Friday, November 2nd, 2018
PETALING JAYA: The National House Buyers Association (HBA) has urged the government to reconsider the increase in Real Property Gains Tax (RPGT) from 0% to 5% for Malaysian individuals.
Secretary-general Datuk Chang Kim Loong said in a statement that the decision to charge 5% for gains on disposal of properties after the fifth year means that Malaysian individuals will have to pay RPGT even though they have “diligently persevered” beyond the five years.
“HBA had in the past called for the government not to change the RPGT rate for the first two properties and to only increase the RPGT rate for the third and subsequent property. This is because most people can only afford to buy two properties, one for own stay and one for long term investment,” he said.
“By charging a RPGT rate for people who have held properties for six years or more, the government is effectively imposing ‘tax on inflation’ and this will be punishing genuine long term investors,” he added.
He urged the government to reconsider the move and to increase the RPGT rate for the third and subsequent property instead.
HBA also disagreed with the stamp duty exemption for first-time home buyers for properties up to RM500,000, saying that the exemption should be restricted to properties priced RM300,000 and below, to ensure the subsidies reach the intended target group.
As for the RM25 million allocated for Cagamas Bhd to provide mortgage guarantees, Chang said this would help prospective house buyers obtain 100% financing.
“Although this proposal will help the house buyer who have problems in coming out with the 10% down payment, HBA urges caution and to ensure that the house buyer can afford to pay the higher monthly installment as a result of getting full 100% financing,” he said.
HBA applauded the government’s move in imposing higher stamp duties on properties priced above RM1 million, from 3% to 4% and urged the government to further increase the stamp duty third and subsequent properties, including those priced below RM1 million.
HBA also supports the move to establish a fund amounting to RM1 billion to assist the lower income group to buy their first home.
“HBA supports this move to help the lower income groups to buy affordable housing by providing interest rates at a subsidised rate. Our sincere hope is that this proposal becomes a reality and not frustrate by time-consuming bureaucracy.
“HBA would urge the government to consider expanding this scheme to include household incomes of up to RM10,000 a month to buy their first property costing up to RM300,000,” said Chang.
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I wish to thank YB Lim Guan Eng, Minister of Finance Malaysia for tabling a comprehensive Budget for 2019 entitled, “Malaysia Wibawa, Ekonomi Dinamik, Rakyat Sejahtera”, which takes into account the issues and challenges faced by Malaysia. The Government is committed to address the fiscal issues and improve governance, for the benefit of the rakyat. In this regard, the commitment towards budget deficit has been revised to 3.7% in 2018, 3.4% in 2019, 3.0% in 2020 and 2.8% in 2021. GDP growth has been revised to 4.8% for 2018 which is a revision from the earlier target of 5% to 5.5%, taking into account the current domestic and global economic challenges.
We are happy to note that MITI has been allocated RM517 million for operating expenditure and RM1.163 billion for development expenditure in 2019, compared to RM469 million and RM1.013 billion, in 2018 respectively. This represents an increase of 10% for operating expenditure and almost 15% for development expenditure. The additional allocation will enable MITI to implement more programmes and initiatives to drive trade promotion and industry development initiatives.
I welcome new measures introduced such as the SST Credit System which will prevent multiple taxation and reduce the cost of doing business. In addition, the introduction of SST on imported services will provide a level playing field for domestic service providers. Meanwhile, the introduction of SST for online service providers effective 1 January 2020 will also contribute to national revenue.
The National Policy on Industry 4.0, i.e. Industry4WRD, is Malaysia’s effort to implement digital transformation of the manufacturing sector and its related services by facilitating companies to embrace Industry 4.0. The 2019 Budget measures will enhance MITI’s efforts to propel Malaysia as a strategic partner for smart manufacturing, primary destination for high-technology industries and total solutions
provider for manufacturing sector and related services in the region.
Industry4WRD will pave the way for enhanced productivity, job creation and high skilled talent pool in the manufacturing sector, and ultimately contribute to the economic prosperity and societal well-being. I am happy to note MITI has been provided an allocation of RM210 million for 2019 to 2021 to adopt Industry 4.0.
I am pleased that SMEs that invest in automation and modernisation as part of Industry 4.0 will be provided with RM2 billion fund under Skim Jaminan Pembiayaan Perniagaan where the Government will provide financing guarantee of up to 70%.
The Industry Digitalisation Transformation Fund totaling RM3 billion will provide subsidies with 2% interest to encourage the adoption of artificial intelligence. The MIDA High Impact Fund will be extended to encourage Industry 4.0 initiatives including R&D, international certification and standards, as well as modernisation.
I welcome Khazanah Nasional Bhd commitment to develop 80 acres of land in Subang as a global aerospace hub. This will create high-skilled work force to meet the aerospace industry demand. MITI’s initiatives under National Aerospace Industry Coordination Office (NAICO) will be enhanced to promote aerospace industry in Malaysia.
I also welcome the additional 2019 Budget measures related to Human capital development related to Industry 4.0 which include the following:
* Double Deduction for companies that provide scholarships for students to pursue technical and vocational training and degrees in engineering and technology related courses;
* Tax Deduction for companies that participate in National Dual Training Scheme (Skim Latihan Dual Nasional) related to Industry 4.0, approved by Ministry of Human Resources or MIDA; and
* Double Deduction for companies that provide structured training programmes for engineering and technology students approved by Ministry of Human Resources.
I am pleased with the announcement of a Joint-Committee co-chaired by the Minister of Finance and myself to drive governance reform agenda particularly to improve the trade process and tax administration. This will contribute to improving the ease of doing business and attract investors to Malaysia.
I welcome the incentives to improve the Principal Hub activities, to be taxed at 10% on total statutory income for a period of five years. This will enhance Malaysia’s position as a regional hub for manufacturing and services.
MITI will work with the industry to mitigate the impact of the increase in minimum wage to RM 1,100 effective Jan 1, 2019. We urge the industry players to adopt initiatives to increase productivity through automation, and reduce dependency on low-skilled labour.
On the implementation on multi-tier levy for foreign workers, MITI will work with the industry players to ensure effective mechanism is properly established and sufficient timeline is given to the industry to prepare for the tier levy implementation.
I laud the government’s effort to support the development of Sabah and Sarawak with an increased allocation. This will augur well to ensure equitable and sustainable development.
The Budget 2019 takes a comprehensive approach in striking a balance for businesses to prosper whilst formulating programmes to drive sustained and inclusive growth for the nation.
Tabled by Finance Minister Lim Guan Eng, Budget 2019 also sees a concerted effort by the Government to advance the small and medium enterprises (SMEs) sector, having announced measures to improve access to financing and accelerate the sector’s adoption of Industry 4.0.
Today’s Budget 2019 announcement demonstrates Malaysia’s clear intent to create a thriving business environment. The move to transform and modernise the SME sector, set up a special task force to improve the ease of doing business here and its competitiveness in the global arena, gives a clear signal that Malaysia is indeed open for business.
The Budget announcement for SMEs also comes at a time when global oil and gas industry is stepping up development activities. We therefore urge OGSE SMEs to leverage on these incentives to tap into the upsurge in oil and gas activities and realise their internationalisation aspirations. MPRC is committed to implementing initiatives that will support the rise of Malaysian OGSE firms onto the global stage.
Budget 2019 also saw the allocation of RM2 billion under Business Loan Guarantee Scheme (SJPP) where the Government will provide guarantees of up to 70% for SMEs that invest in automation and modernisation which forms part of the Industry 4.0. as well as the RM3 billion Industry Digitalisation Transformation Fund.
The emphasis on enabling SMEs in the digital economy, encouraging industry university research collaborations and accelerating their adoption of technology will go a long way to future-proof the backbone of the Malaysian economy.
In delivering our mandate to make Malaysia as the top OGSE hub in the Asia Pacific region, MPRC will continue to work closely with the relevant Government agencies, our stakeholders and other industry players to ensure effective implementation of the measures.
Finance Minister YB Lim Guan Eng has decided to take the bull by the horns and present a budget that is not only comprehensive and inclusive but also deals with current and future issues.
Overall, Budget 2019 casts a wide-sweeping net in announcing measures to address the ballooning levels of debt, the need for prudent spending, and the urgency to increase other sources of revenue to replace GST income.
In the lead-up to Budget 2019, there were expectations of the possible introduction of a number of new taxes including capital gains tax, inheritance tax, environmental-related taxes and taxes addressing the digital economy. Whilst most of these will not see the light of day for now, some initiatives to tax the digital economy were introduced by expanding the coverage of service taxes. Whilst this is not seen as a comprehensive digital tax, but more of a digital services tax, it is the start of introducing fiscal measures to deal with the changes in how businesses are conducted.
What does Budget 2019 mean to corporates
Whilst there are no significant new taxes which directly impact corporates, or changes to the headline tax rate of 24%, Budget 2019 introduced several tightening measures, which include a seven-year limitation on carry-forward of losses, capital allowances and unabsorbed incentives.
Sector-wise, companies in the gaming sector will have to bear additional duties. Malaysian companies with Labuan transactions (particularly Labuan leasing companies) will also have to review the feasibility of the current structures, given the new measures imposed on such transactions.
On a positive note, companies involved in Industry 4.0 and the broader tech sector stand to gain from additional funding to promote growth in this sector.
Making the fiscal regime more business friendly
The Government has heard requests to make the tax system more business-friendly. The service tax exemption for business-to-business (B2B) transactions between registered companies makes perfect sense in eliminating the cascading effect of tax, resulting in lower costs to such businesses. This will certainly reduce administrative burdens on businesses, which would have otherwise needed exemptions on a case-by-case basis. SMEs will also see their corporate tax rates reduced by one percent on their first RM500,000 of income.
Improving compliance levels
We are not new to tax amnesty programmes – similar programmes were previously implemented in 2015 and 2016. However, the rates offered during this Budget appears more attractive compared to the previous programmes, which only offer a reduction of 10% to 20% from the original rates.
Budget 2019 also puts in place penalties post the special voluntary disclosure period, which are far more punitive. Although this is a good move to encourage taxpayers to come forward, the punitive rates need to be applied with caution, as they should only be applied on taxpayers who have willfully or intentionally under-declared or have not declared taxes. Taxpayers who have adopted reasonable positions which may not necessarily be agreed to by the tax authorities should not fall under this category of ‘punitive’ rates.
Given the slow take-up rate in previous programmes, it is also necessary to urge identified ‘high-risk’ taxpayers to come forward with a voluntary disclosure.
Sales and Service Tax (SST)
The expansion of the list of services under the Sales and Service Tax (SST) regime to include import services is necessary to ensure a level playing ground, especially when services can be sourced locally.
Budget 2019 also introduces service taxes on digital services. Although this is a good move in ensuring that imported services are not provided preferential treatment, the Budget still does not tackle the issue which plagues many developing and developed countries, i.e. the taxing of the digital economy itself.
Impact on man on the street
Broadly, whilst there are no changes in tax rates or reliefs (other than the reliefs provided for EPF contributions and life insurance premiums), there are a number of initiatives to assist the lower and middle-income groups. Continuing the previous trend, there are a number of measures to help people get onto the home ownership ladder. Subsidies will be more targeted going forward, and cash handouts in the form of Bantuan Sara Hidup are to continue. It is also timely to see specific measures on employing those above 60 years old.
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The budget reflects a spirit of dynamism and proactiveness and certainly we laud the government for some of its more innovative ideas and proposals including those in support the property sector. The use of crowdfunding to buy properties, a world first pioneered by Malaysia is certainly interesting. We look forward to more details on how potential issues of home ownership and such will be ironed out to ensure the idea is effective and actually boosts home purchase and ownership, especially among the younger generation.
Certainly, we draw confidence in the government’s commitment to adopt an open tender approach for government land, especially for the building of affordable homes. This will ensure appropriate valuations to bolster government coffers.
Property developers would largely welcome the government’s decision to divest or reduce its exposure on certain sectors so as to allow the private sector to flourish. But does this translate to the property sector as well? We hope so as this will spur greater efficiency and competitiveness which will augur well for the industry and consumers.
We are pleased that our proposal for the exemption of stamp duties for properties below RM300,000 purchased by selected households and for unsold properties priced between RM300,001 to RM1 million was included. It would have been most welcomed if the same was extended to the M40 segment purchasing homes priced up to RM500,000. For homes priced RM500,000, it would have been good if stamp duty exemption was for the whole house amount and not just the first RM300,000.
While the RM1 billion fund to help the B40 segment buy homes priced below RM150,000 is well intentioned, it must be taken into account that such priced homes are usually harder to find in urban areas and city centres. Homes in these areas are generally priced higher and hence perhaps the RM150,000 threshold could have been higher.
The Subang Aerohub is interesting as it will serve as a catalyst for property development in the area and perhaps as well as for Shah Alam and Sungai Buloh. Speaking of aviation, the airport real estate investment trust is also interesting. And as a global first, it offers an exciting new model to unlock the value of aviation assets going forward.
On the downside, there was a missed opportunity in Budget 2019 to do more pertaining to financing, especially credit visibility and to relook interest rates. We also believe that the 5% imposition of Real Property Gains Tax will actually dampen the property sector. This move is unnecessary as the present RPGT regime is sufficient and has effectively curbed speculation.
The PropertyGuru Market Index is already showing that prices are on the decline. Rather than RPGT, more assistance should be focussed on financing instead.
On a separate note, the imposition of taxes on imported services and foreign service providers such as architects or designers will impact property developers but it will encourage the use of more local talent.
We laud the Government of Malaysia for putting forward a holistic and inclusive 2019 National Budget, with a view to strengthen Malaysia’s economy and improve the welfare of the Rakyat, particularly the B40 and M40 segments.
Lembaga Tabung Angkatan Tentera (LTAT) is particularly pleased with the allocation of RM400 million for the upgrading, repair and maintenance of government housing, including quarters for the Armed Forces. Given the focus to support Armed Forces members and their families, LTAT’s wholly owned subsidiary Perbadanan Perwira Harta Malaysia (PPHM) hopes to continue contributing to this effort, as per the allocation that has been set aside for this.
With tangible measures such as these, LTAT is confident that Budget 2019 will pave the way forward for a strong future for Malaysia.