KPMG: Pockets of tax initiatives in Budget 2020
KUCHING: Both businesses and the public will stand to gain from tax measures introduced in Budget 2020, said KPMG Tax Services Sdn Bhd executive director Regina Lau, as the new Shared Prosperity Vision 2030 sets the backdrop of the national budget into a new decade.
“Under the Vision to reduce the wealth disparity across all groups regardless of ethnicities, the role of small and medium enterprises (SMEs) is paramount.
“While tax cuts were high on everyone’s wish list but were not much anticipated, the 17 per cent tax rate on the first RM600,000 of SMEs’ chargeable income from RM500,000 previously was certainly much welcome,” Lau shared in a statement.
“The outright RM17,000 tax saving for all SMEs is not insignificant and hopefully, the SMEs will channel the savings into digitalization and automation of their businesses for which various grants available to the SMEs have been announced by the Finance Minister.”
While there is a reduction in tax for SMEs, Lau noted that individual high income earners will have to foot out more with effect from the year of assessment 2020. A new income band will be introduced where income exceeding RM2 million will be subject to tax at 30 per cent.
“Although this is estimated to affect only 2,000 taxpayers, it does propel us to the category of Asean countries with high personal income tax rates,” she shared. “It is to be noted that with the exception of Brunei, our neighbouring countries all have a broad based consumption tax while we have a narrow based sales and service tax.
“To taxpayers, any increase in tax reliefs are particularly welcome. While no new reliefs for individuals were announced, the relief for early childhood education is increased from RM1,000 to RM2,000 and the RM6,000 relief for serious medical illness treatment is extended to cover fertility treatment.
“For businesses, the consolidation of the deduction for company secretarial fees and tax filing fees is good – while the total deduction remains at RM15,000, businesses will be able to maximise the deduction claim and it also simplifies compliance to a certain degree.”
The KPMG executive director One area of disappointment to many was that there is no change to Real Property Gains Tax ( RPGT) on disposals after the fifth year.
As the revision to RPGT was intended to curb property speculation, Lau said subjecting the gains to tax where a property has been held for many years does not fare well with property owners who are genuinely long- term property investors.
Nevertheless, there is a bit of reprieve as properties acquired before year 2013 are deemed to have been acquired on January 1, 2013. This will reduce the gains subject to RPGT for such owners.
Increasing costs is a major issue faced by businesses and people on the street. With stepped up enforcement measures by the tax authorities and greater tax awareness in our society, taxpayers strive to comply with the tax laws properly.
The costs associated with such compliance add on to business costs which ultimately filter down to the ordinary people on the street. In view of the current high costs environment and in tandem with the spirit of Shared Prosperity Vision 2030, the authorities could help to alleviate some of these costs by reviewing some current tax compliance practices and requirements.
There have been complex accounting and tax developments in recent years and the complexity have added onto compliance costs for taxpayers. Simplifying some tax requirements such as adopting full or at least partial convergence with new accounting standards and requirements will greatly simplify and ease the tax compliance process.
While loss or deferral of tax revenue may be a concern, some countries have adopted this and any loss or deferral is a mere transition issue.
Another area that the tax authority could review is with regards to withholding tax on disbursements and reimbursements relating to on- shore services rendered by non- residents to Malaysian businesses.
While withholding tax is meant to be tax of the nonresident, in practically all cases, the withholding tax on these amounts are borne by the Malaysian businesses. This increases the costs of local businesses unnecessarily and are borne by the rakyat ultimately.
Making tax compliance simpler and easier for taxpayers saves cost, increases compliance and ultimately benefits everyone in the tax ecosystem and the nation.
Overall, Budget 2020 is well rounded, all- inclusive and notably is very specific on its targets. As with all plans and proposals, there should be follow- through monitoring, review and evaluation to assess the results of these measures in due course.”
Under the Vision to reduce the wealth disparity across all groups regardless of ethnicities, the role of small and medium enterprises (SMEs) is paramount.