Recommendations for Budget 2023

THE Chartered Tax Institute of Malaysia (CTIM), a premier body for tax professionals, is putting forward Budget 2023 recommendations for treasury’s consideration.

The recommendations focus on tax measures to assist the rakyat, businesses and investors in this challenging time and the widening of the tax bases, some of which are outlined below.

Many businesses have suffered losses during the Covid-19 pandemic. Some businesses have closed down altogether as a result.

The government can assist by allowing businesses to utilise their losses for a limited time in preceding years when they were profitable in order to generate tax refunds to improve their cash flow situation.

Among the countries that have implemented such provisions are Australia, New Zealand and Singapore.

Malaysia, like many other countries, is embracing digitalisation and new technologies as the way forward.

Malaysia needs to be at the forefront of creating instead of merely consuming the benefits of these initiatives.

A key to facilitating this is for the intellectual property (IP) behind these initiatives to be held in the hands of businesses in Malaysia.

Such IP comes at a significant cost.

The government needs to give serious thought to reviewing its stand on excluding IP from tax depreciation allowances in order to encourage businesses in Malaysia to acquire and own IP.

CTIM has been involved in several consultations with treasury on this matter, which we hope will have a positive bearing on proceedings.

Ever since income tax was introduced in Malaysia, tax depreciation allowances for buildings have mainly been confined to the industrial sectors, with a few exceptions.

With the advent of the 21st century, the services sector has become a major contributor to the Malaysian economy that is comparable to the industrial sectors combined.

Unlike their industrial sector counterparts, service sector businesses incur substantial costs of acquiring buildings, such as commercial buildings, office complexes and showrooms, which are not allowed tax depreciation allowances to reduce taxable business profits.

To accord equitability and to recognise the economic contribution of the services sector, we have recommended that tax depreciation allowances be allowed on all building costs incurred by non-industrial sectors.

Time and again, government has shown that it understands the needs of the rakyat.

In Budget 2016, an individual relief of RM1,500 for each parent was introduced up to the year 2020.

This relief was intended to help individuals who are taking care of their parents aged 60 years and above, with an annual income not exceeding RM24,000.

To encourage the strengthening of the family institution of Keluarga Malaysia and to take into account the fact that our aging population is increasing, we have recommended that this individual relief be re-introduced and given in perpetuity.

Rising property prices have resulted in most property buyers taking loans to pay a significant portion of the purchase price. Government has been mindful to assist residential property buyers, especially those who are buying their first residential property.

Steps have been taken in recent budgets to temporarily reduce stamp duty costs associated with the purchase of a residential property.

Tax relief on housing loan interest up to RM10,000 per year for three years was introduced in the 2009 stimulus package but has since lapsed.

To augment existing efforts to encourage property ownership and the sale of unsold residential properties, we have recommended that this relief be re-introduced.

The revocation of the goods and services tax (GST) in 2018 may be welcomed by many for various reasons. Interestingly, the question of introducing GST 2.0 has been asked prior to each budget announcement since then.

This is partly due to Malaysia’s need to widen its tax base. We share the view that GST should be revisited in consultation with all stakeholders concerned.

GST issues such as the delay in refund of input tax credit in GST 1.0 need to be addressed.

If GST 2.0 is to be introduced, we recommend that 12 to 18 months be given from its announcement to its implementation to enable adequate preparation by the parties involved.

Consideration should also be given for GST 2.0 to be charged at a lower rate, of say 3%.

In addition, in widening the tax base, there was speculation that government may introduce capital gains tax (CGT) and wealth tax in the foreseeable future.

We would recommend that careful consideration be given to this and a in-depth study be carried out by government before a conclusion is reached on whether to introduce CGT and wealth tax in Malaysia.

Such study or analysis shall form part of a systematic approach in reforming the Malaysian tax system.

We are hopeful that some of the above recommendations will be given serious consideration by government. Like all Malaysians, we look forward to the Budget 2023 announcement on Friday with much anticipation.

Chow Chee Yen is president of the Chartered Tax Institute of Malaysia. The views expressed here are the writer’s own.

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