Struc­tural is­sues re­solved?

The Sun (Malaysia) - - SUNBIZ -

BUD­GET 2017 as ex­pected ad­dressed the fis­cal deficit and has promised to re­duce it to 3% in 2017 and will carry on to care for the needy sec­tions of the rakyat through the BRIM pay­outs. The Prime Min­is­ter, in the bud­get speech, also ac­knowl­edged they are aware of the vul­ner­a­bil­ity to ex­ter­nal fac­tors such as the 50% drop in oil prices from its high point and the slow­down in many parts of the world es­pe­cially Europe and China.

SME The SME sec­tor was given a boost through the re­duc­tion of cor­po­rate tax by 1% to 18 % for the charge­able in­come up to RM 500,000. This sec­tor also con­tin­ues to re­ceive fi­nan­cial as­sis­tance and re­bates and in­ter­est sub­si­dies and in­sur­ance cov­er­age.

Other cor­po­rates The bud­get has pro­posed to re­duce the cor­po­rate tax with­out com­pro­mis­ing its rev­enues through a grad­ual re­duc­tion of 1% to 4% de­pend­ing on the in­crease in tax­able in­come in 2017 com­pared with the pre­vi­ous year, which will also be avail­able in 2018. The over­all ef­fec­tive tax rate for a com­pany can go down from the cur­rent 24% to 20 %.

The tourism sec­tor will ben­e­fit through the ex­ten­sion of the pi­o­neer sta­tus and in­vest­ment tax al­lowance in­cen­tive to De­cem­ber 2018 for new four- and five-star ho­tels.

BRIM BRIM has been in­creased for house­holds be­low RM3,000 to Rm1,200 from RM1,050 and RM1,000 and house­holds with in­come be­tween RM3,000 and RM4,000 from RM800 to RM900 and for sin­gle in­di­vid­u­als earn­ing less than RM2,000 from RM400 to RM500.

In­di­vid­ual tax re­liefs In­di­vid­ual tax re­liefs have been ex­tended with the in­tro­duc­tion of three new re­liefs.

The pur­chase of printed news­pa­pers along with smart­phones, tablets, in­ter­net sub­scrip­tions and gym­na­sium mem­ber­ship fees now qual­ify for a life­style tax re­lief of up to RM2,500 per year. Tax re­lief of RM1,000 for fees in­curred for pre-school ed­u­ca­tion and for the pur­chase of breast-feed­ing equip­ment is also pro­vided.

Other tax mea­sures The stamp duty is in­creased from 3% to 4% for trans­fers of prop­er­ties val­ued in ex­cess of RM1 mil­lion. GST treat­ment on free trade zones and ware­hous­ing scheme is now stream­lined.

In an ef­fort to re­duce the cost of own­er­ship for first-time Malaysian home­buy­ers, the stamp duty ex­emp­tion of 100% has been ac­corded to trans­fers of prop­er­ties and loan agree­ments for such pur­chases of homes cost­ing less than RM300,000.

This bud­get has pro­posed that there will be shar­ing of data be­tween the 3 au­thor­i­ties: In­land Rev­enue Board, Royal Malaysian Cus­toms and the Com­pa­nies Com­mis­sion of Malaysia. They will be able iden­tify tax­pay­ers who have reg­is­tered for GST but not for in­come tax. This will also help them iden­tify tax evaders etc. and will bring in sig­nif­i­cant rev­enues to the gov­ern­ment.

Struc­tural is­sues – what needs to be ad­dressed?

BRIM cer­tainly helps the poor and the needy but will this solve their prob­lems in the long run. Cash hand­outs on a per­ma­nent or semi-per­ma­nent ba­sis will not help them stand on their own feet. They need their fun­da­men­tal is­sues ad­dressed such as how to make a liv­ing in the long-term and be­come in­de­pen­dent of gov­ern­ment hand­outs. They will need cap­i­tal, train­ing and guid­ance to start small busi­nesses.

M40 ap­pears to be for­got­ten The M40 group earn­ing be­tween RM3,900 and RM8,300 who face the ris­ing cost of liv­ing with­out a com­men­su­rate in­crease in the earn­ings have not been given a help­ing hand. The ex­pected widen­ing of tax bands did not ma­te­ri­alise. This group is also af­fected by ris­ing cost of trans­porta­tion and the need to meet var­i­ous fi­nan­cial obli­ga­tions such as hav­ing to ser­vice their car and hous­ing loans and bear their health care costs. None of these is­sues were ad­dressed.

Com­pet­i­tive­ness of cor­po­rate tax rates

The Malaysian cor­po­rate tax rates are among the high­est in the re­gion when com­pared with our neigh­bors such as Sin­ga­pore 17%, Thai­land 20%, Viet­nam 20% and In­done­sia (plans to go be­low 20%). An an­nounce­ment of a grad­ual re­duc­tion over a time pe­riod would have sent the cor­rect sig­nals to for­eign in­vestors?

Over­all the bud­get ad­dressed some key is­sues but some re­main unan­swered.

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

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