The Impact of Petroleum-Based Revenues on Public Spending in Malaysia

This study aims to evaluate the contribution of petroleum-based tax and nontax on federal government spending (public spending). A time series econometric approach namely an autoregressive distributed lag (ARDL) is used to study the impact of oil revenues on public spending. The findings revealed that petroleum income tax, PETRONAS’s dividend and non-petroleum revenue tax are positively and statistically significance in influencing public spending in the long-run. This findings signal that the federal government needs to further strengthen their tax base revenue, in particular nonnatural- resource-based tax in reducing the dependency of public financing through the public debt.