Posted on 25 October 2013 - 06:43pm
Last updated on 25 October 2013 - 09:09pm
KUALA LUMPUR (Oct 25, 2013): Prime Minister Datuk Seri Najib Abdul Razak today unveiled a pro-active budget, underlining steps to turn Malaysia into an entrepreneurial nation, a pragmatic goods and services tax (GST) that is fair and transparent benefiting all Malaysians and measures to empower Bumiputeras' economy.
The move is positive for the economy as the GST, coupled with tax relief for the middle-income group and reduction in individual income tax rates by one to three per cent, will raise disposable income and increase consumption expenditure and spending.
Najib, who is also the Finance Minister, said the government would formulate a National Aviation Policy to further develop the industry while several airports would be upgraded, given that Malaysia has the potential to be a regional aviation hub.
He also introduced measures to promote the derivatives and sukuk market to finance various sustainable and responsible investment initiatives.
He announced that the GST rate of 6.0 per cent to be implemented in April 2015 would be a boon for businesses as the tax for corporates and small and medium companies will be reduced by one percentage point in 2016 to ensure the smooth implementation of the new tax regime.
This means that the sales and service tax would cease to exist by then. Besides corporate income tax being reduced to 24 per cent from 25 per cent and that for SMES down to 19 per cent from 20 per cent, cooperative tax would also be reduced by one to two percentage points in 2015.
The Real Property Gains Tax (RPGT) tax would be revised whereby the rate will be increased to 30 per cent for gains on properties disposed within three years whereas for disposals within the holding period up to four and five years, the rate will increase to 20 to 15 per cent respectively from 2014. For disposals made in the sixth and subsequent years, no RPGT is imposed on citizens whereas companies are taxed at 5.0 per cent.
Najib said the SME Bank would set up a Bumiputera Equity Fund worth RM300 million to provide loans to enable Bumiputera companies to take over listed companies or companies with potential to be listed on Bursa Malaysia.
In addition, RM200 million will be allocated by SME Bank for loan facilities for development programmes for Malay reserve lands in strategic areas such as Kampung Baru, Kampung Pandan and Kampung Datuk Keramat, a move that will improve the living stands of the Malays in line with the rapid development in surrounding areas.
"The government will continue to increase Bumiputeras' participation in business and entrepreneurship to generate income and wealth (and) among programmes to be implemented are the establishment of the Bumiputera Entrepreneurs Start-Up Scheme (SUPERB), with an initial fund of RM30 million.
To ensure home ownership among Malaysian citizens, the minimum price of properties that can be purchased by foreigners will be raised to RM1 million from RM500,000. he said.
There will be increased transparency in property sales price where property developers will have to display detailed sales price including all benefits and incentives offered to buyers such as exemption of legal fees, stamp duty, sales agreements, cash rebates and free gifts, he said.
Developers are also prohibited from implementing projects that have features of Developer Interest Bearing Scheme (DIBS) to prevent them from incorporating interest rates on loans in house prices during the construction period.
"Therefore, financial institutions are prohibited from providing final funding for projects involved in the DIBS scheme," he said.
Keeping to his promise to empower entrepreneurs and boost innovation, Najib announced a RM50 million funding for the Malaysian Global Innovation and Creativity Centre (MaGIC) and a Graduate Entrepreneurship Fund also worth RM50 million.
Among other things, he said that MaGIC will monitor the performance of entrepreneurs, house an integrated database, provide incubators, registration and patenting of intellectual and funding facilities as well as business-matching processes.
To strengthen the financial market, Bank Negara would lead the initiative in formulating the Netting Act to protect enforcement rights of "close-out netting" under the financial contract, he said.
"This is to reduce credit risk and promote the derivatives market, thereby reducing systemic risks in the domestic financial market as well as reduce the cost of doing business," Najib said.
The domestic bond market is the largest in Southeast Asia with a value exceeding RM1 trillion.
Najib said Valuecap, which invests in listed companies, would allocate RM1 billion to invest in companies that score high on the Environmental, Social and Governance Index (ESG), which will be introduced to raise the profile of listed companies which have high socially responsible practices.
Towards this end, the Securities Commission would introduce the Framework of Socially Responsible Sukuk Instrument (SRI Sukuk) to finance various sustainable and responsible investment initiatives, he added. – Bernama