Sim Kwang Gek, tax leader at accounting firm Deloitte Malaysia, said the reduction in personal income tax rates for the middle-income group would have minimal impact on tax revenue.
The money foregone in taxes would be returned to the economy through higher consumption, she said according to Bernama.
The 2023 federal budget proposals include a 2% cut in the personal income tax rates for those with a taxable income of RM35,001 to RM100,000 a year.
She said the cut will result in tax savings of:
- RM300 for those earning between RM35,001 to RM50,000;
- RM700 for those earning between RM50,001 to RM70,000 and
- RM1,300 for those earning between RM70,001 to RM100,000
Sim said government tax revenue is expected to increase by 4% from a rise in income taxes on the rich, a luxury goods tax, and a voluntary disclosure programme on undisclosed taxable income.
Sim said the budget proposal of a 100% waiver of penalties for voluntary disclosures made from June to May 31 next year will boost the government’s tax collection.
“The full waiver of penalties is more attractive than the previous voluntary disclosure programmes introduced by the Inland Revenue Board (LHDN) where a 10% or 15% penalty is imposed on tax undercharged.” Sim said.
She said the government’s proposal to consider a capital gains tax on unlisted shares indicated that it is taking a phased approach, before embarking on a full-blown capital gains tax.
She said small and medium-sized enterprises could expect to be subject to three progressive tax rates.
Those with annual chargeable income of RM150,001 to RM600,000 would be subject to a 17% corporate tax rate, while income in excess of RM600,000 would be subject to 24%.
The budget proposes a 2% cut in tax from 17% to 15% on chargeable income of up to RM150,000 but the tax savings of RM3,000 may not be significant in view of the current challenges faced by SMEs, Sim said.
“A 2% cut on chargeable income of up to RM600,000 would be more meaningful, and having a two-tier tax rate will also be simpler to administer,” she said.