THE main thrust of this budget has been to keep the economy on a growth path whilst taking care of the people’s welfare.
The Prime Minister has taken the burden of sorting out the past mismanagement of the economy, especially the running deficits for the past two decades and the lack of attention paid in managing the rising cost of the national borrowings which have now come up to RM1.5 trillion.
The Prime Minister has hit the nail on the head and is ready to face the challenges in the current turbulent times head on.
Attacking corruption, improving governance, administrative systems and providing aid to needy sections of society is the correct approach.
To make this happen, the economy must grow. Increasing the expenditure to RM393bil whilst generating additional revenues through the introduction of new taxes will solve the problem.
How will the objectives be achieved?
Plans have been announced to effect the targeted subsidy reduction in 2024.
The intention is to reduce the subsidies from RM81bil to RM64bil. Most of the reduction will come from petrol and diesel subsidies.
The savings will be rechanneled to helping the people through cash transfers, discounts on PTPTN loans, contributions such as i-Suri, larger allocations principally to the health and education ministry, and increasing expenditure on food security.
The key pillar to reviving the economy will be to attract foreign direct investment. Here, the Prime Minister has taken the task on himself to become our chief salesman.
His success is reflected by the investments he has brought in from the United States and the Middle East recently. The focus is also on improving local direct investments and extending the reinvestment allowance incentive to those who have exhausted their 15 years is the right approach.
The environmental, social and governance and green agenda has not been forgotten. Incentives such as the green investment tax allowance and exemption have been extended to 2027 and tax breaks have been given to both the companies and individuals to use electric vehicles.
Significant tax changes
He has missed the opportunity to reintroduce the goods and services tax (GST), which would have brought in a much larger revenue. The pushback has largely been based on the fact that introducing the GST will be regressive, which will affect the lower sections of our society.
The debate will continue and some time in the future, the GST will make a comeback, and the issues around the regressive nature of the tax can be addressed.
The government has instead widened and increased the service tax from 6% to 8% except food and beverage and telecommunications services. The service tax will be expanded to logistics, brokerage, underwriting and karaoke services.
New taxes such as the capital gains tax and luxury tax will be introduced in 2024.
The capital gains tax will come into effect from March 1, 2024 and the effective date for luxury tax is not yet known.
The capital gains tax will be confined to the disposal of unlisted shares owned by companies. Individuals and other bodies will not be affected. It is anticipated that in the future, the capital gains tax will be widened beyond this category.
The luxury tax is intended to be imposed on high-value consumer items such as jewellery, watches, yachts, planes, etc. At the moment, there is no clarity on the threshold or the exact items that will be affected.
The mandatory introduction of e-invoicing will certainly bring in significant revenues through tightening the noose around businesses from falsifying documents relating to their income and expenditure.
This will start for large companies with a turnover of RM100mil from Aug 1, 2024 and is expected to include all businesses by July 1, 2025.
Issues that need to be addressed
Imposing the luxury tax on jewellery may not be a good idea, as jewellery is purchased as a form of savings and the lower sections of society buy jewellery for personal and gifting purposes.
Imposing it will just add a further burden on the lower sections of society whilst the T20 group will opt to buy outside the country.
There needs to be greater communication on the imposition of the capital gains tax. This tax merely brings taxpayers to a level playing field with other taxpayers who are paying income taxes.
E-invoicing is welcomed to reduce the leakage.
The implementation timeline is short, and the Inland Revenue Board (IRB) needs to put in more resources to accelerate the assistance to be given to the businesses, especially micro, small and medium enterprises.
They cannot afford to employ consultants, and this is where the IRB needs to step in and give assistance directly.
The elderly, which is a growing population due to the extension of life expectancy, has been missed out. Measures could have been announced to keep the elderly back at work and take the burden off the government and the family.
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 Star.