Saturday, September 08, 2007

Malaysia Budget, a step in the right direction

Two years ago, I wrote this article, which was published in letter to editor section of Malaysiakini and Malaysia-today.
I do not get all I wish in one go of course, but some stuff that I suggested back then is in the policy.
e.g;1) Reduce corporate tax.
2)Investment in human resources, free school books can qualify for that.
No I havent read all about the budget. So I reserve final comment until I finish reading.

That is the gist from what I read in the IHT online.

Malaysia's budget cuts corporate tax, dangles carrot to attract Islamic funds
The Associated Press
Published: September 7, 2007

KUALA LUMPUR, Malaysia: The Malaysian government announced Friday a further corporate tax reduction, and offered Islamic fund management companies concessions — including full foreign ownership and a nine-year tax holiday — as part of the 2008 budget.

Prime Minister Abdullah Ahmad Badawi also unveiled steps to stimulate the property sector, and said he was abolishing all school fees, which had already been negligible, in government schools. Textbooks will be free, he said.

"The budget will focus on three main strategies, namely enhancing the nation's competitiveness, strengthening human capital development and sharing the well being of all Malaysians," he said, reading out the budget.

Corporate tax, already slated to go down to 26 percent in 2008, will be reduced to 25 percent in 2009 to "enhance the nation's competitiveness and spur the growth of private investment," Abdullah said in announcing the 176.9 billion ringgit (US$50.54 billion; €38.87 billion) budget.

Corporate tax is currently 27 percent.

"I am confident that this reduction will have spillover effects in terms of economic growth and employment opportunities," he said. But he disappointed most Malaysians by failing to provide any other tax reliefs, including in personal income tax.

In a bid to consolidate its position as a global Islamic financial hub, Malaysia will allow foreigners to fully own Islamic fund management companies, he said. The government's pension scheme, the Employment Provident Fund or EPF, will channel 7 billion ringgit (US$2 billion; €1.53 billion) to be managed by Islamic fund management companies.

These companies will be given income tax exemption on all fees received until 2016, and will be allowed to invest all their assets abroad. At the same time, the government said it will issue three new stockbroking licensees to companies that can source investment funds from the Arab countries.

Abdullah said the government will let Malaysians make monthly withdrawals from the EPF to finance house purchases. The scheme will make available up to 9.6 billion ringgit (US$2.74 billion; €2.1 billion) annually for buying houses.

The government will also give 50 percent stamp duty exemption on the purchase of a house worth less than 250,000 ringgit (US$72,000; €55,000). The measure will reduce the cost of purchasing a house by up to 2,000 ringgit (US$571; €440).

1 comment:

Anonymous said...

All newspapers stated that there are no any form of additional tax or increase of tax rate in this year budget.
I wish to point out that This is not true. One of the proposed change are the abolishing of the service tax "threshold" means all services provided by accounting/management firms to us will be subjected 5% service tax. The Govt has enlarge the scope of coverage to those small accounting/management firms that previously not qualify to charge the service tax.

pls refer budget 2008 appendix here.

Present Position
Professional, consultancy and management service providers that have reached the threshold i.e. sales turnover of RM150,000 within a period of 12 months or part thereof, are required to be licensed under the Service Tax Act 1975 and collect 5% service tax.
The sales turnover of such service providers is generally uncertain and making it difficult for them to ascertain whether they have reached the threshold. Thus, exposing them to the risk of being penalised for failure to get the license and collect service tax.
Professional services that are subject to service tax are accounting, legal, engineering, architecture, survey, valuation, appraisal and estate agency.
To facilitate providers of professional, consultancy and management services to collect service tax as well as to create healthy competition among the same service poviders, it is proposed that the threshold for professional, consultancy and management services be abolished.
The proposal is effective from 1 January 2008.

Today, a chinese newspaper (SinChew) even reported the opposite by saying the service tax of these firms were being abolished which is not a correct interpretation.