Tomorrow, Budget 2021 takes centre stage at Parliament, but before that happens, Roshan Kanesan explores:

– how the budget works with a focus on understanding the debt-ceiling and how government debt works

– as well as tax reliefs to watch out for, whether existing or new.

Brought to you by Mah Sing.

Produced by: Roshan Kanesan

Presented by: Roshan Kanesan

Podcast Transcription

Roshan Kanesan: Welcome to Ringgit and Sense. The shows is all about personal finance. I am Roshan Kanesan. Budget 2021 is expected to be table tomorrow and it’s arguably the most important budget in recent history. The Bank Negara estimating that we could see a contraction GDP of between 2.5% and 5.5% this year. Individuals and businesses alike will be looking to the government for support from the unprecedented impacts of COVID-19 pandemic so heading into budget day tomorrow. Today, on ringgit and sense we will be explore the importance of budget and how it works.

Roshan Kanesan: Now in part one of this conversation, I spoke to the economist for better understanding of the budget and what it means. Now we are going take a look at from a tax perspective and to help me with this, I’m speaking with Thanneermalai, managing director of Thannees Tax Consulting Centre. Thanneer, thank you for joining me this morning.

Thanneermalai: Thank you. Thank you very much for inviting me, Roshan.

Roshan Kanesan: So, Thannee. Just straight to the point here, as a tax consultant, what do you pay attention to in the budget announcement, I mean I understand it going to be taxes but is there anything particularly you pay attention to?

Thanneermalai: My focus will be on the tax measures. What is the government announce in terms of tax measures. Are they going to be increases in taxes or any tax reliefs for the individual and also for the company is the tax deduction given. That’s going to be my focus and I am also will be looking out for have the authorities place more burdens on tax payers in order to comply with the taxes because it has a tendency to increase the burden on the tax payers from time to time. The third thing I’m also looking for is in the fine print is whenever the bills come out I’m looking for area where there could be issues like around restriction on certain claim or perhaps they giving greater reliefs so we’ve got to read in between the lines and also I would like to look at the administrative issues. So these are kind of measures and these are the kind of issues that I’ll be looking at and also I’ll be looking at are there any potential tax planning opportunities for individuals and companies. So those are the kind of area I’ll be looking at.

Roshan Kanesan: Alright, so let’s dive into that a little bit. What are key relief or part of the budget that individual should be paying attention to?

Thanneermalai: I think this year they should be looking at the reliefs they will getting relations. I think there are two issues. One it has to be around the health of the population. At the moment we are going through the COVID crisis. There is a lot of additional expenditures that we are spending on ourselves such as sanitizers, gloves, masks and other personal health care hygiene issues. So these are kind of maybe potential reliefs given to us. There will be also reliefs that individuals should be looking out towards because we are working from home. We are into the digitalization era in which using the internet so there will be extra costs and I think the government will pay attention to give reliefs and additional deduction and there will be also cash grants. There will be subsidies given for people to train. I believe the government will also look into that because at the end of the day the people are being unemployed and they need to retrain themselves to get back into market. The other side of the budget will be to try and get employment back rather than increasing the employment you got to reduce the employment. These are the kind of issues that individuals and particulars should be looking out for.

Roshan Kanesan: Now digitalization you mentioned that. It has been a key point this year as more and more people have to work or study from home but I think as you mentioned as well there are certain issues here especially with that expanding digital divide. What do you think can be done to be help manage this divide and bridge the gap?

Thanneermalai: Firstly, I think the younger folks would be fine but at the end of the day they need to buy the equipment, they need to buy software. For all that I think the government needs to give them some form of assistance either in the form of cash grants or it has to be given in the form of tax reliefs. Don’t forget many of the youngsters may not be paying taxes so it has to be given in the form of cash grant. It regards the medium income group which those in 30’s to 50’s group – they are paying the taxes and they need to get the deduction. They also need to move into this era. The third group will be the elderly group will really need the help also. So, in that sense the government should be seriously thinking about giving one cash to the groups that need cash directly and the other one is through reliefs for the purchase of the equipment or for the purchase of the services in terms of the broadband services. So, this will be the whole range of things that needs to be given in terms of the help that they need to give to the individuals.

Roshan Kanesan: And we know when we take a look from any continuation from last year. What reliefs do you want to see extended or even expanded from last year?

Thanneermalai: I think one I would like to see is home ownership campaign. For example, they did help they give reliefs on stamp duty and they even allow the RPGT people to buy and sell the second home. They could get relief for more than one house up to three houses for example. So that relief that all the things should continue because the property sector also needs to be revived in individual spine that shouldn’t be tax on it so that it encourages to invest so the economic activities with regards the property sector – that’s a very important sector, the construction property sector perhaps would be keep going. The other site I would also like to see is this reliefs – this personal reliefs – in the relation to buy the equipment needed for your own personal improvement especially around this digitalization around education, retraining yourself etc. The RM2,500 at the moment they are giving to the equipment and etc. should be increase substantially. Maybe doubled even to RM2,500. So that’s all the kind of things that I’m looking for.

Roshan Kanesan: What about in terms of retirement planning, in terms of the EPF relief or PRS relief? How important is that to our own retirement planning?

Thanneermalai: I think it is very important because if you see now this does exist so many people actually don’t know even have RM50,000 of savings and they are retire so we have to allow them to upgrade or not RM4000 for EPF, RM3000 for insurance, PRS is RM3000 perhaps another thousand ringgit along it should be RM5000, RM4000 and another RM4000 so it will affect to be increasing the all deduction by RM1000 for each of those element I think in the long run especially those who are in the younger group and they keep on saving and they will have a good build-up of retirement saving .

Roshan Kanesan: Aside digitalization and retirement planning, what else do you think and the cash grants we talk about earlier, what else do you think people on the ground need at this point?

Thanneermalai: I know what people want is actually cash in hand. They want cash in hand and they need to actually especially the lower income group need cash in hand because they go back to the economy so they are not paying taxes. The second group M40 need also cash because they are not exactly people with huge amount of savings. They are living practically on the breakeven basis. They needed in the form of tax deduction, tax relief and they are the very people who really need to us especially B40 and more importantly M40. These are the people who are actually be the main driver of the economy. So you got to help them retrain, reorganize themselves, uplift themselves, up-skill themselves. They need help and if they up-skill, the economy will definitely pick up and run. The third group is actually T20 group. I think people do not mind if T20 group have to pay extra taxes either in the form of indirect taxes or direct taxes because they can afford to pay. The last thing is whether you want to bring it any extra taxes on the T20 group either in taxing well or income. So, those are the kind of things that people want to see but there has got to be cash in the economy and it has to work in the economy. That is when we are going to get the employment up and the economy moving. At the moment it is not moving. In fact, we are facing of deflationary environment.

Roshan Kanesan: On the note of putting money back into the economy one of theoretical ways to do that will be to cut taxes for both individuals and corporates and theoretically that would then spur consumption and help the economy out. What are your thoughts on tax cuts, Thannee?

Thanneermalai: I don’t think it will happen for the top group and it won’t happen also for the companies perhaps the only two sectors that I believe they could actually reduce it or maybe even consider of waiving it to some segment of the society would be perhaps the lowest income group perhaps those earnings less than RM50,000 or RM70,000 of taxable income. They could actually give a higher rebate. At the moment they are giving RM400 rebate but perhaps the rebate has to be increased such that the group with RM50,000 taxable income perhaps can be totally waived but the rest of the other groups I think they continue paying the same amount of taxes and the other group will be SMEs – the small and medium-sized enterprises. I would suggest that perhaps a reduction of the first RM500,000 from 17% to maybe 10%. Don’t completely relief it but reduce it substantially or maybe even half the tax for the first RM500,000 and it will cover all the small companies. So those are the kind of things and it is not impossible but you cannot completely relief the tax because where will the government get the money from. It has to come from tax, cash either you have to borrow or you have to sell the asset. So the government needs money too.

Roshan Kanesan: Do you see? I know you mentioned earlier taxes of T20 whether indirect or direct, are you hearing anything about any other forms of taxation we could see coming to play from Budget 2021?

Thanneermalai: They talked about windfall tax but I do not think that will come in. They talked about inheritance tax but that is unlikely as there is going to be powerful lobby groups who will stop it. I think the only area perhaps will actually increase maybe is not introduce any new taxes but widen the SST or the sales and service tax to a wider range of codes. That’s the real possibility that they can widen it. For example, the construction sector is not affected maybe they will widen it to include the construction sector and collect the money and perhaps what they will do is to redistribute the money directly to the group that needs the help.

Roshan Kanesan: On that note, thank you so much for joining me today.

Thanneermalai: Thank you. Thank you very much, Roshan.