Tax perks a mix of old and new for corporate Malaysia

PETALING JAYA: Budget 2018, was a mix of old and new incentives, with no real significant measures that impact corporates directly.

SJ Grant Thornton executive director of indirect tax & GST Alan Chung said Budget 2018 is a mix of old incentives (such as accelerated capital allowance and the tourism sector, which are deemed to be expanded from previous) and new incentives (such as exemption of income tax for women on income earned within 12 months for women re-entry into workforce at least two years after work break).

He said GST had a few proposals compared to last year, when the budget was silent on it.

“One of the major ones is the relief of GST for big ticket items (aircraft and ship). It may sound like they’re promoting the sector of the economy like aircraft but these are not targeted to individuals,” Chung told SunBiz.

He said big ticket items’ GST are paid by companies, and airlines and shipping companies are more likely to be GSTregistered bringing about the question of how much of an impact the measure will have on the economy.

Chung also pointed out that another “questionable but good move” is the 2 percentage point reduction in individual income tax rates in three tax brackets, specifically middle income earners, who have been complaining of being left out of incentives from the Budget.

PwC Malaysia tax leader Jagdev Singh concurred, saying that there are no significant measures that impact corporates directly – with tax rates remaining the same, existing incentives maintained.

“A reduction in corporate taxes was not expected, given the focus on reducing the budget deficit. However, I had hoped that targeted measures based on productivity increases, and investment in R&D would be introduced, and this was visibly missing in Budget 2018,” said Jagdev.

What stood out was the timely reduction in personal tax rates, where he had expected a reduction in personal tax rates after the implementation of GST in 2015, and Budget 2018 certainly delivered on that. The tax benefit of up to RM1,000 will benefit a large number of taxpayers. However, there were no changes to existing reliefs.

“Overall, many timely measures to deal with the elephant in the room – which is the increase in cost of living – were introduced, or continued in this Budget. While Budget 2018 provides a framework for shaping the workforce of the future, I hope that in the long run, measures will focus on increasing our competitiveness in the new economy.”