Will there be sur­prises?

The Sun (Malaysia) - - SUNBIZ -

BUD­GET 2017 is ex­pected to be a pop­ulist bud­get pro­vid­ing good­ies to the rakyat and in­dus­try could be pla­cated with spe­cific in­cen­tives to spur growth and pro­duc­tiv­ity. Fis­cal pru­dence will be main­tained to en­sure the fis­cal deficit is re­duced to 3% of the gross do­mes­tic prod­uct (GDP) in 2017.

Tack­ling the ris­ing cost of liv­ing faced by the lower and mid­dle in­come groups, who are suf­fer­ing from ris­ing prices and stag­nat­ing in­come, will be the pri­or­ity of the gov­ern­ment.

The world econ­omy, with the ex­cep­tion of the US and pos­si­bly In­dia, is look­ing rather gloomy in light of the Brexit vote by the UK, the slump in oil prices and po­lit­i­cal crises in many parts of the world such as the Syr­ian mi­gra­tion to Europe and the slow­down of the Chi­nese econ­omy.

Bud­get 2017 is ex­pected to ac­knowl­edge the cur­rent eco­nomic en­vi­ron­ment and deal with it on a head-on ba­sis to keep the growth en­gine mov­ing and to pro­vide tem­po­rary as­sis­tance to the rakyat.

Good­ies for the rakyat Ban­tuan Rakyat 1 Malaysia (BR1M) cur­rently given to house­holds earn­ing less than RM3,000 a month will con­tinue and may in­crease, pos­si­bly ex­tend­ing to more peo­ple.The M40 group – house­holds with monthly in­come of be­tween RM3,860 and RM8,320 – can ex­pect ad­di­tional per­sonal in­come tax re­liefs and re­bates for one or two years for them to tide over the cur­rent dif­fi­cul­ties. Em­ploy­ees Prov­i­dent Fund (EPF) and life in­surance re­lief could be in­creased from RM6,000 to per­haps RM8,000. The one-off spe­cial tax re­lief of RM2,000 for tax­pay­ers earn­ing RM8,000 or be­low may be ex­tended and the amount may be in­creased.

Af­ford­able hous­ing tops the wish list of most low and mid­dle-in­come Malaysians. Some of the mea­sures which may be taken to ad­dress this are higher with­drawal from EPF Ac­count 2 for first-time home buy­ers, al­low­ing ap­pli­cants to re­ceive full loan for houses priced be­low RM300,000, de­duc­tion of in­ter­est on hous­ing loan and ex­ten­sion of 50 per cent stamp duty ex­emp­tion on trans­fer and loan agree­ments for prop­erty be­low RM500,000. There may be pos­si­ble de­fer­ment of the in­crease in toll charges.

What is in store for the cor­po­rate sec­tor? The cor­po­rate in­come tax rates are not ex­pected to be re­duced in Bud­get 2017. In the medium term, say, in the next four to five years, the gov­ern­ment may in­di­cate a pro­gres­sive re­duc­tion in in­come tax rates to be in line with that of our neigh­bours such as Thai­land and Viet­nam whose cor­po­rate tax rate is 20%. Key eco­nomic growth sec­tors like the dig­i­tal econ­omy, ser­vices in­dus­try and the ex­port sec­tor may be fur­ther in­cen­tivised.

Tight­en­ing the ad­min­is­tra­tion The gov­ern­ment’s tax rev­enue is un­der stress. It will be a chal­lenge for both the Royal Malaysian Cus­toms Depart­ment (Cus­toms) and the In­land Rev­enue Board (IRB) to meet their tar­get col­lec­tion of RM39 bil­lion and about RM125 bil­lion re­spec­tively due to the drop in con­sumer spend­ing and cor­po­rate prof­its.

We ex­pect the en­force­ment of tax ad­min­is­tra­tion to be tight­ened. There will be greater vig­i­lance by the Cus­toms and the IRB in con­duct­ing au­dits and en­forc­ing the tax rules.

Penal­ties will be strictly im­posed. To en­cour­age tax pay­ers to vol­un­tar­ily dis­close un­der­stated or un­de­clared taxes, the “tax amnesty” pro­gramme an­nounced in the re­vised Bud­get 2016 could be ex­tended into 2017 with fur­ther sweet­en­ers such as lower penalty if they come into “open” within a short pe­riod.

Any in­crease in the Goods and Ser­vices Tax (GST) rate? We do not fore­see any change in the GST rate. The gov­ern­ment could look into ex­pand­ing the “zero-rated” cat­e­gory to re­duce the GST rate of more ba­sic com­modi­ties.

In this elec­tion bud­get, the gov­ern­ment will surely take steps to ad­dress the wish list of the rakyat. In spite of the eco­nomic chal­lenges, Bud­get 2017 will be a pos­i­tive one ad­dress­ing our prob­lems and it may con­tain pleas­ant sur­prises for in­di­vid­u­als and spe­cial groups such as civil ser­vants and pen­sion­ers. As the say­ing goes, “Ev­ery cloud has a sil­ver lin­ing.”

Let us look for­ward to a bet­ter year.

The writer is the man­ag­ing di­rec­tor of Crowe Hor­wath KL Tax Sdn Bhd and a trustee of the Malaysian Tax Re­search Foun­da­tion.

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