Planned e-invoicing will be troublesome

KUALA LUMPUR: The planned introduction of e-invoicing will be both redundant and cause more trouble than it is worth, says Datuk Seri Dr Wee Ka Siong.

The MCA president said the government’s push to prevent tax evasion could be easily solved by the reintroduction of the Goods and Services Tax (GST) rather than e-invoicing.

“If we look at GST previously, we didn’t need to mandate this (invoicing) as it was already an automatic mandatory component of GST for those that wanted to get their tax refunds.

“This made it a two-in-one solution as the government didn’t need to make any sort of invoicing compulsory as businesses were forced to produce clear records to claim tax refunds,” he said in a video on his Facebook page yesterday. 

Dr Wee, who is the Ayer Hitam MP, also noted how the frequently changing guidelines – currently at version 2.1 – by the Inland Revenue Board were causing unnecessary confusion.

“This is already the sixth version and every few days it changes.

“How is anyone expected to keep up with this constant development, especially as it’s a complete system transition

“I understand there is also no significant allocation for any workshops or campaigns to educate businesses on how to transition.

“This is a serious issue, as they need to know the transition process in order to be able to comply with it,” he said, adding that the new system could disproportionately impact small businesses negatively.

“This is because compliant businesses will need to digitalise all their business transactions through e-invoices that smaller businesses don’t need to provide.“As such, larger businesses may be discouraged or even indirectly banned from engaging with smaller businesses due to the need for e-invoices that smaller businesses cannot provide.

“This effectively forces smaller businesses to have to implement e-invoicing if they want to engage with bigger businesses,” he said.

Dr Wee noted that the requirement for businesses to fill out 55 data fields for e-invoicing, which carries a penalty of up to RM20,000 for each error, worsens the situation. This exposes businesses to additional financial strains, such as paying fines or hiring administrative or accounting professionals to complete the data.

“How many people understand what a credit note and a debit note are? The big businesses may be fine, but the small ones will have to pay experts to help them solve this,” he said, adding that security and tax data privacy concerns must also be addressed ahead of the new digital system’s implementation.

“Having all 55 data fields from various big businesses collected and stored in a central database makes it a prime target for hackers.

“We still don’t know what cybersecurity measures they may have to defend the system,” he said.

The e-invoicing system will be rolled out gradually starting on Aug 1, and eventually be extended to all taxpayers by July 1, 2025.

Prime Minister Datuk Seri Anwar Ibrahim has said the e-invoicing system will be applied first to taxpayers who earn an annual income exceeding RM100mil.

Source link 

e invoicing Malaysia solution - Malaysia IRBM e-invoicing

Related:

Microenterprises unprepared for e-invoicing, says Wee

https://www.thestar.com.my/news/nation/2024/05/21/microenterprises-unprepared-for-e-invoicing-says-wee

Mandatory e-invoice countdown clock starts next week

Give us time to adjust, urge small businesses

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KUALA LUMPUR: The planned introduction of e-invoicing will be both redundant and cause more trouble than it is worth, says Datuk Seri Dr Wee Ka Siong.

The MCA president said the government’s push to prevent tax evasion could be easily solved by the reintroduction of the Goods and Services Tax (GST) rather than e-invoicing.

“If we look at GST previously, we didn’t need to mandate this (invoicing) as it was already an automatic mandatory component of GST for those that wanted to get their tax refunds.

“This made it a two-in-one solution as the government didn’t need to make any sort of invoicing compulsory as businesses were forced to produce clear records to claim tax refunds,” he said in a video on his Facebook page yesterday. 

Dr Wee, who is the Ayer Hitam MP, also noted how the frequently changing guidelines – currently at version 2.1 – by the Inland Revenue Board were causing unnecessary confusion.

“This is already the sixth version and every few days it changes.

“How is anyone expected to keep up with this constant development, especially as it’s a complete system transition

“I understand there is also no significant allocation for any workshops or campaigns to educate businesses on how to transition.

“This is a serious issue, as they need to know the transition process in order to be able to comply with it,” he said, adding that the new system could disproportionately impact small businesses negatively.

“This is because compliant businesses will need to digitalise all their business transactions through e-invoices that smaller businesses don’t need to provide.“As such, larger businesses may be discouraged or even indirectly banned from engaging with smaller businesses due to the need for e-invoices that smaller businesses cannot provide.

“This effectively forces smaller businesses to have to implement e-invoicing if they want to engage with bigger businesses,” he said.

Dr Wee noted that the requirement for businesses to fill out 55 data fields for e-invoicing, which carries a penalty of up to RM20,000 for each error, worsens the situation. This exposes businesses to additional financial strains, such as paying fines or hiring administrative or accounting professionals to complete the data.

“How many people understand what a credit note and a debit note are? The big businesses may be fine, but the small ones will have to pay experts to help them solve this,” he said, adding that security and tax data privacy concerns must also be addressed ahead of the new digital system’s implementation.

“Having all 55 data fields from various big businesses collected and stored in a central database makes it a prime target for hackers.

“We still don’t know what cybersecurity measures they may have to defend the system,” he said.

The e-invoicing system will be rolled out gradually starting on Aug 1, and eventually be extended to all taxpayers by July 1, 2025.

Prime Minister Datuk Seri Anwar Ibrahim has said the e-invoicing system will be applied first to taxpayers who earn an annual income exceeding RM100mil.

Source link 

e invoicing Malaysia solution - Malaysia IRBM e-invoicing

Related:

Microenterprises unprepared for e-invoicing, says Wee

https://www.thestar.com.my/news/nation/2024/05/21/microenterprises-unprepared-for-e-invoicing-says-wee

Digital way to declare and pay income tax

e-Filing counter facilities are no longer available since last year following the new norm SOP.

 LET’S Click HASiL is a convenient programme for taxpayers to declare their income and pay taxes to the the Inland Revenue Board (IRB).

What is Let’s Click HASiL

Let’s Click HASiL enables taxpayers to submit their income tax return or make payment through the convenience of the easy, accurate and secure MyTax app.

MyTax is the primary access to ezHASiL services such as e-Filing, e-Register, ByrHASiL and other services accessible to all taxpayers with a single sign-on.

Taxpayers can file their return form electronically while ensuring the details are accurate.

Additionally, the programme also provides advice to taxpayers through virtual briefings held in accordance with new norm SOP set by the government.

Submission deadline

The Let’s Click HASiL programme runs from March 1 to June 30,2021.

For individuals without business income, they have until April 30 to submit their BE Form.

People who receive income from business have until June 30 to submit their B Form.

However, e-BE submission via e-Filing allows taxpayers to submit the form by May 15 – an extended period compared to paper submission by April 30, while the deadline for e-B is July 15.

 

Tax refund

For individuals without business income, their employer would have made monthly tax deduction off the monthly salary, reducing the burden of employees as they don’t have to pay a lump sum for their annual income tax.

You are eligible to receive a tax refund if you have paid excess monthly tax deduction than the actual tax levied. The income tax imposed can be reduced through tax reliefs and tax rebates.

The e-Filing service gives taxpayers the advantage of receiving their tax refunds within 30 working days as opposed to 90 days for form submissions by post or hand delivery.

ezHASiL simplified taxation

ezHASiL enables taxpayers to manage their taxation online through e-Filing, e-Register, e-Update, e-Ledger and ByrHASiL without having to visit IRB branches physically.

e-Filing counter facilities are no longer available since last year following the new norm SOP.

The e-Filing system can be accessed via the IRB’s official website at www.hasil.gov.my > MyTax > ezHasil Services > e-Filing.

First-time users are required to obtain the PIN number by filling in the feedback form on the website.

Once you have the PIN number, you can start your e-Filing, make payments using ByrHASiL, access payment review through e-Ledger or update personal details via e-Update.

Declare and pay your income tax at mytax.hasil.gov.my. Let us all do our part to ensure prosperity for the country.

Inquiries can be made through the Customer Feedback Form or call the HASiL Care Line (03-8911 1000). Visit www.hasil.gov.my for further information.

Source link

Related:

Taxpayers under amnesty programme still need to meet cobditions says LHDN 

 

LHDN: No audit on those under SVDP amnesty but they must fellow guidelines 

 

Groups_ Stick to promise and not penalise taxpayers _ The Star

Ma'sian immigration blacklists: PTPTN loan defaulters among 1.14 mil barred from travels

PUTRAJAYA: A wide net has been cast on those barred from leaving the country by the Immigration Department.

And it is not just tax offenders and those with criminal records who face a rude shock at border checkpoints or at the airport.

The latest figures show some 85,000 National Higher Education Fund (PTPTN) beneficiaries who did not repay their loans on the department’s travel blacklist.

They are among 1.14 million people on the list which includes 701,266 Malaysians.

The department has advised Malaysians to check their Immigration status prior to making holiday plans overseas to avoid problems.

“It is the responsibility of the traveller to first check if they are cleared to leave the country.

“It doesn’t matter if you are planning to leave by flight, road, rail or sea.

“As long as you are on the blacklist, you will not be allowed to pass the Immigration checkpoint, even if you have a valid flight ticket,” Immigration security and passport division director Ibrahim Abdullah told The Star.

As of Sept 3, the department’s overseas travel restriction orders included those who have been declared with outstanding debt issues. There were 277,693 such Malaysians named by the Insolvency Department.

Malaysians who have violated a foreign country’s immigration laws, such as by overstaying or abusing their travel visas, are also not spared.

Ibrahim said the countries concerned may bar the defaulters from re-entering the country and this information would be shared with the local Immigration department, such as Malaysia’s, which would then put the defaulter on a watchlist.

A total of 32,516 Malaysians were in this category for having overstayed in another country, alongside 115,803 foreigners who have similarly overstayed in Malaysia and are now barred from leaving the country.

“If any Malaysians on the watchlist try to leave the country, they will be stopped and taken in for an interrogation until it is satisfied that they will not commit the same act in another country again,” said Ibrahim.

Stubborn tax defaulters make up a sizeable group on the travel blacklist, with 135,111 persons named by the Inland Revenue Board.

The Star has reported on Aug 26 that defaulters will not be allowed to travel abroad until they have settled their tax obligations.

The treatment will be the same for those with outstanding issues with the Employees Provident Fund (EPF), such as those who failed to file their EPF contributions. There were 10,219 Malaysians and 532 foreigners listed under this category.

Another 133,314 non-citizens have been barred from leaving the country for having their citizenship revoked or application rejected by the National Registration Depart­ment.

This is on top of 88,830 foreigners who had entered the country illegally and have been classified under the Immigration’s Kes Tanpa Izin.

An unusual cluster of 210 Malaysians were also placed under this category which, according to Ibrahim, had referred to those who have been identified by the Home Ministry as having been involved in activities involving illegal foreign workers.

Several other categories were criminally-linked, including those under police observation (15,699 cases) and for drug-related charges (7,673 cases) or crime (5,090 cases).

There were also 4,953 Malaysians barred from overseas travel for violating Customs regulations.

To find out if you are barred from travelling abroad, one needs only to enter the MyKad number on the department’s travel status check portal at http://sspi2.imi.gov.my/

“If they have been barred, they must be present in person at the nearest Immigration passport and security division, where they will be told why they are not allowed to leave.

“This is to avoid identity abuse by a third party as we do not want private information to be divulged to an impostor,” Ibrahim said.

Almost 85,000 PTPTN study loan defaulters barred from leaving Malaysia

PETALING JAYA: Almost 85,000 National Higher Education Fund Corporation (PTPTN) recipients have been barred from leaving the country to date.

PTPTN chief executive officer Agos Cholan said the corporation had to resort to barring the defaulters from leaving because they had been ignoring repeated reminders to repay their loans.

He said the corporation would send borrowers a reminder to begin repaying their loans six months after graduation.

“If there is no payment after two months, the first notice would be sent,” he said.

This, he added, is followed subsequently by a second and third notice if there was still no repayment.

Agos said after this, the corporation would send a legal notice and subsequently blacklist the borrowers.

To lift the travel ban, Agos said they would need to make some payment immediately, depending on their income.

“They would also need to sign papers committing to pay monthly instalments and arrange for a bank’s standing instruction or salary deductions. Restructuring is allowed if they wish to vary instalment amount,” he said.

Agos said the number had reduced from some 130,000 in 2007 who were barred.

Since Prime Minister Datuk Seri Najib Tun Razak’s announcement that borrowers could expect a 20% discount if they repay their loans in full by March 31 next year, Agos said there had been a few enquiries on the dates.

Najib, when tabling Budget 2015 last Friday, said borrowers who were unable to do so could still get a 10% off their loans if they made continuous payments for 12 months until Dec 31, 2015.

Borrowers were given similar discounts under the Budget 2013.

The travel ban is also imposed on 277,693 Malaysians listed under the Insolvency Department for failing to settle their debts.

Tax defaulters are also on the blacklist, with 135,111 persons named by the Inland Revenue Board.

Another 32,516 Malaysians who have violated laws in foreign countries, including overstaying, have also been barred from leaving the country.

Also blacklisted are 115,803 foreigners who have overstayed in Malaysia.

Immigration's security and passport division director Ibrahim Abdullah told The Star that as long as a person was on the blacklist, they would not be allowed to pass the Immigration checkpoint, even if they have a valid flight ticket.

"It doesn't matter if you are planning to leave by flight, rail, road or sea," he told The Star.

The report added that the travel ban will also be imposed on those with outstanding Employees Provident Fund issues, including those who had failed to file their EPF contributions. A total of 10,219 Malaysians and 532 foreigners are listed under this category.

Meanwhile, The Star also reported PTPTN chief executive officer Agos Cholan as saying that they had to resort to barring the study loan defaulters from leaving the country as they had ignored repeated reminders to repay their loans.

Agos had also reportedly said that to lift the travel ban, defaulters would need to make some payment immediately, with the amount determined by their income. – October 14, 2014.

Source: The Star/Asia News Network

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US government monitoring its oversea citizens by Foreign Account Tax Compliance Act (FATCA)

Malaysia to ink pact in line with FATCA

KUALA LUMPUR: All local financial institutions will be required to declare their American customers to the United States Internal Revenue Service (IRS) under a new agreement to catch its tax evaders who hide their money overseas.

Malaysia will be entering into an inter-governmental agreement with the US in line with the implementation of its Foreign Account Tax Compliance Act (Fatca).

Inland Revenue Board (IRB) chief executive officer Tan Sri Dr Mohd Shukor Mahfar said Malaysia would fully enforce all the requirements of Fatca by September next year.

“Fatca is a very interesting move by the US to monitor its citizens who have income outside of the country. The rest of the world is required to abide by Fatca or the US government will impose a withholding tax of 30%.

“So, IRB, as the tax authority for Malaysia, along with Bank Negara, will be signing the agreement,” he said at the National Tax Conference 2014 here yesterday.

The tax is imposed by withholding earnings on the funds in the account of the US citizen and paid to its government.

Under the Act, all foreign financial institutions must declare the financial holdings of any US citizen or cough up a 30% withholding tax on their own.

The US imposes income tax on its citizens, regardless of which country they reside in.

Many countries, including Switzerland which was previously considered a haven for those who sought to keep money overseas in secrecy, have signed the agreement.

Other countries listed by the US Treasury website are Britain, Australia and France while Indonesia, Thailand, Singapore and China are those which have consented to entering the agreement.

Earlier, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said the proposed amendment to Inland Revenue Board of Malaysia Act would be tabled at the Dewan Rakyat sitting in October.

Previously, a controversy had erupted when it was alleged that the amendments would transform the tax agency into a firm that invested taxes collected on behalf of the Government.

The Finance Ministry later denied this, adding that all direct taxes collected by the board would be channelled to the Federal Consolidated Fund.

By P. Aruna The Star/Asian News Network

IRS Notes:

Foreign Account Tax Compliance Act

FATCA Current Alerts and Other News
The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.
FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts
FATCA focuses on reporting:
	By U.S. taxpayers about certain foreign financial accounts and offshore assets
	By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest
The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.

Individuals		Financial Institutions		Governments
U.S. individual taxpayers must report information about certain foreign financial accounts and offshore assets on Form 8938 and attach it to their income tax return, if the total asset value exceeds the appropriate reporting threshold. Form 8938 reporting is in addition to FBAR reporting. > Learn More ...		Foreign To avoid being withheld upon, a foreign financial institution may register with the IRS, obtain a Global Intermediary Identification Number (GIIN) and report certain information on U.S. accounts to the IRS. > Learn More... U.S. U.S. financial institutions and other U.S withholding agents must both withhold 30% on certain payments to foreign entities that do not document their FATCA status and report information about certain non-financial foreign entities. > Learn More...		If a jurisdiction enters into an Intergovernmental Agreement (IGA) to implement FATCA, the reporting and other compliance burdens on the financial institutions in the jurisdiction may be simplified. Such financial institutions will not be subject to withholding under FATCA. > Learn More ...

Property gain tax won't hurt genuine buyers

Banning DIBS is the right move

FOR many years, the National House Buyers Association (HBA) has been urging the Government to take measures to stem the steep rise in property prices to avoid a “homeless generation” as current property prices are far beyond the reach of many low and middle-income families in urban and suburban areas.This is a ticking time bomb that will result in many social problems if left unchecked.


Real Property Gains Tax (RPGT)

The announcement of the revised rate of tax on gains made in the disposal of properties, namely, the Real Property Gains Tax (RPGT), formerly known as the Anti Speculation Act, under Budget 2014 is far more superior to what had been proposed under Budget 2013 (See table above)

This is because, typically, if the property is purchased directly from the developer, it takes two years (for landed properties) and three years (for strata properties) to be completed.

Hence, under the previous RPGT, speculators could purchase properties from property developers upon their launch and then flip these properties on completion (after two years) and having to pay 10% (i.e. within the 3rd to 5th year).

It is hoped that the revised RPGT rate will deter speculators and, at the same time, not punish genuine house buyers who buy for their own stay or long-term investment. It is worth noting that buyers of residential property could seek a once-in-a-lifetime exemption from the tax.

Budget 2014 is best described as an “excellent mathematical formula” to curb the unbridled escalation of house prices, which has in the last three years skyrocketed. The Government has taken a step in the right direction with measures to slow down the steep rise in property prices due to false demand caused by excessive speculation fuelled by easy housing loans and the previously low RPGT.


Foreign purchasers to pay more

HBA applauds the move to increase the minimum price of property that can be purchased by foreigners from RM500,000 to RM1mil. Foreigners must be prevented from “snapping up” property meant for the lower and middle income.

This artificially inflates prices and creates a domino effect which can result in higher property prices across the industry. This is especially true for development corridors such as Iskandar Malaysia which has seen foreign purchasers arriving in droves and scooping up properties with their advantageous exchange rate.


Banning the Developer Interest-Bearing Scheme (DIBS) 

DIBS is popular with speculators as they pay nothing to make a profit. Their initial down-payments and deposits are sometimes factored into the purchase price by the collusive developers, and some unethical financial institutions do not even require that the developer collect the deposit that has to be paid by the so-called purchaser.

This is one of the factors which induces “bogus” house buyers (which I have written about in this column on Aug 31 entitled: Of Speculators and bogus house buyers) who merely flip the property at the right time.

Kudos to Bank Negara for heeding our call and banning DIBS. It may be worth noting that Singapore banned DIBS in 2009.

Considering the deep pockets of property speculators, the effectiveness of these measures remain to be seen. However, they are expected to make speculation unworthwhile. HBA praises the Prime Minister for putting a stop to DIBS, which is one of the reasons attributed to the steep increase in property prices for three reasons:

1. DIBS encourages speculation as the house buyer does not need to “service” any interest/instalment during the construction stage. This will “lure” and tempt many house buyers to speculate and buy into DIBS projects hoping to flip on completion and make a quick profit with little or no capital upfront. Connivingly, the interest element is “serviced” by the participating developers.

2. DIBS artificially inflates prices as all interests borne by the developer are ultimately imputed into the property price. This in turn creates a domino effect which pulls up property prices in surrounding locations.

3. Bank and financial institution staff conniving with developers using the DIBS model should be investigated on their “modus operandi” in financing those artificially inflated prices (DIBS + sales price) and ignoring guidelines on prudent lending.

Banks and financial institutions are to be prudent and only provide mortgage financing up to the fair value/market value of the property. In this respect, a benchmark of fair value or market value is the current properties available. Somehow, properties sold under DIBS are always priced much higher; 15% to 20% higher compared with those without DIBS.

For standard condominiums costing RM500,000 without DIBS, should the developer market such properties under DIBS, the selling price could be as high as RM650,000. This creates a potential property bubble should the developer default in “servicing” the interest and the borrower/purchaser also defaults. The bank would only be able to recover up to RM500,000 if the said property is auctioned at market value.

In the event of an economic downturn, banks saddled with too much DIBS end-financing could collapse as the losses from such DIBS end-financing will erode the banks’ capital.

The collapse of just one bank/financial institution could cause a systemic collapse of the entire financial industry.

Bank Negara should take action against such bank and financial institution staff who have provided both project financing and end-financing to DIBS projects under the newly-minted Financial Services Act, 2013.

With the RPGT increase, banning of the DIBS and the Government’s aspiration to supply more ‘ownership housing schemes’ at affordable pricing, it is hoped that speculative demand for properties will stabilise to a more realistic level. I have heard that many businessmen do not do business anymore but indulge in property speculation as a livelihood and for income.

It is akin to the stock market dealings that were rampant during a ‘bull run’. Certain things have to be stopped before they become worse like the sub-prime crisis in the US.

If readers were to take a drive around completed projects, they will find signboards advertising units for sale upon the delivery of keys. If the purchaser is purchasing for his own occupation, why is there this need to put up these signboards or appoint estate agents to dispose of the units? It goes to show that some purchasers are merely speculators (not investors) from day one and the banks and financial institutions choose to “close one eye” despite knowing this.

Have the banks ever gone to the ground to check whether the units purchased and financed are actually “owner occupied”? If the property is “owner occupied”, the risk rating is lower and thus, he enjoys a lower interest rate. But if it is non-owner occupied, it should have higher interest rates. Borrowers of “owner occupied” properties are normally required to make a declaration to that effect to enjoy a lower interest rate.

But does the bank participate in this booking of credit risk?

If the property is non-owner occupied, the lending will fall under ‘real estate classification’ and not ‘housing’.

So, there may even be misreporting to Bank Negara and subsequent national statistics.

This column continues next week.

- Contributed by Chang Kim Loong

CHANG KIM LOONG is the honorary secretary-general of the National House Buyers Association (www.hba.org.my), a non-profit, non-governmental organisation (NGO) manned by volunteers. He is also an NGO Councillor at the Subang Jaya Municipality Council.

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2. Malaysia's high property taxes may not stop prices going up, sub-sales residential houses likely to soar!
3. Malaysia Tax Budget 2014 Updates

Malaysia Tax Budget 2014 Updates

Malaysia's government moved to allay concerns over its fast-rising debt on Friday, announcing a new consumption tax at a surprisingly high rate, abolishing subsidies on sugar and hiking property taxes to dampen a surge in home prices.

Prime Minister Najib Razak, in his annual budget speech to parliament, announced his government would bring in a goods and services tax (GST) in 2015 at a rate of 6 percent, above market expectations of 4 or 5 percent.

The ringgit currency gained against the dollar in late trade as investors welcomed the tax, which is aimed at broadening the revenue base in a country where only about 10 percent of citizens pay income tax and most of the government's money comes from oil and gas.

Otherwise, Najib announced few major steps to cut subsidies that take up about a fifth of government spending, or deeper reforms such as reducing a bloated, but politically influential, civil service.

Once a high-flying "tiger" economy, Malaysia has become heavily dependent on commodity exports and struggled with low private investment since the 1997-98 Asian financial crisis, despite a partial revival in recent years.

"The government has decided to implement a fair and comprehensive tax system that benefits all Malaysians," Najib said. "The government believes that this is the best time to implement GST as the inflation rate is low and contained."

Najib was under pressure to take bold steps after Fitch ratings agency in July cut its outlook on Malaysia's sovereign debt to negative, citing poor prospects for reform following a divisive May election.

Malaysian markets suffered a bout of turmoil over the summer as the country's shrinking current account surplus left it vulnerable to fund outflows driven by an expected tightening of U.S. monetary policy.

Most economists said Najib's budget had gone some way to restoring confidence in the government's political will to improve its finances, which has been shaken by a rapid rise in debt in recent years.

"The fact that they took the bold step to introduce 6 percent at the start shows a lot of commitment in reining in the fiscal deficit," said Irvin Seah, DBS economist in Singapore.

"You won't see the full benefit of the GST on the fiscal position at the outset... But in the longer term it will help bolster the fiscal position."

Najib announced a raft of steps to offset the impact of the GST, including exemptions on basic food items and transport and one-off payments to poorer families. He also announced a cut in corporate tax of 1 percent to take effect in 2016.

Ratings agency Standard & Poor's called the budget "a step in the right direction" though it added that the budget proposals did not fully address the weaknesses of high subsidies and poor revenue structure.

"We would have preferred more clarity on say fuel subsidies such as details and timelines," said Selena Ling, head of treasury research at Overseas-Chinese Banking Corp in Singapore.

After securing his power base last weekend in ruling party elections, Najib had appeared to have a freer hand to tackle a high fiscal deficit with unpopular steps.

But having trimmed fuel subsidies by 3.3 billion ringgit ($1 billion) per year shortly the Fitch announcement, Najib only pledged to gradually restructure the subsidy policy.

COOLING PROPERTY BOOM

The government's economic report, released just ahead of the budget speech, said that spending on subsidies, including fuel, would total 39.4 billion ringgit next year, down from 46.7 billion ringgit in 2013.

The abolition of the 0.34 ringgit per kg subsidy on sugar was justified as needed to combat rising rate of diabetes.

In the report, the government maintained its commitment to steadily cut the budget gap, from 4.5 percent in 2012 to 4.0 percent in 2013 and 3.5 percent in 2014.

"We believe that the government has paid heed to increasing criticism by markets and rating agencies, and has followed through after the aggressive fuel subsidy reduction in September," Barclays Capital economists wrote in a note.

The economic report forecast a slight pick-up in GDP growth to 5.0-5.5 percent in 2014 from 4.5-5.0 percent in 2013, underpinned by strong domestic demand. The government expects to narrowly stay within its self-imposed debt limit of 55 percent of GDP next year, forecasting a ratio of 54.7 percent.

To cool a surging property market, Najib announced that the country's property gains tax would be doubled to 30 percent for real estate sold within three years. The minimum value of a property for foreign buyers was doubled to 1 million ringgit.

Malaysian property prices have risen by about a third in the past three years, with even bigger rises in hot spots such as parts of southern Johor state.

The government forecast private investment would rise to 17.9 percent of GDP in 2014, with funds going into oil and gas, textiles, transport equipment and real estate development.

Private investment remains well below levels seen in the 1990s, when it averaged 22.9 percent of GDP annually, but it is recovering from an average of 11.8 percent between 2001-2011.

Following are highlights from Najib's ongoing speech to parliament:

CIVIL SERVICE

* Pensioners will receive a special financial assistance of 250 ringgit to assist them meet the rising cost of living. * Government to give a half-month bonus for 2013 with a minimum payment of RM500 to be paid in early January 2014.

CASH HANDOUTS
* Cash handouts to households with a monthly income of below 3,000 ringgit will be increased to 650 ringgit from 500 ringgit.
* For individuals aged 21 and above and with a monthly income not exceeding 2,000 ringgit, cash handouts will be increased to 300 ringgit from 250 ringgit.
* For the first time, cash assistance of 450 ringgit will be extended to households with a monthly income of between 3,000-4,000 ringgit. rising cost of living borne by the lower middle-income group.
* To implement all cash schemes, government will allocate 4.6 billion ringgit which is expected to benefit 7.9 million recipients.

REAL PROPERTY GAINS TAX
* For gains on properties disposed within the holding period of up to 3 years, RPGT rate is increased to 30 percent.
* For disposals within the holding period up to 4 and 5 years, the rates are increased to 20 percent and 15 percent, respectively. Malaysian property firms with exposure to this tax change include UEM Sunrise, Mah Sing Group and Tropicana Corp .
* Raise the minimum price of property that can be purchased by foreigners to 1 million ringgit from 500,000 ringgit.
* Prohibit developers from implementing projects that have features of Developer Interest Bearing Scheme (DIBS), to prevent developers from incorporating interest rates on loans in house prices during the construction period.
* Financial institutions are prohibited from providing final funding for projects involved in the DIBS scheme. Malaysia's top three banks are Maybank, CIMB and Public Bank.

AFFORDABLE HOMES
* To further increase access to home ownership at affordable prices, an estimated 223,000 units of new houses will be built by the government and the private sector in 2014.
* Companies that specialise in affordable housing development include Hua Yang Bhd.
* Government to allocate 578 million ringgit to the National Housing Department (JPN) for low cost flats consisting of 16,473 housing units.
* Malaysian's government to provide 80,000 housing units with an allocation of 1 billion ringgit under affordable housing scheme. The sales price of the houses will be 20 percent lower than market prices.
* Introduce the Private Affordable Ownership Housing Scheme (MyHome) to encourage the private sector to build more low and medium-cost houses. The scheme provides a subsidy of 30,000 ringgit to the private developers for each unit built.
* Preference will be given to developers who build low and medium-cost houses in areas with high demand and limited to 10,000 units in 2014.
* The scheme is for housing projects approved effective from 1 January 2014 with an allocation of 300 million ringgit.

TAX RELIEF
* Government proposes a special tax relief of 2,000 ringgit be given to tax payers with a monthly income up to 8,000 ringgit received in 2013.

GOODS AND SALES TAX
* To implement goods and services tax (GST) on April 1, 2015 - 17 months from now.
* GST rate fixed at six percent, the lowest among ASEAN countries.
* GST replaces current sales tax.
* Basic food items, transportation services, highway tolls, water and first 200 units of electricity for domestic users per month to be exempt from GST.
* Sale, purchase and rental of residential properties as well as selected financial services are exempted from GST.
* PM Najib: "The reality is that inflation now is low at around 2 percent. The government is confident this will be the best time to impose GST as inflation is minimal and under control."
* Training grant of 100 million ringgit will be provided to businesses that send their employees for GST training in 2013 and 2014.
* Financial assistance amounting to 150 million ringgit will be provided to small and medium enterprises for the purchase of accounting software in 2014 and 2015.

CORPORATE TAX
* corporate income tax rate be reduced by 1 percentage from 25 percent to 24 percent.
* income tax rate for small and medium companies will be reduced by 1 percentage point from 20 percent to 19 percent from the year of assessment 2016.

INCOME TAX
* government to give one-off cash assistance of 300 ringgit to low income households
* personal income tax rates be reduced by 1 to 3 percentage points for all tax payers.
* individual income tax structure will be reviewed
* chargeable income subject to the maximum rate will be increased from exceeding 100,000 ringgit to exceeding 400,000 ringgit.
* Current maximum tax rate at 26 percent to be reduced to 24 percent
* measures to be effective in 2015

SUBSIDIES
* Subsidy programme to be "gradually restructured"
* A portion of savings from restructuring to be distributed in the form of direct cash assistance with the other half to finance development projects.
* To abolish the sugar subsidy of 34 sen effective October 26 2013.

IMPROVING BUDGET MANAGEMENT
* committed to reducing the fiscal deficit gradually, with the aim of achieving a balanced budget by 2020.
* to ensure federal debt level will remain low and not exceed 55 percent of GDP.
* government to conduct audits on projects valued at more than 100 million ringgit during its implementation.

ISLAMIC FINANCE
- Securities Commission to introduce the a framework for Social Responsible Investment (SRI) Sukuk, or Islamic bonds, to finance "sustainable and responsible" investment initiatives.

AGRICULTURE
- Government to allocate six billion ringgit allocated for agriculture programmes.
* Says to 243 million ringgit allocated for rubber, palm oil and cocoa replanting as well as forest plantation programmes. Main plantation companies in Malaysia include Sime Darby , IOI Corp and KL Kepong.

LOGISTICS
- Government to allocate 3 billion ringgit in soft loans under the Maritime Development Fund through Bank Pembangunan Malaysia.
* The fund is to provide financing to encourage the development of the shipping industry, shipyard construction, oil and gas as well as maritime-related support activities.

AVIATION
- To replace existing air traffic control and management system in Subang, a new air traffic management centre costing 700 million ringgit will be built at Kuala Lumpur International Airport (KLIA).
* Kota Kinabalu, Sandakan, Miri, Sibu and Mukah airports in Sabah and Sarawak to be upgraded with 312 million ringgit allocation.
- Malaysia Airports manages and operates all airports across the country except for one in Johor.

PUBLIC INVESTMENTS
* Public investments to reach 106 billion ringgit. Projects to be implemented include:
- A 316-kilometre West Coast Expressway. Locally listed Kumpulan Europlus Bhd owns 80 percent of the project, while IJM Corp owns the balance 20 percent.
- Double-tracking rail project along west coast Malaysia. The project is carried out by as a joint venture between MMC Corp and Gamuda.
- Various projects from state oil firm Petronas under its 300 billion ringgit capex programme, including a petrochemicals plant in southern Johor state.

INTERNET ACCESS
- To carry out second phase of high-speed broadband project with the private sector involving 1.8 billion ringgit investment. State-linked telco Telekom Malaysia Bhd is involved in the project.
- To increase Internet coverage in rural areas, 1,000 telecommunication transmission towers will be built in the next three years, with an investment of 1.5 billion ringgit.
- To increase Internet access in Sabah and Sarawak, new underwater cables will be laid within three years at a cost of 850 million ringgit.



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2. No asset bubble, said Malaysian Central Bank governor 
3. Time for crucial fiscal reforms: Malaysia Budget 2014

Malaysia Tax Budget 2014 Updates

Malaysia's government moved to allay concerns over its fast-rising debt on Friday, announcing a new consumption tax at a surprisingly high rate, abolishing subsidies on sugar and hiking property taxes to dampen a surge in home prices.

Prime Minister Najib Razak, in his annual budget speech to parliament, announced his government would bring in a goods and services tax (GST) in 2015 at a rate of 6 percent, above market expectations of 4 or 5 percent.

The ringgit currency gained against the dollar in late trade as investors welcomed the tax, which is aimed at broadening the revenue base in a country where only about 10 percent of citizens pay income tax and most of the government's money comes from oil and gas.

Otherwise, Najib announced few major steps to cut subsidies that take up about a fifth of government spending, or deeper reforms such as reducing a bloated, but politically influential, civil service.

Once a high-flying "tiger" economy, Malaysia has become heavily dependent on commodity exports and struggled with low private investment since the 1997-98 Asian financial crisis, despite a partial revival in recent years.

"The government has decided to implement a fair and comprehensive tax system that benefits all Malaysians," Najib said. "The government believes that this is the best time to implement GST as the inflation rate is low and contained."

Najib was under pressure to take bold steps after Fitch ratings agency in July cut its outlook on Malaysia's sovereign debt to negative, citing poor prospects for reform following a divisive May election.

Malaysian markets suffered a bout of turmoil over the summer as the country's shrinking current account surplus left it vulnerable to fund outflows driven by an expected tightening of U.S. monetary policy.

Most economists said Najib's budget had gone some way to restoring confidence in the government's political will to improve its finances, which has been shaken by a rapid rise in debt in recent years.

"The fact that they took the bold step to introduce 6 percent at the start shows a lot of commitment in reining in the fiscal deficit," said Irvin Seah, DBS economist in Singapore.

"You won't see the full benefit of the GST on the fiscal position at the outset... But in the longer term it will help bolster the fiscal position."

Najib announced a raft of steps to offset the impact of the GST, including exemptions on basic food items and transport and one-off payments to poorer families. He also announced a cut in corporate tax of 1 percent to take effect in 2016.

Ratings agency Standard & Poor's called the budget "a step in the right direction" though it added that the budget proposals did not fully address the weaknesses of high subsidies and poor revenue structure.

"We would have preferred more clarity on say fuel subsidies such as details and timelines," said Selena Ling, head of treasury research at Overseas-Chinese Banking Corp in Singapore.

After securing his power base last weekend in ruling party elections, Najib had appeared to have a freer hand to tackle a high fiscal deficit with unpopular steps.

But having trimmed fuel subsidies by 3.3 billion ringgit ($1 billion) per year shortly the Fitch announcement, Najib only pledged to gradually restructure the subsidy policy.

COOLING PROPERTY BOOM

The government's economic report, released just ahead of the budget speech, said that spending on subsidies, including fuel, would total 39.4 billion ringgit next year, down from 46.7 billion ringgit in 2013.

The abolition of the 0.34 ringgit per kg subsidy on sugar was justified as needed to combat rising rate of diabetes.

In the report, the government maintained its commitment to steadily cut the budget gap, from 4.5 percent in 2012 to 4.0 percent in 2013 and 3.5 percent in 2014.

"We believe that the government has paid heed to increasing criticism by markets and rating agencies, and has followed through after the aggressive fuel subsidy reduction in September," Barclays Capital economists wrote in a note.

The economic report forecast a slight pick-up in GDP growth to 5.0-5.5 percent in 2014 from 4.5-5.0 percent in 2013, underpinned by strong domestic demand. The government expects to narrowly stay within its self-imposed debt limit of 55 percent of GDP next year, forecasting a ratio of 54.7 percent.

To cool a surging property market, Najib announced that the country's property gains tax would be doubled to 30 percent for real estate sold within three years. The minimum value of a property for foreign buyers was doubled to 1 million ringgit.

Malaysian property prices have risen by about a third in the past three years, with even bigger rises in hot spots such as parts of southern Johor state.

The government forecast private investment would rise to 17.9 percent of GDP in 2014, with funds going into oil and gas, textiles, transport equipment and real estate development.

Private investment remains well below levels seen in the 1990s, when it averaged 22.9 percent of GDP annually, but it is recovering from an average of 11.8 percent between 2001-2011.

Following are highlights from Najib's ongoing speech to parliament:

CIVIL SERVICE

* Pensioners will receive a special financial assistance of 250 ringgit to assist them meet the rising cost of living. * Government to give a half-month bonus for 2013 with a minimum payment of RM500 to be paid in early January 2014.

CASH HANDOUTS
* Cash handouts to households with a monthly income of below 3,000 ringgit will be increased to 650 ringgit from 500 ringgit.
* For individuals aged 21 and above and with a monthly income not exceeding 2,000 ringgit, cash handouts will be increased to 300 ringgit from 250 ringgit.
* For the first time, cash assistance of 450 ringgit will be extended to households with a monthly income of between 3,000-4,000 ringgit. rising cost of living borne by the lower middle-income group.
* To implement all cash schemes, government will allocate 4.6 billion ringgit which is expected to benefit 7.9 million recipients.

REAL PROPERTY GAINS TAX
* For gains on properties disposed within the holding period of up to 3 years, RPGT rate is increased to 30 percent.
* For disposals within the holding period up to 4 and 5 years, the rates are increased to 20 percent and 15 percent, respectively. Malaysian property firms with exposure to this tax change include UEM Sunrise, Mah Sing Group and Tropicana Corp .
* Raise the minimum price of property that can be purchased by foreigners to 1 million ringgit from 500,000 ringgit.
* Prohibit developers from implementing projects that have features of Developer Interest Bearing Scheme (DIBS), to prevent developers from incorporating interest rates on loans in house prices during the construction period.
* Financial institutions are prohibited from providing final funding for projects involved in the DIBS scheme. Malaysia's top three banks are Maybank, CIMB and Public Bank.

AFFORDABLE HOMES
* To further increase access to home ownership at affordable prices, an estimated 223,000 units of new houses will be built by the government and the private sector in 2014.
* Companies that specialise in affordable housing development include Hua Yang Bhd.
* Government to allocate 578 million ringgit to the National Housing Department (JPN) for low cost flats consisting of 16,473 housing units.
* Malaysian's government to provide 80,000 housing units with an allocation of 1 billion ringgit under affordable housing scheme. The sales price of the houses will be 20 percent lower than market prices.
* Introduce the Private Affordable Ownership Housing Scheme (MyHome) to encourage the private sector to build more low and medium-cost houses. The scheme provides a subsidy of 30,000 ringgit to the private developers for each unit built.
* Preference will be given to developers who build low and medium-cost houses in areas with high demand and limited to 10,000 units in 2014.
* The scheme is for housing projects approved effective from 1 January 2014 with an allocation of 300 million ringgit.

TAX RELIEF
* Government proposes a special tax relief of 2,000 ringgit be given to tax payers with a monthly income up to 8,000 ringgit received in 2013.

GOODS AND SALES TAX
* To implement goods and services tax (GST) on April 1, 2015 - 17 months from now.
* GST rate fixed at six percent, the lowest among ASEAN countries.
* GST replaces current sales tax.
* Basic food items, transportation services, highway tolls, water and first 200 units of electricity for domestic users per month to be exempt from GST.
* Sale, purchase and rental of residential properties as well as selected financial services are exempted from GST.
* PM Najib: "The reality is that inflation now is low at around 2 percent. The government is confident this will be the best time to impose GST as inflation is minimal and under control."
* Training grant of 100 million ringgit will be provided to businesses that send their employees for GST training in 2013 and 2014.
* Financial assistance amounting to 150 million ringgit will be provided to small and medium enterprises for the purchase of accounting software in 2014 and 2015.

CORPORATE TAX
* corporate income tax rate be reduced by 1 percentage from 25 percent to 24 percent.
* income tax rate for small and medium companies will be reduced by 1 percentage point from 20 percent to 19 percent from the year of assessment 2016.

INCOME TAX
* government to give one-off cash assistance of 300 ringgit to low income households
* personal income tax rates be reduced by 1 to 3 percentage points for all tax payers.
* individual income tax structure will be reviewed
* chargeable income subject to the maximum rate will be increased from exceeding 100,000 ringgit to exceeding 400,000 ringgit.
* Current maximum tax rate at 26 percent to be reduced to 24 percent
* measures to be effective in 2015

SUBSIDIES
* Subsidy programme to be "gradually restructured"
* A portion of savings from restructuring to be distributed in the form of direct cash assistance with the other half to finance development projects.
* To abolish the sugar subsidy of 34 sen effective October 26 2013.

IMPROVING BUDGET MANAGEMENT
* committed to reducing the fiscal deficit gradually, with the aim of achieving a balanced budget by 2020.
* to ensure federal debt level will remain low and not exceed 55 percent of GDP.
* government to conduct audits on projects valued at more than 100 million ringgit during its implementation.

ISLAMIC FINANCE
- Securities Commission to introduce the a framework for Social Responsible Investment (SRI) Sukuk, or Islamic bonds, to finance "sustainable and responsible" investment initiatives.

AGRICULTURE
- Government to allocate six billion ringgit allocated for agriculture programmes.
* Says to 243 million ringgit allocated for rubber, palm oil and cocoa replanting as well as forest plantation programmes. Main plantation companies in Malaysia include Sime Darby , IOI Corp and KL Kepong.

LOGISTICS
- Government to allocate 3 billion ringgit in soft loans under the Maritime Development Fund through Bank Pembangunan Malaysia.
* The fund is to provide financing to encourage the development of the shipping industry, shipyard construction, oil and gas as well as maritime-related support activities.

AVIATION
- To replace existing air traffic control and management system in Subang, a new air traffic management centre costing 700 million ringgit will be built at Kuala Lumpur International Airport (KLIA).
* Kota Kinabalu, Sandakan, Miri, Sibu and Mukah airports in Sabah and Sarawak to be upgraded with 312 million ringgit allocation.
- Malaysia Airports manages and operates all airports across the country except for one in Johor.

PUBLIC INVESTMENTS
* Public investments to reach 106 billion ringgit. Projects to be implemented include:
- A 316-kilometre West Coast Expressway. Locally listed Kumpulan Europlus Bhd owns 80 percent of the project, while IJM Corp owns the balance 20 percent.
- Double-tracking rail project along west coast Malaysia. The project is carried out by as a joint venture between MMC Corp and Gamuda.
- Various projects from state oil firm Petronas under its 300 billion ringgit capex programme, including a petrochemicals plant in southern Johor state.

INTERNET ACCESS
- To carry out second phase of high-speed broadband project with the private sector involving 1.8 billion ringgit investment. State-linked telco Telekom Malaysia Bhd is involved in the project.
- To increase Internet coverage in rural areas, 1,000 telecommunication transmission towers will be built in the next three years, with an investment of 1.5 billion ringgit.
- To increase Internet access in Sabah and Sarawak, new underwater cables will be laid within three years at a cost of 850 million ringgit.



Related posts:
1. Malaysia's Budget to increase real property gains ..
2. No asset bubble, said Malaysian Central Bank governor 
3. Time for crucial fiscal reforms: Malaysia Budget 2014