personal income taxes


World Bank lowers Malaysia’s 2019 GDP growth forecast to 4.6%

PUTRAJAYA: The World Bank has trimmed its forecast for Malaysia’s 2019 economic growth to 4.6% from 4.7% earlier, due to weaker-than-expected investment and export activity in the first quarter.

World Bank Group lead economist Richard Record said it is maintaining its forecast of 4.6% for 2020.

“We’re still optimistic that we’ll see a recovery in global trade flows. We expect to see global growth returning closer to its trend rate by 2020 and the technology sector would also begin to move up again by 2020. 4.6% is around Malaysia’s potential rate of growth at this stage and this development,” he told a press conference at the launch of World Bank Group’s “Malaysia Economic Monitor on Re-Energising the Public Service” report in conjunction with the 12th Malaysia Plan: Kick-off Conference here today.

Given Malaysia’s deep financial and trade integration with the global economy, unresolved trade tensions, heightened protectionist tendencies among major economies, a sharper-than-expected slowdown in larger economies, as well as volatility in financial and commodity markets pose risks to growth in the near term, according to the 20th edition of the Malaysia Economic Monitor.

With an uncertain external environment and subdued business confidence, the report said, policy actions should aim to strengthen fiscal buffers, facilitate private investment and ensure adequate social protection for lower-income households. In the medium term, bold reforms and measures are needed, particularly to boost human capital and to increase the level of public sector revenues.

At present, Malaysia’s revenue from personal income taxes and consumption taxes both fall well below the average levels seen in other upper middle-income economies and high-income countries. Record said reforms to widen the tax base should be accompanied by measures to expand and improve the existing social protection system to boost resilience and protect the vulnerable.

“Malaysia collects around 2.2% of GDP (gross domestic product) in personal in-come taxes, about a quarter of the average in high income economies. Over time, if Malaysia seeks to provide an increased range in quality of public services and aspires to become a high-income economy, then over time, Malaysia will need to collect more in personal income taxes,” he said.

Meanwhile, federal government debt as a percentage of GDP increased to 51.2% in 2018 (2017: 50.1%) due to the upward adjustment in the fiscal deficit to 3.7% of GDP in 2018. Total committed government guarantees that are serviced by the govern-ment to finance the ongoing infrastructure projects also increased in 2018, to 9.2% of GDP (2017: 7.4%). The overall value of the federal government debt and liabilities is estimated to stand at RM1.1 trillion, or 75.4% to GDP (2017: 79.3%).

“Malaysia’s debt, while elevated, is certainly manageable. Over the medium term, it’s important to rebuild Malaysia’s fiscal buffers, both in terms of the deficit and level of debt, so that there is more space to absorb shocks if they hit the economy in the future,” Record said.

The report said Malaysia remains on track to achieve high-income economy status by 2024. Malaysia’s GNI per capita stood at US$10,460 in 2018, US$1,915 below the thresh-old of US$12,375 that the World Bank defines as high-income country status. The latest World Bank projections indicate that Malaysia could exceed the threshold some time between 2021 and 2024.

Government looking at targeted subsidies and rationalising tax, says Public IB Research


KUALA LUMPUR (May 16): In addition to mapping out plans to abolish the goods and services tax, the recently established Council of Eminent Persons is looking at other areas such as the targeted petrol subsidies, and possible rationalisation of corporate and personal income taxes, said Public Investment Bank Bhd (Public IB). In a strategy note today, Public IB said these area are part of a comprehensive review of the nation’s entire fiscal regime to achieve the most optimal structure, which could possibly take slightly longer than what is being anticipatedRead More

How will Singapore fund its rising budget?

SG street scene

SINGAPORE (Feb 19): Ahead of the Budget Speech on Feb 19, the market is abuzz with speculation on which taxes will be raised and which will not. Indeed, the government itself has been hammering home the point over the past year that taxes will need to rise to fund its sharply rising expenditures to reshape the economy, as well as soaring healthcare costs as Singapore’s population ages. The need for higher taxes was a key theme of last year’s Budget Speech and Prime Minister Lee Hsien Loong’s speech at theRead More

Philippine Congress approves much-awaited tax reform bill

MANILA, Dec 14 — The Philippine Congress approved late yesterday a tax reform bill President Rodrigo Duterte needs to push ahead with his economic agenda. Duterte, who took office more than 17 months ago, has promised to usher in a “golden…

Malaysia’s 2018 fiscal deficit target of 2.8% of GDP achievable: RAM

PETALING JAYA: RAM Ratings opines that Malaysia’s target to narrow its fiscal deficit to 2.8% of gross domestic product (GDP) under Budget 2018, from an estimated 3.0% in 2017, is achievable despite the federal government debt remaining elevated and its contingent liabilities significant at 16.9% of GDP in first half of 2017 (1H 2017).

It said federal government debt remains elevated despite the anticipated decline to 50.3% of GDP by end-2018, from the 2017 estimate of 51.2%.

The government’s hefty debt burden translates into a relatively high debt service-to-revenue ratio of 12.6% in 2018, higher than those of Malaysia’s peers in the region. This is exacerbated by higher bond yields following the adjustment of the Foreign Exchange Administration rules in November 2016.

“That said, these effects have since partially normalised,” said RAM.

The government’s contingent liabilities also remained significant at 16.9% of GDP in 1H 2017, which imposes a continuous risk on its fiscal position.
This ratio is estimated to rise to 18.4% by 2023, premised on RAM’s expectation of existing and upcoming infrastructure projects as well as the government’s routine commitments to housing and higher-education loan agencies.

“That said, stricter oversight over the issuers of these debts is likely following the establishment of the Fiscal Risk and Contingent Liability Technical Committee, and a possible introduction of a limit on guaranteed debt in the future,” said RAM.

It added that the adjustment to the government’s Medium-Term Fiscal Framework targeted fiscal deficit to an average 2.4% of GDP throughout 2018-2020, from a near-balance target by 2020, is realistic and indicates a more gradual pace of fiscal consolidation.

Fiscal revenue is expected to rise 6.5% to RM240.0 billion in 2018, as negative pressures ease. This will be driven by resilient economic growth and a gradual recovery in global commodity prices.

“Notably, O&G revenue is projected to exceed the government’s budgeted amount given its conservative assumed oil price of US$52 per barrel,” said RAM head of sovereign ratings Esther Lai.

These factors are, however, balanced by tax rate reductions for three brackets of personal income taxes, which are estimated to have a fiscal impact of RM1.6 billion (0.1% of GDP) – and tax relief measures for companies.

While there is a higher likelihood of fiscal slippage leading up to the 14th general election, RAM said, there is evidence that the government’s budgetary discipline has improved.

Budget 2018 addresses long-term structural bottlenecks, says CIMB Research

KUALA LUMPUR (Oct 30): CIMB Research said despite limited fiscal bandwidth, Budget 2018 made room for initiatives to address long-term structural bottlenecks, such as infrastructure,…

Budget 2018 – Lower income and corporate taxes?

PETALING JAYA: Budget 2018 could see a reduction in corporate personal income taxes in the wake of rising cost of living.

The Socio-Economic Research Centre (SERC) executive director Lee Heng Guie opined that the government’s priority would be addressing the higher cost burden, which not only affects the people but also businesses.

As the regional countries are moving towards a more competitive tax structure, he is hoping that the government could lower the corporate tax.

Associated Chinese Chambers of Commerce and Industry of Malaysia’s (ACCCIM) SMEs and Human Resource Development Committee chairman Koong Lin Loong concurred, saying that the tax rate on chargeable income up to the first RM500,000 should be reduced by 1% to 17% from the current 18%.

Moreover, he said the RM500,000 threshold is too low and that it should be increased to RM1 billion or RM2 billion.

Koong stressed that Malaysia should follow the regional countries’ steps in reducing the corporate tax aggressively.

“The Asian countries are very aggressive. They have lowered it down to almost 20%. Can we have a 1% reduction per year?”

Lee opined that the 1% to 4% tax rate reduction for companies with significant increase in taxable income announced in the last budget was insufficient to address the businesses’ needs.

“It will be more impactful and cost savings if the government can provide outright reduction.”

On personal income tax, Lee is of the view that “it is not much” to ask for 1% to 2% as the people will have more disposable income for daily expenses.

“We know the government will still allocate money for capex, but if you can give direct tax rebate and tax reliefs or even tax cut into the pockets of households, I think it is more direct and the people can spend it.”

Koong also pointed out that the top range of 28% for personal income tax is too high, which will discourage foreign direct investments and the inflow of expatriates.

He said the ideal top range rate should be 26%, the level before it was raised to 28% a few years ago.

“Those days personal income tax is similar to corporate tax, but now it is the other way round. Corporate tax is reducing, but they (the government) increased the personal income tax.

The government need to readjust this, otherwise foreign investors see the Malaysian tax is too high.”

Meanwhile, Koong also hopes the personal relief of RM9,000, will be increased to RM12,000 to RM13,000.

“This RM9,000 relief has been stagnant for the past five to six years, it’s time to increase to address the high cost of living. We also expect higher tax relief for children, currently is about RM2,000 per child, so we think it should double. Let the parents to have more disposable income.”

Why an economic-centric focus for Singapore’s Budget 2017 is in order

Why an economic-centric focus for Singapore's Budget 2017 is in order

SINGAPORE (Feb 8): UOB is forecasting an overall budget surplus of S$6.7 billion for FY16 — 0.9% higher than the Singapore government’s estimate of S$3.4 billion — on expectations of higher contributions from corporate and personal income taxes; motor vehicle quota premiums; and GST collections.

This comes in higher than DBS Group Research’s projection of S$4.3 billion.


Budget signals stability, but weakness persists

International agencies Fitch, Moody’s keep close watch on falling revenues, weakening debt affordability KUCHING: The recently announced Budget 2017 signified stability for Malaysia’s public finances but international rating agencies are keeping their eyes on weakening in debt affordability, and an absence of major fiscal reforms, which place the medium-term goal of a balanced budget by […] Source: Borneo Post Online

Malaysia may miss 3.1% fiscal deficit target

Malaysia may miss 3.1% fiscal deficit target
This article first appeared in The Edge Financial Daily, on October 26, 2016.


KUALA LUMPUR: The absence of bolder steps towards fiscal deficit reduction places at risk the Malaysian government’s goal of a balanced budget by 2020, said Moody’s Investors Service Inc.

Unlike in recent years when the prime minister used the budget speech to announce a goods and services tax and the rationalisation of subsidies, the international rating agency noted that there were no major new reforms to address Malaysia’s underlying fiscal weaknesses in Budget 2017.


Source: The Edge Markets