This article first appeared in The Edge Malaysia Weekly, on October 26 - November 1, 2015.

Higher collection from the Goods and Services Tax (GST) in 2016 will mitigate the impact of lower revenue from the oil and gas (O&G) segment, Minister in the Prime Minister's Department Datuk Seri Abdul Wahid Omar says.

"From what was presented in the budget, we expect GST collection to be higher at RM39 billion for 2016. The higher collection will mitigate the impact of lower O&G revenue," he told reporters at the Parliament lobby last Friday, after the tabling of Budget 2016 by Prime Minister Datuk Seri Najib Razak.

He said the government's revenue base has been broadened, noting that O&G contribution, which was 30% in 2014, has now dropped to below 30% this year.

Abdul Wahid said the implementation of the GST has also enabled the government to spend more on development.

"With Budget 2016 being the first budget under the 11th Malaysia Plan (11MP), we are able to spend about RM52 billion in development expenditure for the country. Given the diversified structure of our economy, although we still have many challenges next year, we hope to be able to expand the economy by between 4% and 5%," said Abdul Wahid.

He also said the government is committed to fiscal consolidation in order to realise a balanced budget by 2020.

“The fact that we are able to achieve a 3.2% fiscal deficit this year, narrowing to 3.1% next year, means that we are still maintaining our aim for a balanced budget by 2020," he said.

Earlier in his speech, Najib said the implementation of the GST has resulted in higher collection compared with the previous sales and services tax (SST).

He noted that if SST were retained, 2016 collection would have been only RM18 billion compared with GST revenue of RM39 billion.

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