BUDGET 2024 is focusing on bringing the country’s economy back to a growth path and dealing with the legacy problems of servicing the ballooning government debt which now stands at RM1.5 trillion.
At the same time, the prime minister has given a helping hand to the lower segments of society. He has many balls to juggle: ringgit weakness, low tax collection, slowing exports.
This budget has hit the nail on the head to reduce petrol and diesel subsidies and provide them only to targeted groups which will be implemented in 2024. The other subsidies that will be reduced are electricity prices for high-volume users and pricing of chicken and eggs will be left to the free market.
The subsidy bill is expected to decline to RM64 billion. The savings will be channelled to the B40 and others in need through Sumbangan Tunai Rahmah (STR), i-saraan and i-suri, and through cash handouts to the poor, students and others.
The prime minister is focused on attacking corruption. It will take time for the mindset of the people to change. In this regard, he has given the necessary authority and resources to enforcement agencies to increase their vigilance on corruption.
To grow the economy, Malaysia cannot keep on borrowing. It must increase the flow of foreign direct investments into Malaysia and increase its own revenue base. Here, incentives such as Global Services Hub will be able to attract global companies into Malaysia.
There are a number of measures he has announced in this budget that will ease the pain of the rakyat and help MSMEs. The main focus is increasing the amount of STR from RM3,100 to RM3,700 for families and, for youths, from RM350 to RM500. The total amount will be increased from RM8 billion to RM10 billion and this will be expected to benefit nine million people. The government has allocated RM44 billion in loans and financial guarantees to MSMEs.
For individuals, the existing tax relief for medical treatment will be widened to include dental care. The RM8,000 relief given for parents’ medical treatment and care will include now full medical examination up to a limit of RM1,000.
Sport equipment and activities have been given an increased relief of RM1,000 from the existing RM500. Childcare allowance provided to employees has been increased from RM2,400 to RM3,000.
Capital gains tax (CGT) will be imposed on the disposal of unlisted shares by companies from March 1, 2024. The rate of tax is 10% of the net gain. Individuals and other bodies are not affected by CGT.
Luxury tax is expected to be introduced in 2024. Details on the threshold and when it will be implemented is not known at present. It will be imposed on high value goods such as jewellery, watches, yachts, etc.
Jewellery is often purchased by the lower sections of our society as investments/savings and as gifts to family members. Should luxury tax be imposed on jewellery?
Service tax has been increased from 6% to 8%. However, it will not apply to F&B and telecommunication services. It has also been widened to the logistics, brokerage, underwriting and karaoke services.
To encourage reinvestment by domestic companies who have exhausted their 15-year reinvestment allowance tax incentive, a special reinvestment allowance has been given for investments incurred for an extra three years up to 2027.
E-invoicing has been made mandatory for businesses whose turnover exceeds RM100 million from Aug 1, 2024 and gradually to all businesses by July 1, 2025. This will involve significant resources to be put in by businesses to digitalise their sales and expenses.
The most urgent assistance businesses need is help from the Inland Revenue Board (IRB) to implement e-invoicing without incurring significant costs. IRB should increase its resources to directly help MSMEs and reduce their reliance on using consultants. The consultants can help the larger companies.
Greater communication and education is needed to explain the workings of capital gains tax, luxury tax and the widening of service tax.
This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com).
This article was originally published on the Sun daily.