Malaysia Budget 2014: 6% GST, Sugar Subsidy Cut, more BR1M
Malaysia Budget 2014 was being announced by Prime Minister Dato’ Sri Mohd Najib Razak in the Dewan Rakyat yesterday on 25th October 2013.
Implementation of 6% Goods and Services Tax (GST) rate effective 2015 with a new income tax structure, abolishment of the 34 sen sugar subsidy and increased BR1M payments were among the main highlights of the Budget 2014.
The Budget 2014 is formulated based on the theme “Strengthening Economic Resilience, Accelerating Transformation and Fulfilling Promises”, focussing on five main thrusts:
First Thrust: Invigorating Economic Activity
Second Thrust: Strengthening Fiscal Management
Third Thrust: Inculcating Excellence in Human Capital
Forth Thrust: Intensifying Urban and Rural Development
Fifth Thrust: Ensuring Well-Being of the Rakyat
The best Quote : “Subsidi gula dihapuskan.. Kurangkan gula, tambah manis dalam senyuman.”
Highlights of the Malaysia Budget 2014:
* The Government to abolish the sugar subsidy of 34 sen effective 26 October 2013.
* Pensioners will receive a special financial assistance of RM250 to assist them in meeting 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 (BR1M)
* BR1M to households with a monthly income of below RM3,000 increased from RM500 to RM650; and for the first time, BR1M assistance of RM450 to be extended to households with monthly income of between RM3,000 and RM4,000.
* BR1M increased from RM250 to RM300 for single individuals aged 21 and above and with a monthly income not exceeding RM2,000.
* To implement all cash schemes, government will allocate RM4.6 billion which is expected to benefit 7.9 million recipients.
* Real Property Gains Tax (RPGT) – For gains on properties disposed within the holding period of up to three years, the RPGT rate is increased to 30%, whereas for disposals within the holding period of up to four and five years, the rates are increased to 20% and 15%, respectively. For disposals made in the sixth and subsequent years, no RPGT is imposed on citizens, whereas companies are taxed at 5%.
* RM100mil will be provided to the 1Malaysia Maintenance Fund under the Ministry of Urban Well-being, Housing and Local Government. The Government will also allocate RM82mil to rehabilitate 20 abandoned housing projects involving 8,197 houses.
GOODS AND SALES TAX (GST) or VAT (value added tax)
* Sales tax and service tax to be abolished, to be replaced by Goods and Services Tax (GST) effective on 1 April 2015.
* GST rate is fixed at 6% and the rate is lowest among ASEAN countries. One-off payment of RM300 to households who are BR1M recipients would be given when GST is implemented.
* GST will not be imposed on basic food items, piped water supply, the first 200 units of electricity per month for domestic consumers, services provided by the government such as issuance of passports and licences, health services, school education.
* Sale, purchase and rental of residential properties as well as selected financial services were exempted from GST. Similarly, GST would be excluded in transportation services such as bus, train, LRT, taxi, ferry, boat and highway tolls.
* Expenses incurred for training in accounting and ICT relating to GST to be given further tax deduction for years of assessment 2014 and 2015.
* Training grant of RM100 million to be provided to businesses that send employees for GST training in 2013 and 2014.
* RM150 million financial assistance for SMEs to purchase accounting software in 2014 and 2015.
What’s GST? click here to read more about GST in Malaysia
* Corporate income tax rate to be reduced by 1 percentage point from 25% to 24%.
* Income tax rate for SMEs to be reduced by 1 percentage point from 20% to 19% from year of assessment 2016.
* Individual income tax rates to be reduced by 1 to 3 percentage points for all tax payers to increase disposable income.
* Tax Relief for Middle-Income Group – Government proposes a special tax relief of RM2,000 be given to tax payers with a monthly income up to RM8,000 received in 2013. This measure will result in tax savings up to RM480. This group is already enjoying tax savings up to RM475 on income received in 2013 with the reduction of tax rates announced by the Government in the last Budget.
* To encourage Minimum Wage Policy compliance, further tax deduction to be given with regard to the difference in the wages paid by employers in 2014.
* RM100 schooling assistance to all primary and secondary school students as well as 1Malaysia Book Voucher Programme valued at RM250 to continue, with allocations of RM540 million and RM325 million respectively.
* RM50 million will be allocated under Graduate Entrepreneurship Fund to be managed by SME Bank to provide soft loans of up to RM500,000 at 4% interest rate with a view to reducing graduate unemployment.
* In 2014 Budget, public investment is expected to reach RM106 bil.
* Projects to be implemented include West Coast Expressway from Banting to Taiping (316KM), double-tracking projects from Ipoh to Padang Besar and from Gemas to Johor Baharu.
* Among the projects undertaken by Petronas include Sabah Ammonia Urea Project (SAMUR) in Sipitang, integrated oil and gas production development project in Kebabangan, the regasification plant project in Lahad Datu and RAPID in Pengerang, Johor, which is the largest investment in Malaysia.
* The Government will allocate RM1.6 billion for development in the 5 regional corridors.
* Services Sector Blueprint will be launched next year to outline strategies, measures & identifies potential subsectors.
* The government has implemented the High-Speed Broadband (HSBB) project under the National Broadband Initiative. To expand coverage in major towns, we will implement 2nd phase of HSBB in collaboration with private sector involving RM1.8bil investment. This is expected to increase Internet coverage in urban areas, benefiting 2.8 million households. Internet speed will be increased to 10 Mbps.
* For Sabah & Sarawak, to enhance the internet speed coverage, underwater cables will be laid over 3 years – RM850 million.
GOVERNMENT EFFORT FOR BETTER MALAYSIA
* Government has allocated RM200mil to equip PDRM with the latest tools and equipment such as firearms, ammunition, bulletproof vests, narcotic detectors, biometric systems and forensic vehicles. The Government will also provide 496 closed-circuit cameras (CCTV) in 25 local authorities involving an allocation of RM20mil.
* To strengthen the development of green technology, the Government will provide investment tax allowance for the purchase of green technology equipment and income tax exemption on the use of green technology services and system.
* To encourage a green lifestyle, the Malaysian Green Foundation will be established to promote and enhance use of green technology by the corporate sector and the general public. For this, a launching grant of RM15mil will be provided to the Foundation.
* The Government to purchase four special buses for the implementation of the Mobile Family Centre which will provide advisory services related to family matters; dietary requirements; screening for chronic disease; as well as testing for glucose and cholesterol.
* Health sector allocated RM22.1bil; RM150mil to appoint 6,800 more nurses; RM3.3bil to purchase medicine and medical equipment.
* Police and Armed Forces allocated RM8.8bil and RM13.2bil respectively to reduce crime and enhance military preparedness. RM75mil proposed to further strengthen the East Coast Special Security Area (ESSCOM) operations. RM48mil allocation to cater for the welfare of 20,000 armed forces veterans, including health payments, ex-gratia and education; RM202mil to build and refurbish ATM quarters.
* The domestic economy is expected to grow between 4.5% to 5.0%.
* The unemployment rate for Budget 2014 is estimated at 3.1% while the inflation rate remains lowest between 2% and 3%.
* Goods exports are expected to grow 2.5% while the construction sector is expected to grow 9.6% and followed by services sector at 5.7%.
* The per capita income for 2014 is expected to reach RM34,126, which is 37% higher than RM24,879 in 2009.
* It is possible that Malaysia will achieve developed nation status much earlier than 2020.
* Logistics Sector Master Plan and National Aviation Policy will be formulated.
* To replace existing air traffic control and management system in Subang, a new air traffic management centre costing RM700 million will be built at KLIA.
* Malaysia to host 5th Global Social Business Summit on Nov 7-9, 2013.
* RM100 million will be allocated to create Night Market Traders Entrepreneur Scheme under Bank Simpanan Nasional; soft loans to carry 4% interest rate, with maximum loans of up to RM30,000.
* Ministry of Health, Ministry of International Trade and Industry, and Ministry of Finance to undergo performance evaluation based on Outcome-Based Budgeting (OBB).
* Government to conduct audit on projects valued at more than RM100 million during their implementation phase.
* Monthly Tax Deductions (MTD) as Final Tax, effective from assessment year 2014.
* Secretarial fee and tax filing fee are allowed as tax deductions from year of assessment 2015.
* Cost of purchasing ICT equipment and software is given Accelerated Capital Allowance until year of assessment 2016.
* RM54.6 billion or 21% of Budget 2014 will be allocated to accelerate academic achievement, competencies and skills.
* RM450 million will be allocated to the Special Fund for Building, Upgrading and Maintenance of Schools.
* Allocation of RM600 million in research grants for public institutions of higher learning; RM110 million for MyBrain15 programme which finances tuition fees at post-graduate level, especially for private sector executives.
* Human Resource Development Fund to provide RM400 million for upskilling and reskilling programmes meant for employees of registered companies; can also be used to train apprentices and future workers.
* RM1.2 billion allocated to build and upgrade dams and water treatment plants to increase coverage of water supply to 100%, especially in urban areas.
So, what’s your view on this Budget 2014? Did the Budget 2014 meet your expectations?