximately 77.6% of the Singapore Government’s Operating Revenue and 11.9% of the nation’s Gross Domestic Product (GDP). The taxes collected will be used to fund essential services, support social development programmes, grow the economy, and enhance Singapore’s living environment.

In addition to tax collection, IRAS processed close to S$2.3 billion in enterprise grants, benefiting over 131,000 businesses and workers. The arrears rate for Income Tax, Goods and Services Tax (GST), and Property Tax remained low at 0.64%.

Breakdown of Tax Revenue

Corporate Income Tax (CIT) showed the largest increase, rising by 25.6% from S$23.1 billion in FY2022 to S$29.0 billion in FY2023, due to strong corporate earnings. CIT accounted for 36.1% of total revenue collection.

Individual Income Tax (IIT) accounted for 21.8% of the total, with revenue increasing by S$2 billion to S$17.5 billion, driven by higher wages and an increase in the number of taxpayers.

GST contributed 20.7% of the total revenue, with collections rising by S$2.6 billion to S$16.6 billion, a result of higher consumer spending and the increase in the GST rate.

Property Tax contributed 7.4% (S$5.9 billion), and Stamp Duty accounted for 7.2% (S$5.8 billion), though Stamp Duty saw a decline of S$0.1 billion due to lower property transaction volumes.

S$2.3 Billion in Enterprise Grants Processed

IRAS also disbursed S$2.3 billion in grants to support businesses and workers under several schemes, including the Progressive Wage Credit Scheme (PWCS), Senior Employment Credit (SEC), and Jobs Growth Incentive (JGI). These grants were designed to assist businesses in maintaining operations and supporting workers’ employment.

Digital Solutions for Businesses

IRAS continues to enhance digital solutions to facilitate tax compliance for businesses.

Initiatives include:

  • InvoiceNow: This e-invoicing system, set to become mandatory for GST-registered businesses starting in November 2025 for new GST registrants, allows for seamless transmission of invoice data to IRAS for tax administration.
  • One-Stop Payroll (OSP): Developed in collaboration with the Central Provident Fund Board, Ministry of Manpower, and GovTech, this system allows businesses to submit wage-related information to various agencies through a single platform. These initiatives build on IRAS’ existing digital services, such as the Submission of Employment Income API.

To date, over 120 software providers have partnered with IRAS, offering 46 software products designed to simplify tax filing and payments for businesses.

In FY2023/24, it audited and investigated 9,590 cases, recovering approximately S$857 million in taxes and penalties from non-compliant taxpayers.

IRAS aims to ensure timely tax filing and payment while addressing tax avoidance and evasion.

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Economy

Singapore faces 25% increase in bankruptcy filings during first half of 2024

Bankruptcy cases in Singapore surged in the first half of 2024, with 2,334 filings—a 25% increase from 2023. The number of undischarged bankrupts reached 9,903, reflecting ongoing financial challenges and highlighting a rise in bankruptcy orders and applications.

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3 weeks ago

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2 September 2024

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Singapore faces 25% increase in bankruptcy filings during first half of 2024
(photo for illustration purposes only/Unsplash)

SINGAPORE: Bankruptcy cases in Singapore surged in the first half of 2024, with 2,334 individuals filing for bankruptcy—a 25% increase compared to the same period in 2023, according to data from the Ministry of Law (MinLaw).

The rise in filings highlights the ongoing financial challenges faced by many in the country.

The total number of undischarged bankrupts reached 9,903 as of 30 June, marking a 2.4% increase since January.

Additionally, 594 individuals were declared bankrupt between January and June 2024, an 11% rise from the previous year.

May recorded the highest number of bankruptcy applications, with 430 cases, followed by January with 409.

In comparison, May 2023 saw 314 applications, while the highest figure for the first half of 2023 was 356 in March.

Bankruptcy orders also increased, with 595 orders issued in the first half of 2024, compared to 537 during the same period in 2023.

Under Singapore law, individuals with at least S$15,000 (US$11,480) in unpaid debts can file for bankruptcy in the High Court.

The process requires a deposit of S$1,850 (US$1,415) to the Official Assignee for the administration of the bankrupt’s estate.

However, this deposit is non-refundable for those filing for their own bankruptcy. Creditors may recover the deposit if sufficient funds are available in the bankrupt’s estate.

Some cases may qualify for the Debt Repayment Scheme (DRS), an alternative to bankruptcy designed to help debtors repay their debts without filing for insolvency.

The DRS is accessible only through creditors and is available to employed individuals with debts of up to S$150,000 (US$114,807).

Those who qualify must repay their debts in monthly installments over up to five years.

Credit Counselling Singapore (CCS) general manager Tan Huey Min noted that borrowers under the DRS typically repay less than the full amount owed, but once they fulfill their obligations, they can start afresh.

MinLaw cautioned, however, that there is no guarantee of significant debt reduction, and any reduction above 70% would be considered substantial.

Despite the lighter debt burden under the DRS, some individuals still fail to complete their repayment plans.

In such cases, creditors can pursue the remaining debt, which may include filing another bankruptcy application.

Additionally, not all debtors qualify for the DRS, and those deemed unsuitable are declared bankrupt.

Recent reforms in Singapore’s bankruptcy system aim to rehabilitate debtors with clearer discharge timelines

In an interview with Straits Times, Yuen Law associate director Tris Xavier highlighted that prior to 2016, the system lacked clear timelines for discharge from bankruptcy, with some individuals remaining in this state for decades.

The reforms now offer clearer milestones for debtors based on their personal circumstances, making the system more debtor-centric.

First-time bankrupts can be discharged within three to seven years if they meet their target contributions, which typically require 52 monthly payments.

Repeat bankrupts can be discharged within five to nine years, contingent on 76 monthly payments.

Those who fully meet their target contributions will have their names removed from public records five years after discharge, while those who do not will remain on public records permanently.

Xavier emphasized that bankruptcy should not be seen as a way to reduce debt but rather as a financial rehabilitation tool.

He warned against hiding assets, explaining that bankruptcy laws cover both local and overseas assets, and the court can reverse transactions intended to shield assets from creditors.

While CPF savings are protected from creditors during bankruptcy, CPF funds inherited by a bankrupt after death are not.

Additionally, bankrupts face restrictions, including needing permission to travel overseas and being barred from managing a business or acting as a company director.

For those in financial distress, bankruptcy is not the only option.

Xavier advised debtors to communicate openly with creditors as soon as financial difficulties arise.

Credit Counselling Singapore (CCS) also offers a Debt Management Programme that negotiates more affordable repayment terms with creditors.

Unlike the DRS, the CCS program requires full repayment of debts, but it allows individuals to avoid bankruptcy, keeping their financial situation private.

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