Would there be goodies for the rakyat?


IT is no secret that the annual budget announcement by the Finance Minister is an eagerly anticipated event in Malaysia, be it the business community or a Malaysian resident.

Therefore, it is no surprise that prior to the budget announcement, we are all hoping that there will be some goodies for us.

After a two-year long battle, we are slowly but surely emerging from the pandemic.

The 2023 budget is likely to be focused on post-Covid recovery efforts amidst a bleak global economy, such as creation of jobs, increasing the income of the rakyat, as well as improving the social protection systems and the well-being of the rakyat.

To this end, we are hopeful that the government will continue prioritising the welfare of Keluarga Malaysia.

Below are some quick-fire measures that can bring relief to the rakyat as the government works on implementing sustainable initiatives to manage the rakyat’s welfare.

Financial resilience via savingsMalaysia is expected to achieve an ‘aged nation’ status by 2030, i.e. when it is expected that 15.3% of the total population will be aged 60 and above.

Coupled with the recent announcement that 52% of the total of 12.78 million Employees Provident Fund (EPF) members aged under 55 had savings of less than RM10,000, this is indeed a very dire situation.

Hence, immediate and urgent action must be taken to reverse this situation, especially so for members who had to make early withdrawals during the pandemic.

We would recommend for the government to encourage voluntary contributions (in addition to the mandatory 11%) with the objective to replenish the depleted EPF savings via the following measures:

> Provide a grant to partially match a member’s voluntary contributions.

> Grant a special tax relief, in addition to the current relief of RM4,000, to members who voluntarily contribute more to their retirement savings.

It is also a suitable time to assess the necessity of increasing the limit for tax relief in respect of the employee’s mandatory EPF contributions.

Prior to year 2019, a maximum of RM6,000 is allowed as tax relief for both EPF and life insurance premiums.

However, this relief was separated from year 2019 onwards, with RM4,000 being allocated for EPF and RM3,000 for life insurance premiums.

The tax relief of RM4,000 is relatively low in comparison to similar tax reliefs granted in other jurisdictions.

Furthermore, it is worth noting that certain countries with comprehensive social security schemes (the Philippines and Vietnam) allow qualified individuals to deduct the mandatory social security contributions amounts from their gross income for personal income tax purposes.

Flexible Work Arrangement

With the onset of the pandemic, most of the workforce have been working from home.

From 1 January 2023, employees can officially request for Flexible Work Arrangement (FWA), as a result of the amendment to the Employment Act 1955.

With this new development, it may lead to an increase in household expenses.

As we move towards FWA, the government may want to look at introducing tax policies to address the cost concerns arising from this new work arrangement such as:> Introduce a prescribed fixed FWA tax relief (which may be capped) in respect of incremental costs incurred due to a FWA.

> Issue guidelines on the deductibility of actual incremental expenses incurred to maintain a dedicated work area in their home.

Increase disposable income

Inflation rate in Malaysia has increased, and is expected to increase further due to escalating food and commodities prices.

In addition to cash incentive programmes (which are primarily targeted at the B40 group), it would be helpful if the government also refreshed or resurrected existing tax breaks to mitigate the rising cost of living for both the B40 and M40 group. Below are some measures for the government to consider:

> Increase the quantum for self-relief of RM9,000 which have remained unchanged for at least a decade.

> Reintroduce the relief (introduced in 2009) for interest on housing loan, following the recent increases in the overnight policy rate.

This relief may also encourage more home ownership especially for the younger generation, and help boost the local housing market, which is currently at a surplus.

> Reinstate the relief for parental care, which will benefit taxpayers categorised as the “sandwich generation”, where they need to provide for their own family while taking care of the needs of their elderly but healthy parents.

It is hoped that the above measures can help ease the financial burden of most taxpayers, but in particular the M40 group, as they have been generally overlooked in the last few budgets.

It is also hoped that the Budget 2023 will enable our resilient rakyat to be better prepared to weather the coming headwinds in Malaysia as well as in the global economy next year.

Chee Ying Cheng is Global Employer Services executive director and Lee Lai Kuen is Global Employer Services sssociate director of Deloitte Malaysia. The views expressed here are the writers’ own.

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