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Low oil price shock in Malaysia: Government fiscal impact and petroleum industry reactions


The current “shock” of low oil prices as a disruptor to government tax revenue and petroleum industry activity is a concern within the Asia-Pacific region. In the case of Malaysia, the government is heavily dependent on petroleum revenues, which is the reason for this parallel evaluation of government fiscal impact and industry reactions to the slide in world oil prices. The research draws data from publicly available information as well as recent expert interviews. Findings show that low oil prices have impacted the Malaysian Government petroleum-related revenue, resulting in Budget revisions in 2015 and 2016. Malaysia’s new goods and services tax has, however, partly offset lower petroleum revenues. From the petroleum industry perspective, low oil prices are having structural impacts, although reactions have differed to secure cash flows depending on whether an entity is extractive, service or refining orientated. This interdisciplinary research is significant for its up-to-date analysis of changes in government tax policy and the petroleum industry activities. It makes a contribution to understanding government revenue consequences and effects on industry of low oil prices on an ASEAN country that is an export competitor to Australia. It has useful insights for Australia’s 2017 review of petroleum taxation.

Author profiles

Lydia Thiagarajah
Lydia is a Tax Advisor, EY and Teaching Associate, Department of Business Law and Taxation, Monash Business School, Monash University, Australia.
Diane Kraal
Diane works for Monash Business School, Monash University, Melbourne, Australia. - Current at 31 March 2020
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Jeyapalan Kasipillai
Jeyapalan is a Professor, School of Business, Monash University, Malaysia. - Current at 04 July 2016
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