Insights to Budget 2021
I’m very happy with the Budget 2021 announcement. I feel that the finance minister has just focused and hit the nail on the head. This is an economic climate where we are facing a downturn with a 5.4% deficit. These are tough times and he’s got to put money back into the economy which is exactly what he has done.
How will you get this money quickly into the economy? It is through individuals. He has given away tax breaks in terms of a percentage – 1% reduction for certain groups of people earning less than MYR 50,000. He has also given cash to the B40 groups who will spend the money. They’re going to get anywhere between RM1,200 to RM1,800 and it’s the right kind of group.
He also said EPF have a reduction next year where the employee contribution will be reduced from 11% to 7%. What happens is the money gets back into the economy because it’s being given to the people who are not in the top 20 but in the M40 group. The people who are extremely poor those who are earning less than RM4,500 to RM4,800, the B40 as we call it have been given direct cash injections. That way, they get to immediately spend money which will get back into the economy. This is exactly what I wanted and this is exactly what he has done.
The next group I had forecasted earlier, the unemployed who need to be taken care of, they need to be re-skilled and retrained. So he has allocated funds, grants and also tax deductions. To also help the unemployed, there’s now compensation. If you’re receiving severance pay, he has also increased the deductions from RM10,000 to RM20,000 which will not be taxed for each year of employment. That’s also wonderful because it gives them some opportunity to regroup, retrain and get back into the economy.
The second group was the unemployed retraining. Because we’re all working from home, he’s also focused on increasing the lifestyle allowance from RM2,500 to RM3,000 so that you can spend more money on all these gadgets, broadband etc.
When it comes to cigarettes, there’s been a lot of discussions around illicit cigarettes and he’s also taken that point into account. He stopped the main activity that is creating the flow of illicit cigarettes which is really the transhipment of cargo that’s actually going through. He said no more transhipment of cargo and there’s a stop to it. He has actually imposed excise duties on vape products which are also good. I think those smokers are going to suffer but those who are not smoking are going to be happy about it because vaping is not good for health.
When it comes to the incentives for example, where should he be focusing on? He hasn’t actually widened the incentives because the government is giving away too many incentives anyway. He has really focused on bringing large multinationals from overseas to Malaysia by loosening the requirements under the global hub incentive. Overall, he’s focused on a group that is outside the country.
For foreign workers – if you are now in an industry where you’re employing foreign workers and if you replace them with Malaysian workers, the employer will get a tax exemption and SOCSO will give them 40% off of the employee cost as a payment. The individual also gets another payment – a Malaysian employee gets 20% for being employed and replacing the foreign employee.
As for equity crowdfunding, there are so many different ways to raise money and one of the new ways is equity crowdfunding where individuals and others can actually put in and support new ventures. He said to them if you contribute we’ll give you 50% tax exemptions and there are limitations to it.
If you think about it, his main focus has been putting money into the economy, reviving the economy and getting employment back into the economy. I laud him for that. In my opinion, that’s the right direction to go. This is the right cause of action and we will succeed as a country.