FACULTY OF ECONOMICS AND BUSINESS

EBE2053 PUBLIC FINANCE (G03)

ASSIGNMENT 1

LECTURER NAME: DR DZUL HADZWAN HUSAINI

NO NAME MATRIC NUMBER

1 Nur Azriana binti Mohd Aris 80574
2 Maizatul Nurazwa Binti Rosidi 79952
3 Mohd Haziq Huzaifah bin Abdul Khalid 75767
4 Nur Fitrah Binti Nawawi 80608
5 Mior Muhd Irsyadi bin Mior Syazril 80055
6 Muhammad Aufa bin Ahmad 80211
Discussion
Years Tax Revenue Non-Tax Revenue
Mean Median Std. Dev Mean Median Std. Dev
1970-1984 26420.8226 26811.2698 11239.6225 5297.5544 4096.3073 2655.6774
1985-1999 65177.3185 66381.4592 21720.7453 18500.1805 19048.0388 3760.1852
2000-2022 144069.8060 141542.5114 38225.4119 46857.3061 48798.2759 12528.2658

Tax Revenue 1970 to 1984

Based on the obtained time series of tax revenue and the statistical calculation, the mean of
tax revenue is 26420. 8226 indicates that, on average, the government receives that amount
for each year from 1970 to 1984. But according to the real GDP pattern throughout the 14
years, it shows an increasing pattern of tax revenue. Malaysia had not been able to obtain the
revenue past the mean point of the time frame until 1977. The year is also the median, which
points to the central tendency of the time frame. Seven years past the point, there are no years
that show values below the median. It also shows that in the first half of the time frame, the
revenue was in ascending order.

The standard deviation of the time frame of 11239.6225 indicates that the tax revenue of the
government had a wide range and was spread out throughout the time period. Standard
deviation is a method to calculate the amount of dispersion or variability in a set of data. It
provides the distance of each data point from the mean. The value of the standard deviation
until the mid-80s shows that there are no years that fall below the point.

Tax Revenue 1985-1999

For the second time frame, the mean was significantly higher than the one and a half decade
before at 65177.3185. The tax revenue starts in the range of 45,000 to 50,000 in the first five
years.

One of the factors causing the tax revenue to increase in such a pattern is the increasing
population. In the first few years of the time frame, the annual change of the population went
up to 3% and gradually decreased from 1988 to 1999. Due to the following factor, the mean
is 66381.4592, which in 1992 was the real GDP of tax revenue in increasing order.
In addition to that, there was the Asian Financial Crisis in the late 1990s, which caused
economic problems such as unemployment and inflation that affected consumers' purchasing
power. The crisis started in late 1997 due to a sequence of currency devaluations that caused
some countries to struggle to defend their currencies (Investopedia, 2022). Based on real
GDP data, we can see a significant drop from 1998 to 2000 (80220.2721, 80201.5128,
76645.7054). In order to keep the tax revenue income from dropping more, the government
increased the corporate tax to 30% in 1997 and lowered it to 28% in 1998 (Trading
Economics, n.d.).

The standard deviation for the second time frame is higher than the previous at 21720.7453,
which means the range of the tax revenue is wider than the previous, where in 1985 the
revenue was at 45138.7860 and the maximum value was at 102955.3805. It also gives a
picture of how revenue grew rapidly up to 1997.

Tax Revenue 2000-2022

For the last 22 years, after the Asian Financial Crisis and COVID-19, Malaysia's tax revenue
has been higher than ever. In 2019 and 2020, the tax revenue is 205302.8787 and 205762.
The mean is 144069.8060, which is the highest mean of all. The corporate tax rate in the time
frame declined from 28% to 24% up to 2022 (Trading Economics, n.d.). Meanwhile, the
personal income tax had increased up to 30% until now. But in 2015, the rate was at the
lowest in 14 years at 25% as a result of the government's effort to increase the citizens
disposable income (Trading Economics, n.d.). That is during the time period when the
government implements the Goods and Services Tax (GST) at 6% and reduces income tax to
assist citizens during the implementation.

The median is 141542.5114 in 2011, which means that there is inconsistent growth of tax
revenue in the time frame. Meanwhile, the standard deviation of 38225.4119 is the widest
range of tax revenue from the mean.
Non-Tax Revenue 1970-1984

During the first period, from 1970 to 1984, the average non-tax revenue was 5,297.5544,
reflecting the government's average revenue. In 1978, the median non-tax revenue was
$4,096.3073, demonstrating inconsistency in growth during the very first half of the period.

The greatest amount of non-tax revenue in the first time frame was 10,416.5513, which was
reported in 1982. The role of petroleum and liquefied natural gas (LNG), which accounted for
nearly 29% of Malaysian export earnings, influenced this record revenue. However, it is
worth noting that revenue from petroleum and LNG fell in 1988, reducing net revenue
production ("Petroleum: Malaysia's New Engine of Growth?", 1982).

Non-tax revenue climbed dramatically over prior years, indicating the nation's high economic
performance in the 1980s. Yet, the Asian Financial Crisis of the late 1990s had consequences
for the first time frame as well. Even though the crisis happened after this period, it had an
impact on the entire economic environment and contributed to the events that occurred in the
following time frame. The Asian Financial Crisis had a substantial impact on the Malaysian
economy, producing unemployment, inflation, and a drop in export revenues. These factors
hampered revenue collection, with consequences for both tax and non-tax revenue.

Non-Tax Revenue 1985-1999

During the second time frame (1985-1999), non-tax revenue showed irregular growth but a
modest overall increase. Before the Asian Financial Crisis, the highest level of non-tax
revenue was obtained in 1994, with 24,202.6372. This growth was driven by robust demand
from both domestic and international sources, according to data from the government website
mof.gov.my. Furthermore, within a year, all sectors of the economy witnessed substantial
growth.
However, the Asian Financial Crisis in the late 1990s had a severe impact on non-tax
revenue. The crisis resulted in economic issues such as unemployment and inflation, which
had an impact on consumer demand and spending power. As a result, non-tax revenue
declined to 20,522.5890 in 1995, despite the government's expectations of continuous
growth.
Despite this setback, the average non-tax revenue for the second period was 18,500.1805, a
significant improvement over the previous decade and a half. This reflects the overall upward
trend of non-tax revenue from 1985. In addition, the median non-tax revenue in 1989 was
19,048.0388, demonstrating the significant increase in revenue over time.
In this time, the standard deviation of non-tax revenue was 3,760.1852. Although this is
slightly different from the preceding time, it can be linked to the Asian Financial Crisis in the
last decade of the 1990s and the unsteady expansion in the late 1980s. The higher standard
deviation indicates greater variability or variations in non-tax revenue over this time,
reflecting the economic instability and uncertainty linked with the Asian Financial Crisis.

Non-Tax Revenue 2000-2022

Non-tax revenue increased significantly from 2000 to 2022 as compared to earlier decades.
The average non-tax revenue for this time frame was the greatest, at 46,857.3061, suggesting
a significant rise in the government's average revenue earned. This progress can be ascribed
to a variety of factors, including increasing trade and the advent of the internet, which
enhanced corporate operations and income creation, assisting governments in gathering non-
tax revenue.

In 2022, the median non-tax revenue was 48,798.2759, showing that income had fallen and
suffered erratic growth. However, the greatest value of non-tax revenue was 75,139.8910,
resulting in a larger variation from the mean and a standard deviation of 12,528.2658.

kakDuring this same period, the COVID-19 epidemic had a considerable impact on
non-tax revenue. Non-tax revenue decreased significantly in 2020 and 2021, falling from
75,139.8910 to 59,501.2780 and then to 46,830.8490. Non-tax revenue, unlike tax revenue,
was severely impacted by the pandemic, owing to factors such as quickly expanding
unemployment and decreased purchasing power. Because of the poor economic conditions,
non-tax revenue has decreased. In terms of the Asian Financial Crisis, it is crucial to highlight
that this period follows the financial crisis, and its effect on non-tax revenue may be
indirectly. The Asian Financial Crisis predominantly happened in the latter part of the 1990s,
having considerable impact on the economic environment of the time. However, as evidenced
by the greater mean non-tax revenue, successive years experienced improvements and
improved revenue generation.
Conclusion
In conclusion, the tax revenue in Malaysia has shown increasing patterns across the different
time frames analysed. The revenue has been influenced by factors such as population growth,
economic crises, and changes in tax rates. To ensure sustainable revenue growth, it is
recommended that the government continue monitoring economic trends, adapt tax policies
as needed, and foster a favourable business environment.
Reference
TRADING ECONOMICS. (n.d.-c). Malaysia Sales and Services Tax - SST - 2022 Data -
2023 Forecast. https://tradingeconomics.com/malaysia/sales-tax-rate
TRADING ECONOMICS. (n.d.-b). Malaysia Personal Income Tax Rate - 2022 Data - 2023
Forecast - 2004-2021 Historical. https://tradingeconomics.com/malaysia/personal-
income-tax-rate
TRADING ECONOMICS. (n.d.-a). Malaysia Corporate Tax Rate - 2022 Data - 2023
Forecast - 1997-2021 Historical -
Chart. https://tradingeconomics.com/malaysia/corporate-tax-rate
The Malaysia Economy in 1994 and Prospects for 1995. (n.d.). Ministry of Finance.
Retrieved May 17, 2023,
from https://www.mof.gov.my/portal/arkib/economy/1995/chapter1.pdf
Wells, R. J. G. (1982). Petroleum: Malaysia’s New Engine of Growth? The World
Today, 38(7/8), 315–318. http://www.jstor.org/stable/40395633