Chartered Tax Institute of Malaysia (CTIM) does not expect tax cuts for individuals or corporates, but more details on the luxury goods tax (LGT) and the mechanism for capital gains tax in the upcoming Budget 2024.
President Chow Chee Yen said the tax rate for individuals is expected to be maintained as changes were already made in Budget 2023.
“A tax cut is not expected as the government is constantly looking to widen its tax base,” he said.
Chow said personal relief for individuals may be enhanced in line with the rise in the cost of living, for instance, by combining the Employees Provident Fund (EPF) and insurance relief and increasing its quantum.
“There may be a need to streamline some of the personal reliefs to be in line with the current needs of the rakyat,” he said
For corporate entities, he opined that special tax deductions and tax incentives may be proposed for micro, small, and medium enterprises (MSMEs) relating to corporate tax governance, environmental, social, and governance (ESG) principles, and e-invoice system implementation.
Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim is scheduled to table Budget 2024 in Parliament on Oct 13.
Luxury goods tax (LGT) rate could range from three to five percent
Chow believed the government is scrutinising the implementation of the LGT and “is studying the best practices in other countries and how it can be best implemented in Malaysia with an expected rate from three to five percent.”
The LGT, to be imposed on certain high-end items this year to expand the tax base, was mooted in the revised Budget 2023 tabled in February 2023. No details were disclosed since that announcement.
In the same revised budget, the government also said it would study the introduction of a capital gains tax for the disposal of unlisted shares by companies beginning in 2024 at a lower rate.
“I am expecting Budget 2024 to release details on the mechanism for capital gains tax and the LGT,” said Chow.
Possible comeback of low-valued goods tax
Chow also reckoned that there could be a possible comeback of a low-valued goods (LVG) tax, despite concerns about its impact on the low and middle-income groups.
The Royal Malaysian Customs Department said in March this year that it has indefinitely postponed the implementation of the 10 percent LVG tax, which was supposed to come into effect on April 1, 2023, due to an adverse economic situation.
On the return of the goods and services tax (GST), Chow said the government has not ruled this out and will decide on the right time for its implementation. The GST was abolished in 2018.
On the carbon tax, he believed there may be more incentives to encourage low-carbon practices in businesses but the mechanism and its appropriate tax rate will require deliberation and consultation with stakeholders.
Timely to review windfall tax measure
As for the windfall tax on the palm industry, Chow agreed that it is timely to review this to ease smallholders’ burden.
He said it is nothing new in Malaysia and other countries have turned to it as a revenue source but it may be time for a review.
“In line with the aspiration to ensure better wealth distribution and reduce income disparity, the government can consider channelling the revenue collected to the palm oil industry to assist smallholders,” he said.
Chow said the windfall tax is imposed on certain industries when economic conditions enable them to experience significantly above-average profits.
“Malaysia is the world’s second-largest palm oil producer and there is a current three percent levy on palm oil prices above RM3,000 per tonne in Peninsular Malaysia, and above RM3,500 per tonne in Sabah and Sarawak, the largest palm oil-producing states in the country,” he said.
