CHAPTER 5 : Public Sector

Government Expenditure
Government expenditure is divided into 2 categories; 1. Operating Expenditure
Consist of payment for the emoluments, pensions, any debt services charges and other maintenance expenditure. 2. Development Expenditure
Comprises of the expenditure of defence and internal security, social responsibility that includes education and health, and the expenditure to run the economics policy like granting subsidy and train workers
Sources of Government Revenue
There are 2 major sources of government revenues: 1. Non-taxes
Selling of goods and services, grant from other countries (example: donations for tsunami victims), domestic loans (example: government bonds) and loan from overseas (example: IMF) 2. Taxes a) Direct tax * Where the burden of tax cannot be transferred to other parties. * Collected by Department of Inland Revenue * Main direct tax:- I. Personal income tax
The tax is levied on gross income II. Corporate Tax
Imposed on company’s profit whether it is earned at home or abroad. III. Petroleum Revenue Tax
Tax is levied on all petroleum companies operating in Malaysia. IV. Capital Gain Tax
Levied on the increase in the value of capital asset between the time of purchase and the time of sale (sale of shares, factories etc.) V. Other tax
Stamp duties (agreements), motor vehicles duties b) Indirect Tax * Where the burden of tax can be passed on to other parties. * Collected by the customs and excise department

* Main direct tax:- I. Customs duty
Levied on the value and volume of the important commodities. II. Excise duty
Levied on domestic and imported goods with the aim of raising revenue to the government and to discourage people from consuming them.

Structure of Tax 1. Progressive Tax * Rate of tax increases as