PUTRAJAYA: The freeing of RM9.6bil in Employees Provident Fund contributions for payment of housing loans will not affect the earnings of the body.
Second Finance Minister Tan Sri Nor Mohamed Yakcop also quelled fears that this mechanism, which makes it easier for Malaysians to own a home, would lead to retirees not having enough funds to cover their expenses in the future.
“The purchase of a home is a good form of investment and not consumption.
“The buying of homes should not be put off until people retire. Prices of homes would have appreciated by then and would be too expensive for these people.
“Housing is the one thing we want all Malaysians to have,” he told reporters in a briefing on the Budget tabled by Prime Minister Datuk Seri Abdullah Ahmad Badawi in Parliament on Friday.
Nor Mohamed said EPF had indicated that it was very happy with the Government’s announcement to let contributors use the amount in Account 2 to offset or pay their housing loans.
This means that a working person with a salary of RM2,000 can use the RM138 estimated to be the monthly contribution to Account II to offset the housing instalment.
“This mechanism will enable a lot of people in the lower and middle income group to own their own or even second homes,” said Nor Mohamed.
EPF posted a gross investment income of RM13.3bil in 2006 and an asset size of around RM290.2bil, with around 11.4 million members. It also recorded total contributions of RM26.2bil.
Nor Mohamed said the availability of such a huge amount of funds for home purchases was expected to have a huge impact on the property market as it would pave the way for Malaysia to diversify its economy to one led by consumption and local investment.
“Currently, Malaysia has a very open economy with its international trade value recorded at 212% of its growth domestic product (GDP) figures. Even if you look at the United States, Europe and Japan, their international trade value is only around 25% of their GDP. So we have huge international trade.
“However, while we have benefited from our exports, we want to diversify our economy,” he added.
Nor Mohamed said although the reduction of corporate tax from 26% next year to 25% in 2009 meant a loss of some RM900mil in revenue for the Government, he was confident that better collection of taxes and mechanisms put into place by the related agencies would make up for the shortfall.
“All our sectors are doing better so we think we can afford the reduction,” he said, adding that although firms in Singapore and Hong Kong enjoyed lesser corporate tax rates of around 18% and 17.5% respectively, they were not granted other tax incentives and rebates such as pioneer status or capital allowances.
“Besides, firms operating in Singapore and Hong Kong are imposed with goods and services tax, and value-added tax. We don’t have that, thus making our total package less than 25%,” Nor Mohamed said.