Budget 2023 likely to maintain proposed tax cut for M40, rise for T20, says group

20 Feb 2023 11:24am

Under Budget 2023 tabled on Oct 7, 2022, by the former government, the income tax for the chargeable income band of between RM50,001 to RM100,000 was reduced by two ppt for the year of assessment 2023 -- from 13 per cent to 11 per cent for the RM50,001-RM70,000 band, and from 21 per cent to 19 per cent for the RM70,001-RM100,000 band.

KUALA LUMPUR - The Chartered Tax Institute of Malaysia (CTIM) does not anticipate any new tax to be introduced in the upcoming Budget 2023 but expects the government to maintain the two-percentage point (ppt) income tax cut for the middle-income group (M40) and 0.5-ppt tax rise for the high-income earners (T20) proposed in the previous budget.

President Chow Chee Yen said the purpose of the tax reduction is to help the M40 with the rising cost of living and increase their disposable income, while the tax increase on the T20 is to alleviate the reduction in revenue collection caused by the tax cut.

"Helping to combat the cost of living and improving the country’s fiscal position are the important focus of the current government.

"As such, I would expect the respective tax cut of two ppt and tax increase of 0.5 ppt to be maintained,” he told Bernama via email recently.

Under Budget 2023 tabled on Oct 7, 2022, by the former government, the income tax for the chargeable income band of between RM50,001 to RM100,000 was reduced by two ppt for the year of assessment 2023 -- from 13 per cent to 11 per cent for the RM50,001-RM70,000 band, and from 21 per cent to 19 per cent for the RM70,001-RM100,000 band.

Former prime minister Datuk Seri Ismail Sabri Yaakob’s administration also raised the tax for those in the chargeable income bracket of between RM250,001 and RM400,000 from 24.5 per cent to 25 per cent.

Newly-minted Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim, who succeeded Ismail following the 15th general election on Nov 19, 2022, will present a revised Budget 2023 on Feb 24, 2023.

Asked if a carbon tax would be introduced in the upcoming budget, Chow shrugged off the possibility, saying the relevant government authorities need to study the carbon pricing mechanism and set an appropriate carbon tax rate to drive the national climate goals of achieving net-zero emissions.

"Feedback would also need to be sought from stakeholders so that this matter is duly deliberated before the authorities decide on the implementation.

"A transitional framework should also be considered,” he said.

On the proposed 15 per cent Global Minimum Tax (GMT), Chow expected relevant measures would be announced in Budget 2023, but implementation would take place no earlier than 2024 to provide time for deliberation and feedback from stakeholders before it comes into operation.

According to him, GMT is in line with international tax developments to combat revenue leakages and profit-shifting activities, and will allow Malaysia the first right to charge top-up taxes on revenue from entities located in Malaysia that are paying taxes below the threshold of 15 per cent.

Meanwhile, he said the return of the Goods and Services Tax (GST) would not be on the cards as Anwar has recently stated that the government would not introduce the broad-based consumption tax.

"GST is not the priority of the current government in this upcoming budget because, being a broad-based consumption tax, GST would also impact the low and middle-income households. The Malaysian economy is still in the recovery phase,” he said.

Asked if the government would further increase the 10 per cent sales tax imposed on low-value goods (LVG) priced less than RM500 bought online from April 1, 2023 onwards, Chow dismissed the possibility.

"I do not expect the government to increase the rate in the budget at this preliminary stage of its implementation or even in the near future, as it could be seen as burdening the people,” he said.

Nonetheless, he added, it is estimated that the government could collect about RM200 million to RM300 million annually once the LVG sales tax comes into force. - Bernama