The 2022 Budget is essentially only about short-term assistance of various kinds. There is no long-term vision and plan to enhance the country’s productivity and competitiveness, which is regrettable.
There is no income tax relief for small and medium-sized business corporations that contribute 40% of the country’s economic development and drive domestic economic activity. Instead, a prosperity tax and an income tax on the repatriation of income by permanent residents abroad can backfire.
In brief: The country is ruled by bureaucrats, political leaders have no economic vision and there is no direction for the country’s future.
Excerpt: The increase in government revenue in the short term will certainly affect foreign investment and reinvestment plans of existing enterprises in the long term, and they may even consider relocating out of Malaysia, which in turn may lead to a negative phenomenon of the government raising tax rates but causing a reduction in tax revenue.
The Budget is crucial to how the economy will be driven to recover from the pandemic. The 2022 Budget is essentially only about short-term assistance of various kinds. There is no long-term vision and plan to enhance the country’s productivity and competitiveness, which is regrettable.
There are some benevolent policies in the Budget, such as tax relief for landlords who reduce their rents, funding for domestic violence prevention and the establishment of shelters. Regrettably, there is no income tax relief for small and medium-sized business corporations that contribute 40% of the country’s economic development and drive domestic economic activity. Instead, a prosperity tax and an income tax on the repatriation of income by permanent residents abroad can backfire.
Income tax for small and medium-sized enterprises should be reduced to 10-15%. In China, the government gives many tax incentives to micro, small and medium-sized enterprises. Last year, a 10% levy was imposed on profits up to $1 million, making many companies willing to file more tax returns. It fully demonstrates the rationale that a lower tax rate by the government can instead increase tax revenue.
I do not agree with the 33% prosperity tax. This measure appears to be purely about finding money to cover government expenses. The increase in government revenue in the short term will certainly affect foreign investment and reinvestment plans of existing enterprises in the long term, and they may even consider relocating out of Malaysia, which in turn may lead to a negative phenomenon of the government raising tax rates but causing a reduction in tax revenue.
In fact, the government could impose a prosperity tax only on licensed, low-competition industries such as banks and mineral companies. There should not be tax penalties for companies that do not rely on privileges but on competitiveness to make money.
There are as many as one million Malaysian citizens living and working abroad. They will be subject to income tax on income earned overseas and received locally. This is putting the cart before the horse. In my Budget comments last year, I suggested that overseas Malaysians should be encouraged to send remittances back home tax-free (like the policy during the 1998 financial turmoil). Furthermore, under global taxation principles, all income earned by Malaysians working overseas should be taxed in the country where they are based, including income received in Malaysia. So how can the Malaysian government impose a tax? This will encourage people to keep their money in foreign countries and pay more taxes abroad.
On the contrary, to please the young people, the government has proposed a tax exemption for e-sports players’ bonuses. It is unreasonable that Malaysians are taxed on their hard-earned money overseas.
The Budget encourages employment for low-income groups and young people, and the Federal Government proposes that the State Government lease out wasteland and Malay reserve land. The land belongs to the state government, so the federal government can only make “recommendations”. I have repeatedly proposed in the Johor State Assembly that modern agriculture be one of the state government’s key development strategies, opening 18,000 acres of government wasteland in Johor to young people using modern technology to apply for land.
The Financial Bill allows the employment of specific groups to enjoy allowances. I suggest that the specific group should be extended to cover Malaysians who previously held a Singapore work permit but returned to the country after the outbreak. Before the outbreak, there were about 300,000 to 400,000 Malaysian workers. The remaining 60,000 to 70,000 are currently working in Singapore, many of whom have returned to Malaysia for employment or are unemployed and need priority assistance.
The Finance Bill extends the employee provident fund contribution rate and I think the employer’s contribution rate should also be reduced. I also suggested last year that not only the members contribution rate, but in fact the employer contribution rate should also be reduced. While employees may not like the proposal, it is the right policy to keep the business alive, preserve cash flow and save the jobs of the employees.
China’s 2020 pandemic is severe, with the toughest economic and employment situation ever. The government compulsorily exempts employers and employees from provident funds and insurance premiums, thus effectively protecting businesses, jobs, and the lifeline of the economy.
The Finance Bill is designed to please civil servants by allocating RM900 million in special assistance for civil servants to be used as a subsidy to increase business automation.
The assistance is not urgently needed by civil servants with secure jobs. To improve the country’s competitiveness and prospects, it should have been used for the more urgent “Business Automation Transformation Grant” which would have helped the economy to recover and increase productivity. It is surprising that only RM100 million has been allocated for this grant.
The Finance Bill also stipulates a quota for female directors of listed companies. This is superfluous and even discriminates against women. Capable women do not need to rely on quota protection at all, and many quota systems are designed to please specific groups. Private companies should be given the freedom to choose the members most necessary to the business as directors, without the government getting involved at all.
In brief: The country is ruled by bureaucrats, political leaders have no economic vision and there is no direction for the country’s future.