At the same time, those in the high income group (T20) are expected to continue paying the additional 0.5ppt in income tax in the year ahead.
CTIM president Chow Chee Yen said the tax reduction was to help the M40 cope with the rising cost of living by raising the quantum of their disposable income.
The rich are paying more to make up for the loss in revenue caused by the tax cut.
“Helping to combat the cost of living and improving the country’s fiscal position are the important focus of the current government,” he told Bernama via email recently.
“As such, I would expect the tax cut for the M40 and tax increase for the T20 to be maintained,” he added.
Under the first iteration of Budget 2023 tabled on Oct 7, 2022 by the former government, the tax for chargeable income of RM50,001 to RM70,000 was reduced from 13% to 11%, while that for RM70,001 to RM100,000 dropped from 21% to 19%.
Former prime minister Ismail Sabri Yaakob’s administration also raised the tax for those in the chargeable income bracket of RM250,001 to RM400,000 from 24.5% to 25%.
Prime Minister and finance minister Anwar Ibrahim, who succeeded Ismail following the 15th general election on Nov 19, 2022, will present a revised Budget 2023 this Friday.
Chow also shrugged off the possibility that a carbon tax would be introduced in the upcoming budget.
He said the relevant government authorities need to study the carbon pricing mechanism and set an appropriate carbon tax rate to drive the national climate goals of achieving net-zero emissions.
“Feedback would also need to be sought from stakeholders so that this matter is duly deliberated before the authorities decide on the implementation,” he said.
On the proposed 15% global minimum tax (GMT), Chow expected relevant measures would be announced in Budget 2023, but implementation would take place no earlier than 2024 to give time for deliberation and feedback from stakeholders before it comes into operation.
According to him, GMT is in line with international tax developments to combat revenue leakages and profit-shifting activities, and will give Malaysia the first right to charge top-up taxes on revenue from entities located in Malaysia that are paying taxes below the threshold of 15%.
Chow said the return of the goods and services tax (GST) would not be on the cards as Anwar has recently stated that the government would not introduce the broad-based consumption tax.
“GST is not the priority of the current government in this upcoming budget because, being a broad-based consumption tax, GST would also have an impact on the low and middle-income households. The Malaysian economy is still in the recovery phase,” he said.
Chow also dismissed the possibility that the government would raise the 10% sales tax imposed on low-value goods (LVG) priced less than RM500 bought online from April 1, 2023 onwards.
“It could be seen as an additional burden to the people,” he said.
Nonetheless, he added, it is estimated that the government could collect about RM200 million to RM300 million annually once the LVG sales tax comes into force.