Tax perks a mix of old and new for corporate Malaysia

PETALING JAYA: Budget 2018, was a mix of old and new incentives, with no real significant measures that impact corporates directly.
SJ Grant Thornton executive director of indirect tax & GST Alan Chung said Budget 2018 is a mix of old incentives (such as accelerated capital allowance and the tourism sector, which are deemed to be expanded from previous) and new incentives (such as exemption of income tax for women on income earned within 12 months for women re-entry into workforce at least two years after work break).
He said GST has a few proposals compared to last year, which was silent on it.
“One of the major ones is the relief of GST for big ticket items (aircraft and ship). It may sound like they’re promoting the sector of the economy like aircraft but these are not targeted to individuals,” Chung told SunBiz.
He said big ticket items’ GST are paid by companies, and airlines and shipping companies are more likely to be GST-registered.
“If they get charged, they get the payment back as input tax. They have to pay first but they get to claim it back. So effectively it’s not a cost to the shipping industry. To them, the benefit is that they don’t have to pay first. So how much of an impact does this give to the economy and how much is it expansionary for the country? To me, this is questionable,” said Chung.
He pointed out that another “questionable but good move” is the 2 percentage point reduction in individual income tax rates in three tax brackets, specifically middle income earners, who have been complaining of being left out of incentives from the Budget.
“A 2 percentage point, how much does it translate to disposable income for these individuals? It may not translate to a big amount on a monthly basis, but then again, granted that they have been left out for the last few years, whatever they can get is still something,” said Chung.
PwC Malaysia tax leader Jagdev Singh concurred, saying that there are no significant measures that impact corporates directly – with tax rates remaining the same, existing incentives maintained.
"A reduction in corporate taxes was not expected, given the focus on reducing the budget deficit. However, I had hoped that targeted measures based on productivity increases, and investment in R&D would be introduced, and this was visibly missing in Budget 2018,” said Jagdev.
What stood out was the timely reduction in personal tax rates, where he had expected a reduction in personal tax rates after the implementation of GST in 2015, and Budget 2018 certainly delivered on that. The tax benefit of up to RM1,000 will benefit a large number of taxpayers. However, there were no changes to existing reliefs.
He said Budget 2018 focuses on the nuts and bolts of addressing the increase in cost of living as well as progressing towards a high-income economy. Many of the measures announced are focused on the man on the street – addressing issues of the B40 and M40 groups, civil servants, and women in the workforce.
Cash handouts remain to be the best way in providing immediate relief to the B40 group, and Budget 2018 continues what was started in 2012. While there may appear to be a long list of different cash handouts, this is necessary as the requirements of the different target audience are unique and difficult to address singularly.
“Overall, many timely measures to deal with the elephant in the room - which is the increase in cost of living -were introduced, or continued in this Budget. While Budget 2018 provides a framework for shaping the workforce of the future, I hope that in the long run measures will focus on increasing our competitiveness in the new economy.”