Posted on 18 October 2013 - 05:37am
PETALING JAYA (Oct 18, 2013): Malaysian Rating Corp Bhd (MARC) has called on the government to revamp the personal income tax structure in the upcoming Budget 2014, which currently sees Malaysian workers pushed to higher tax brackets even when they receive only small increments in their incomes.
The local rating agency believes that a revamp in the personal income tax structure will not only make a difference in terms of the disposable incomes of Malaysians, but also serve as an incentive for local workers not to seek job opportunities in other countries.
"As we have continuously voiced out in our previous Budget reports, the burden on the middle-income group is, to some extent, related to the narrow tax band and the rising cost of living in urban centres in Malaysia," it said in its pre-Budget 2014 report entitled "Speeding up fiscal reforms, alleviating burden on rakyat" released yesterday.
According to the 2012 Household Income and Basic Amenities Survey, about 60% of total urban households earned RM4,999 or less, which, MARC said, is barely sufficient to make ends meet in urban areas.
"This is compounded by the significant rise in cost of houses in places like the Klang Valley, Selangor and Penang.
"In addition, the middle-income group is not eligible for the government assistance measures intended for the lower-income group," it said.
MARC pointed to Malaysia's narrow tax band, where income tax rates for Malaysians whose chargeable income of circa RM60,000 per year are as high 19%.
"This is relatively hefty for people at this income level, especially when compared with another country like Singapore, which imposes a maximum income tax rate of 7% for those with chargeable incomes of less than S$80,000.
"Similarly, in Malaysia, the highest tax rate (which is currently at 26%) is imposed on those whose chargeable income is above RM100,000 per year, while in Singapore, only those whose chargeable incomes are above S$320,000 per year fall in the top tax bracket," it added.
MARC is also of the view that the country's budget deficit could be reduced faster if the trend of higher-than-projected revenue received by the government in past years continues. This can be done by outlining a specific percentage of additional revenue that needs to be put aside to be used for deficit reduction in the future.
It also believes that the leakages commonly associated with the 'supplies and services' item under the operating expenses can be further contained through constant revisions of procurement guidelines.
"This is critical as the amount accounts for more than 17% of total operating expenditure and has increased by 184% since 2002."
While MARC is agreeable of the overall positive impact of the goods and services tax (GST), it thinks the government should also highlight the possible negative effects, especially the tax burden on Malaysians, and clearly outline measures to mitigate them.
"The GST is regressive in nature, meaning that the tax burden on the lower-income group will be raised more proportionately than for the higher-income group in terms of percentage. The possible impact on consumer prices also should not be underestimated and this should be highlighted.
"As such, there should be clear measures to offset these negative repercussions through, for instance, additional income assistance programmes such as 1Malaysia People's Aid (BR1M) and income tax cuts," it said.
On the issue of BR1M, MARC still thinks that it should be given on conditional basis rather than through simple cash handouts as currently being practiced,for example, through shopping vouchers which people can use to purchase only basic necessities such as food.
MARC also reckons that a sliding scale in the real property gains tax (RPGT) (from 30% to 0%, depending on the number of years held) is preferable to the present scale to deter speculation in the property market.
It also thinks that an increase in stamp duty will help to mitigate the risk of higher home prices.
No comments:
Post a Comment