Will states receive increased federal revenue if collections rise?

Question

Accepted Answer

States Will Receive Increased Federal Revenue If Collections Rise

State governments are entitled to receive a distribution of the federal government's revenue should there be an increase in overall revenue collected. This distribution is facilitated by an annual allocation, typically RM250 million, provided by the Ministry of Finance. The process is formally governed by specific legislative acts designed to ensure revenue sharing between federal and state levels.
Revenue Distribution Mechanism

The distribution of any increased federal revenue to the states is carried out under the framework established by the Akta Pemberian Pertambahan Hasil 1977 (Revenue Growths Distribution Act 2007) and its amendment, Akta Pemberian Pertambahan Hasil (Pindaan) 2007 (Revenue Growths Distribution (Amendment) Act 2007). These acts outline the legal basis for sharing additional revenue collected by the federal government.
Annual Allocation and Confirmation

Annually, the Ministry of Finance normally earmarks an allocation of RM250 million for distribution to all states. This allocation is contingent upon confirmation from the Accountant-General's Department, which verifies an increase in the federal government's annual revenue. Concurrently, gross domestic product (GDP) data, as received from the Economic Planning Unit, is also considered in this confirmation process.
Principle of Revenue Sharing

The underlying principle for this distribution is revenue sharing. States are set to receive the increased amount when the federal government's revenue for a specific financial year surpasses that of the preceding year. This mechanism ensures that states benefit directly from any growth in federal revenue collection.
Trigger for Distribution

Even a minimal increase in federal revenue, as little as one ringgit, will trigger the distribution process. Once an uptick in revenue is confirmed at the federal level compared to the previous year, the states will be eligible to receive their share from the designated RM250 million allocation. This signifies a direct link between federal fiscal performance and state financial resources.

Reading history

Hide →

This history is cleared when the page is closed.

Will states receive increased federal revenue if collections rise?

Loading

Was this article helpful?

Helpful

Not helpful

Report an issue

1

0

0

Share with friends