She said Malaysia’s personal income tax system is progressive with the aim of continuously assisting low-income earners.

“In the last 10 years, among the 11 tax bands (chargeable income) we have now, there has been a reduction of between 1-5% in every single band. This has resulted in fewer people paying tax now,” she said.

Malaysia has 11 tax bands to cater for chargeable incomes of RM0-RM5,000, which carries a zero rate, to incomes exceeding RM1,000,000 which attracts an income tax of 28%.

For instance, 10 years ago the monthly household income that triggered the payment of taxes was RM3,500, but from the year of assessment 2017, the taxable household income was raised to RM4,500.

“With the 2% reduction (in personal income tax rate) for three tax bands (in 2018 Budget), the monthly trigger has now increased to RM4,800 (for 2018 filing).

“So, between 2017 and 2018 assessment, about 261,000 additional taxpayers will not fall into the taxable category,” Liow told Bernama

In 2018 Budget, tax rates were cut by two percentage points on taxable incomes of between RM20,000 and RM70,000. This raised disposable income of individuals by RM300 to RM1,000.

In the last 10 years, Liow said the reduction in taxes for people has been 100% for some and at least 10% for those in the RM600,000 income bracket.

As for tax relief, Liow said the government has also been very progressive, both in terms of the items and value.

The total value of relief has increased 22% from RM79,000 to RM97,000 since the year 2009.

“Some of the new things that have been introduced are relevant to the current state. It is actually, in a way, shaping the behavioural changes of how people spend the money.

“So, we see a lot of enhancement in terms of knowledge enhancement, household technology, tablets and things like that,” she added.

For 2017, the government also announced tax reliefs for gym memberships for self, spouse or child, besides relief for books, tablets and sports equipment.

The government also encourages people to save for their retirement, healthcare and education, by way of giving tax relief for savings in education fund, life insurance and private retirement schemes.

Asked if tax relief was common, Liow said it was not a common practice in other countries.

“I think Singapore gives, but for only half of the items that we do. Most countries give relief for just two items, namely personal and mortgage interest,” Liow revealed.

Going forward, Liow said there was still plenty of room for the government to improve the personal income tax system.

“The rates are nowhere near low-paying countries as yet. So, it can be reduced further,” said the tax consultant, adding that this should be possible now, especially after Malaysia introduced the goods and services tax (GST).

“The GST is a fairer tax regime compared with direct income taxes. It’s a consumption tax — if you don’t spend, you don’t pay.”

In a way, it needs to be balanced out as an individual cannot be paying both income tax as well as consumption tax, she said.

Hence the concept behind direct taxes needs to be reduced in stages.

Besides, she felt the process could be simplified further.

Liow said more things can be administrated through monthly income. “Family and personal relief, for example, can be captured there itself. The employers can have something like a tax card.”

Such measures would not only further reduce the need for more people to file their taxes but also help the government reduce its administrative cost, she added.