The Government has reiterated its commitment to cut income taxes by between 1% to 3% for the 2015 year of assessment, meaning some 300,000 individual taxpayers will no longer pay income tax.
Under Budget 2015, tax payers with family and income of RM4,000 per month will not have tax liability, Prime Minister Datuk Seri Najib Tun Razak said.
Individual income taxes will be restructured whereby the chargeable income subject to the maximum rate will be increased from above RM100,000 to RM400,000.
The current maximum tax rate at 26% will be reduced to 24%, 24.5% and 25%. This will result in tax savings of at least 5.3% for the tax payer.
PwC Malaysia executive director Hilda Liow said that although the Government did not lower the income tax ceiling as suggested by some quarters, it may gradually do so in line with the practice of other countries that have implemented consumption-based taxes.
“Malaysia is starting to see traction in making its personal tax structure more competitive,” she told StarBizWeek.
In the region, Hong Kong and Singapore have the most competitive tax rates at 16% and 20% while Thailand’s tax regime is close to Malaysia’s.
KPMG Tax Services Sdn Bhd executive director Datin Pauline Tam said the tax reduction was intended to help alleviate the expected increase in costs due to GST.
“The reduction in income tax to a certain extent would help reduce the effects of GST.”