WHAT is needed to revitalise our economy? The simple answer would be to inject more money into the economy to revive businesses. The fastest way is to give away money to individuals in the lower- and middle-income group. They are the very people who are affected by the economic crisis who are either currently unable to find employment or have become unemployed due to the pandemic.
Budget 2021 hits the nail on the head by transferring cash directly to individuals or indirectly either via tax reliefs or allowing them to retain extra cash through a reduction of EPF contributions.
B40 and M40 groups
If your household income is less than RM5,000 per month, you will be eligible for the BPR assistance ranging between RM500 and RM1,800 depending on the number of children. Single individuals earning less than RM2,500 monthly will be eligible for RM350. For the B40 group to stay connected online, a RM180 telecommunication credits is allocated for them. The Financial Assistance for Children is now increased to RM150-200 per child with maximum RM1,000 per family. The loan moratorium for the B40 group will be extended for three months and if you are able to repay 50% of the loan, this can be extended for six months.
Tax reliefs have been increased and extended: Lifestyle relief to RM3,000, medical expenses for self and parents to RM8,000 each. Included in the medical expenses will be RM1,000 for vaccination. Reliefs up to RM8,000 and RM3,000 for contribution into SSPN and PRS has been extended to 2022 and 2025. The tax relief for education fees is expanded to include RM1,000 for upskilling or self-enhancement courses. A 1% reduction in the tax rate has been given for taxable income between RM50,001 and RM70,000.
Additional cash will be available to all employees through the reduction of employee contribution to EPF from 11% to 9%.
To assist the unemployed, the Budget has increased the tax exemption for those receiving compensation for loss of employment from RM10,000 to RM20,000. Also, this group will be given additional job search allowance for three months under the Employment Insurance Scheme. The unemployed can withdraw RM500 monthly from their EPF Account 1 for 12 months.
Overall this Budget is attempting to revive the economy and help the lower and mid-income group alleviate their suffering during this difficult period. Although the intention is good, the effect from the injection of money will take time to come through. It is absolutely important that the money allocated for distribution is quickly doled out to the people who need it without any leakage in the system.
Wherever possible the transfers should be done directly to the individuals rather than through intermediaries. In order to realise the objective, all government agencies need to cooperate and get the money into the economy so that we can quickly see the revival of the economy.
This article was contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai.
This article was originally published on the Sun daily.