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Thursday, October 31, 2013

Budget 2014: Budget likely to be remembered as GST Budget

Published: Saturday October 26, 2013 MYT 12:00:00 AM 
Updated: Saturday October 26, 2013 MYT 7:43:22 AM

KUALA LUMPUR: Budget 2014 may forever be known as the Goods and Services Tax (GST) Budget because the document bears the message that the Government is finally set to introduce the goods and services tax.

There have been a few false starts before, but this time, there will likely be no more postponements. The date has been fixed: April 1, 2015.

The murmur of discontent in Dewan Rakyat when Prime Minister Datuk Seri Najib Tun Razak revealed the country’s worst-kept secret – that the Government will impose the GST at 6% – is bound to be echoed across the country.

Nobody cheers when the tax machinery gets an additional component.

However, Najib pointed out that this decision was based on studies done over a few years. It also took into account the views of all stakeholder groups.

The implementation of the GST, he added, would enable the Government to address weaknesses in the current taxation system.

Indeed, the GST is the cornerstone of what may well be the country’s biggest tax revamp ever.

The GST will replace the sales tax and the service tax. In tandem with that change, income tax rates for individuals, companies and co-operatives will be cut by as much as three percentage points.

Also, the income of individuals that is subject to the maximum tax rate will be pushed up from above RM100,000 to above RM400,000.

The idea is to help the rakyat (by increasing disposable income) and businesses (by lowering costs) during the GST transition period.

What is certain is there will be intense interest in the GST and the related measures over the next several months.

The next most talked-about aspect of Budget 2014 (although widely anticipated) is probably be the package of proposals to increase home ownership.

These include curbs on excessive speculation in property; schemes and incentives for affordable housing; and the setting up of the National Housing Council.

Property developers, banks and property investors may be less than pleased, but these are clearly pro-rakyat initiatives.

There are several more examples. One that stands out is the proposed special tax relief of RM2,000 for taxpayers with a monthly income in 2013 of up to RM8,000.

Others include the increase in the BR1M (Bantuan Rakyat 1Malaysia) payments, the plans to expand Internet access and programmes to develop entrepreneurs.

However, nobody will mistake Budget 2014 for a populist budget; the GST announcement ensures that. The immediate withdrawal of the sugar subsidy of 34 sen is also an unpopular move, never mind that the Government is hoping it will slash sugar consumption.

The point is, Budget 2014 has specific objectives that are meant to benefit the nation as a whole. It was formulated based on the theme “Strengthening Economic Resi­lience, Accelerating Transformation and Fulfilling Promises”.

Its five main thrusts are to invigorate economic activity, strengthen fiscal management, inculcating excellence in human capital, intensifying urban and rural development, ensuring the wellbeing of the rakyat.

Presented with a buffet of dozens of Budget 2014 proposals, well-received or otherwise, people can easily overlook that in his speech, Najib said the Government was confident of achieving the target per capita income of RM46,500 or US$15,000 in 2020.

In fact, he added, Malaysia could even upgrade to developed nation status much earlier than 2020.

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