Fiscal Policy in Malaysia
FISCAL POLICY
Fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are government taxation and changes in the level and composition of taxation and government spending can affect the following variables in the economy: * Aggregate demand and the level of economic activity; * The distribution of income; * The pattern of resource allocation within the government sector and relative to the private sector.
Fiscal policy refers to the use of the government budget to influence economic activity. By practicing the fiscal policy, the government decides how much to spend, what to spend, what to spend for and how to finance its spending.
Federal government expenditure in Malaysia was allocated for 2 major purposes namely, operation purposes and development purposes.
The rationale for allocating the budget for operation purposes is to upgrade and improve productivity as well as to impede long term economic growth potential.
The largest component of operating expenditure is emoluments, subsidies, supplies and services.
The factor contributing to higher allocation for emoluments is to accommodate the improved scheme of service for the police as well as the amendment to the salary scheme of medical and dental lecturers in public higher education institutions (Economic Report, Ministry of Finance 2010-2011).
Subsidies is second top operation expenditure. Its trend has increased over the years starting from 2006 onwards and the impact is closely linked to the world commodity prices, particularly oil (Economic Report 2010/2011; Ministry of Finance). The reason for improving subsidies is to reduce the burden of society especially to the poor and disadvantaged group.
On the other hand, the rationale for allocating the budget for development purposes is to upgrade rural basic infrastructure, urban transport, low income household and other social
Fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are government taxation and changes in the level and composition of taxation and government spending can affect the following variables in the economy: * Aggregate demand and the level of economic activity; * The distribution of income; * The pattern of resource allocation within the government sector and relative to the private sector.
Fiscal policy refers to the use of the government budget to influence economic activity. By practicing the fiscal policy, the government decides how much to spend, what to spend, what to spend for and how to finance its spending.
Federal government expenditure in Malaysia was allocated for 2 major purposes namely, operation purposes and development purposes.
The rationale for allocating the budget for operation purposes is to upgrade and improve productivity as well as to impede long term economic growth potential.
The largest component of operating expenditure is emoluments, subsidies, supplies and services.
The factor contributing to higher allocation for emoluments is to accommodate the improved scheme of service for the police as well as the amendment to the salary scheme of medical and dental lecturers in public higher education institutions (Economic Report, Ministry of Finance 2010-2011).
Subsidies is second top operation expenditure. Its trend has increased over the years starting from 2006 onwards and the impact is closely linked to the world commodity prices, particularly oil (Economic Report 2010/2011; Ministry of Finance). The reason for improving subsidies is to reduce the burden of society especially to the poor and disadvantaged group.
On the other hand, the rationale for allocating the budget for development purposes is to upgrade rural basic infrastructure, urban transport, low income household and other social