KUCHING: As the last Budget under the 10th Malaysia Plan, besides allocations for remaining programmes to ease a smooth transition into the next Malaysia Plan, Budget 2015 is seen threading the fine balance between stimulating growth and exercising fiscal prudence amidst an environment of inflationary pressures.
Kuching-based KPMG Tax Services Sdn Bhd executive director Regina Lau affirmed that rising costs continue to be everyday issues that the rakyat grapple with.
“Additional and higher cash handouts in the form of BR1M for targeted households to alleviate rising living costs were announced as largely expected,” she said.
“While savings from subsidies reduction together with the yet-to-be announced new fuel subsidy mechanism will be better channelled towards directly assisting the vulnerable groups, the handouts giving direct and immediate financial relief are short-term measures which do nothing to empower the groups to increase their earning power to overcome the rut of persistent inflation.
“In recognising this, the prime minister announced various measures aimed at enhancing employability and up-skilling workers which would help to increase the earning capacity of the people and move the country a step towards its aspiration as a high income nation.
“Private companies are encouraged in this respect by the proposed double deductions of expenses on scholarship awards, structured internship programmes and training expenses on employees to attain accredited vocational and professional qualifications.”
With the Goods and Services Tax (GST) poised to take effect from April 1, 2015, Lau said there is much concern on further inflationary pain especially on residential properties, healthcare and education.
“Taking cognisance of such concerns, the list of zero rated and exempt items announced in the Budget has been expanded to relieve more basic necessities from GST and thereby relieve the consumption tax burden on the vulnerable groups to a greater degree.
RON 95 petrol, diesel and LPG not subject to GST are met with relief by individuals and businesses alike.
However, with more items relieved from GST, the KPMG executive director noted that the GST revenue projected for 2015 and 2016 have been revised downwards by 40 per cent and 23 per cent respectively.
“With the reduction and restructuring of income tax for individuals from year of assessment 2015 and the slight reduction in corporate income tax rate from year of assessment 2016 already announced in the last budget, no announcement of further reductions in the tax rates was within expectations but was still disappointing.
“To stay competitive and attract foreign direct investments, further cuts in tax rates ought to be considered with a consumption tax in place.
It is expected that such cuts will be forthcoming once the GST revenue reaches a minimum desired level.” Lau opined that the Budget does not fulfill a number of tax wishes of business and individuals alike – the notable absence being further reductions in income tax rates.
“The dearth of incentives, rebates and reliefs to ease costs of doing business and more direct measures to relieve inflationary pressures in everyday living costs disappoints many.” Meanwhile, Lau opined that the proposed increased tax reliefs on disabled child, serious diseases and purchase of basic supporting equipment was something to cheer for.
“Demographically, it is expected that such enforcement will be a challenge in the interior areas of Sarawak where physical accessibility and access to information pose a problem.
“It is therefore gratifying to note that the Budget commits to various infrastructure developments in Sarawak, much needed developments such as the long overdue Pan-Borneo Highway, more rural roads and healthcare facilities.
“The allocation of funds to finance the cost of transportation and enforcement of price control on essential goods will complement efforts to ensure that there is no artificial inflation in the rural areas post GST.”