KPMG says Budget 2014 must promote growth, cut deficit

Published: Saturday October 12, 2013 MYT 12:00:00 AM 

Updated: Saturday October 12, 2013 MYT 9:15:08 AM

Raslan: ‘The ultimate goal is for Malaysia to attract and retain quality talent.’

KUALA LUMPUR: Audit, tax and advisory services provider KPMG Malaysia expects Budget 2014 to contain substantial fiscal reform measures aimed at spearheading sustainable growth and reducing the deficit.

In a statement yesterday, managing partner Mohamed Raslan Abdul Rahman said tax reform was an important issue that generated global discussions.

“The need to reduce the problem of non-compliance and boost administrative efficiency in our tax system to enhance revenue collection is critical,” he said.

He said the firm hoped that the budget would provide incentives to promote talent development and boost the employment of fresh graduates, particularly in the professional services industry.

Raslan said it was crucial that organisations such as KPMG were encouraged to bridge the gap between the corporate sector and educational institutions for Malaysia to achieve a knowledge-based economy. “In doing so, we not only educate but also instil skills that are much needed in today’s business environment. The ultimate goal is for Malaysia to attract and retain quality talent with expertise to support the country’s key growth areas,” he said.

Meanwhile, KPMG Tax Services Sdn Bhd head of tax Khoo Chin Guan said the budget would touch on the goods and services tax (GST), with a firmer timeline for its implementation. “While we do not expect the reduction of income tax just yet, we view the gradual introduction of the GST as a positive move by the Government. 

“Broadening the tax base is critical to help the Government reduce over-dependence on income tax and oil revenue,” he said in the statement.

He said the GST should not be a burden to the lower- and middle-income groups, as basic necessities such as sugar and rice would be “zero-rated” and reduce the cascading effect of our present sales tax and service tax system.

However, he said, both consumers and businesses required additional educational awareness on the GST.

KPMG Malaysia said while the momentum of economic growth was expected to be sustained in the coming fiscal year, the spectre of public debt projected to reach RM546bil (53% of gross domestic product) by year-end posed a number of economic challenges.

The audit firm said in pursuing the ambition of becoming a high-income nation by 2020, it was essential for Budget 2014 to promote international competitiveness and attract investors into Malaysia, while balancing public expectations and introducing innovative measures to build the equitable and inclusive society the Government was aiming for.

It said this was no mean feat, given the sizeable budget deficit, which might necessitate the implementation of tough fiscal reforms to pave the way for longer-term gains and economic robustness. “While such reforms could potentially be controversial, there is a genuine need to adopt a prudent fiscal budget to safeguard against potential adverse effects from the increasingly volatile global economy,” it said.

Nevertheless, the audit firm viewed positively the possible increases in the real property gains tax and stamp duty for third property purchases. – Bernama

PROPERTY Q&A

Publication: NST

Date of publication: Oct 11, 2013

Section heading: Real Estate & Decor

Page number: 011

Q/A1

Kenneth L .@Old Klang Road: I understand the property market may experience panic buying in 2014 by investors if the goods and services tax (GST) was implemented in 2015. Experience from other countries had seen such trends in anticipation of an inflationary push on asset prices.Should I start buying now even before the Budget 2014 is announced on Oct 25?

RED: Bear in mind inflation is always there and prices of property will go up in the long run despite the up and down cycles. The GST will definitely increase the overall cost of buying but capital appreciation and increased rental may offset the increased cost. You should never panic buy whatever the circumstances are. You should buy only when your own personal circumstances are right for you, not in reaction to the market.

Remember you are getting into a long-term commitment of at least 20 years, so don't rush into it. You should do your own homework first in particular with regards to the location, developer, condition of property, loan amount you could borrow and the conditions, value of surrounding property, future development in the area, ease of access, nearby amenities and facilities as well as transportation links.

On a plus note, in a booming or depressed market, there are always distressed properties up for auction. So, there are always cheaper options out there irrespective of market conditions.

Also, it's getting harder to get financing so fewer people are in competition to buy so if your personal financial circumstances are sound, you are ahead of the pack when it comes to getting financing.

Remember that if you'd lost a property you really wanted, there is always a better one around the corner. By Jan Yong, Editor, NST RED

Q/A2

Tee GP@Penang: My father has four properties worth a few million ringgit and two wives. I am the youngest child of his second wife. I have another older sister and three step-siblings from my father's first wife. My father is dying in hospital and he doesn't have a will. Should I get him to sign a will now bequeathing all his assets equally among all of us?

RED: Yes, better a will than none. Dying without a will (intestacy) causes a lot of delay to the surviving next-of-kin. But in order to avoid a dispute later among all the heirs, better to get all of them to agree to an equal share as well as who the executor of the will would be. Get two independent friends or relatives with no vested interest to sign as witnesses. It's easier said than done of course, but not doing it spells more hassle later on. By Jan Yong, Editor, NST RED

Of women power and tax

Publication: NST

Date of publication: Oct 11, 2013

Section heading: Business Times

Page number: 005

Byline / Author: By Johan Abdullah

THEY say that women are a mystery and difficult to understand. But everyone seems to agree that all women love shopping!

Is this true?

There are three kinds of women when it comes to shopping. The first is the kind that shops till she drops. Husbands need to have a limited credit card for these kinds. The second buys according to the allocated budget. The third compares prices between shops before making a purchase.

The reality is that the majority of women (63 per cent) make the household shopping decision.

Thus, it is imperative that they are aware of how much they spend every month and how much of it goes where.

There are also some women who notice the amount paid for taxes and calculate the total every month. Many don't do this, but should.

If all women did this, they would notice that we are already paying taxes in the form of a sales tax when we buy our goods from the market. Thus, should the Goods and Services Tax (GST) come into effect, it is not a new tax but one that replaces the old tax.

Paying tax is important to the family as a bulk of it goes to the children's development and family care. Schools and hospitals are funded by tax money, which form an income source for the government.

Women are well aware of the importance of developing our children and providing healthcare, especially to the elderly. Thus, women should be able to do the math and see that a small household contribution every month goes a long way in the nation's development.

Among the development we get to enjoy from the government with the income derived from tax are education for children (no school fees and for teachers' salary), affordable universities for youths, PTPTN loans, hospitals (free check-ups at government hospitals), roads, basic amenities such as taxi and bus stands, market place, community halls, clean water, efficient energy such as electricity, subsidies, Voucher 1Malaysia for books, national and state libraries, hospital for women, micro credit loan to women and small traders, programmes under the Women, Family and Community Development Ministry and many more.

No doubt that women care for the well-being of their children. The government takes care of the future generation through the income it earns from collecting taxes. As such, women's support to the government is imperative.

The contributor is a professional writer for World Communications

Janji yang pertama ditepati oleh Najib

This picture puts it best, the effects of the new GST (Goods and Services Tax), when compared with the old GST (Government Service Tax).

When we were being educated on GST, the rate used in examples was 4%. Even before introduction, it has been increased to 7% (to test the reaction of the people?), a whopping 75% increase in rate. Even when it was mentioned at 4%, many people like myself, had warned about the possible change in rate at will by the government, once it has been introduced. Well, BN can now claim they have the mandate to introduce GST, long delayed because of their worry over its effects on GE13, and increase the rate if and when necessary (to reduce high deficits).

Source: http://kosongcafe.blogspot.com/2013/05/janji-yang-pertama-ditepati-oleh-najib.html

Penang Institute: GST is not the only way to raise revenue

By Fatin Rasyiqah Mustaza of theedgemalaysia.com | Business | The Edge Malaysia – Wed, Oct 9, 2013

KUALA LUMPUR: While some quarters have called on the government to speed up the implementation of the goods and services tax (GST) to increase revenue and address the budget deficit, another group has questioned whether the GST is the only means of meeting the twin targets.

The Penang Institute yesterday said there are other methods besides introducing the GST.

Executive director Datuk Dr Woo Wing Thye advocated a rise in taxes and increasing the government’s efficiency in managing its expenditure to rein in the worsening deficit.

“There is room for efficiency in government spending,” he said, adding that if the government practises open tender procurement it could lower its expenditure by 30%.

Woo told a Penang government forum on GST & You yesterday that action should be taken against certain parties mentioned in the Auditor-General’s reports should there be any inconsistency or inaccuracy.

“We only do something when the Auditor-General’s report is out, which is after the roof has fallen down. Before an event occurs, we should practise open tender as well as inspect or monitor ongoing projects,” he said.

Woo said government linked-companies and state investment agencies should contribute more of their retained profits to the government’s revenue base in the form of dividends.

His colleague at the Penang Institute, Dr Lim Kim-Hwa, said the GST would burden the middle-income group the most.

With an average GST of 7%, he said the middle-income households would have to fork out at least RM104 a month to pay for taxes, representing 2.93% of their total income.

Lim said the GST would heavily weigh on consumer goods, restaurants and hotels as well as transport. Healthcare, food and non-alcoholic beverages would have the lowest GST rate.

He said it is possible to raise the same amount of RM7 billion in revenue per annum, while making the GST less regressive at the same time.

According to Lim, the GST could be implemented in a multi-tiered structure and the tax imposed on only selected items. Income tax rates could also be lowered and refundable tax credits be allowed.

“This is difficult though, as the middle-income groups will still pay higher GST than the higher-income group,” he said.

This article first appeared in The Edge Financial Daily, on October 9, 2013.

Budget 2014 to focus on reducing fiscal deficit, building resilience: Najib

OCTOBER 10, 2013

The Budget 2014 to be tabled on Oct. 25 will focus on reducing the fiscal deficit and enhancing national resilience, said Prime Minister Datuk Seri Najib Razak.

Najib (pic), who is also Finance Minister, said strengthening the national economy would enable Malaysia to be more resilient and achieve reasonable growth in an uncertain global economy.

"We will focus on strengthening our economy so that we can last. One important element is enhancing national resilience," he told Malaysian journalists covering the 23rd Asean Summit and Related Summits which ended in Bandar Seri Begawan, Brunei today.

He was responding to a question on whether the fiscal standoff in the United States, which has to resolve its debt ceiling issue by Oct. 17, had been taken into account in Budget 2014.

Najib said the situation regarding the standoff is fluid and a compromise could be reached at the last minute.

"That's what we are hoping for (a compromise), but whatever the outcome, we hope America's growth is not affected or, even worse, its economy crashes," he said.

Najib said an American economic crisis could affect global economic growth, making it difficult to predict what would happen next.

On the request by the Congress of Unions of Employees in the Public and Civil Services (CUEPACS) for a two-month bonus and higher allowances for 1.4 million civil servants this year in the wake of the recent fuel subsidy cuts, Najib said the matter should be further studied in detail.

"I don't want to say anything now. I have to look at the government's accounts first. We are on track to reduce the fiscal deficit, and we want to complete whatever programmes for the people's well-being," he added.

Najib said leaders at the Summit took note of the current global economic situation, with trade seen growing at a slower rate in 2013 and global economic growth at around three per cent.

However, he said, the good news is the Asia Pacific region emerging as the fastest-growing region, making it the world's growth engine.

"In my intervention, I stated the need to be given clear signals on the quantitative easing to be carried out by the United States, especially by the Federal Reserve. But the timing and total amount to be involved in the quantitative easing are not clear, contributing somewhat to the volatility in emerging economies," he said. – Bernama, October 10, 2013.