TAXPAYERS who were hoping for additional tax relief next year were left disappointed with Budget 2015 last Friday.

The budget, with regard to personal income tax, is merely a repetition of Budget 2014 that promises a reduction of 1% to 3% and a restructuring of the current tax band. This means that some 300,000 individuals will no longer be liable to pay income tax, and part of the restructuring includes the reduction of the maximum tax rate to 25% from 26% previously.

As all these will only take effect in year of assessment 2015 (YA 2015), taxpayers will only see the perks when they file their tax returns in 2016.

However, the subsidy rationalisation programme is already in motion. Consumers were reminded of its reality just recently when the petrol subsidy was cut by 20 sen per litre, raising the price of RON95 to RM2.30 per litre from RM2.10 previously.

“You can’t expect surprises every year. The government needs to make sure that the programmes that were planned are implemented successfully. Budget 2015 is about the successful implementation of the Goods and Services Tax (GST) and winning the rakyat’s buy-in on the subsidy rationalisation plans,” says Deloitte Malaysia country tax leader Yee Wing Peng, when contacted by The Edge.

He adds that the government should see its revenue increase further in YA 2016, possibly by RM8 billion.

“With the additional revenue and a possible adjustment of GST rates in YA 2016/2017, income tax rates can come down by 1% to 2%. It is my hope that the personal income tax rate will be the same as the proposed corporate income tax rate of 24% by YA 2016,” says Yee.  

KPMG Malaysia tax chief operating officer Nicholas Crist concurs with Yee. Crist says Budget 2015 is straightforward, with emphasis on ensuring the GST is implemented successfully.

“The prime minister wants to keep it simple so that people are not distracted from the upcoming GST implementation,” he adds.

Crist says it will be difficult to predict if personal income tax will be further lowered beyond YA 2015.

While there was no cheer on the income tax front, one consolation is probably the government’s plan to widen the scope of items that will not be subjected to GST.

EY Malaysia partner and tax leader Yeo Eng Ping believes that the government has delivered on its promise that Budget 2015 will be one with the rakyat in mind by expanding the GST-exempt list.  

“Of significance, RON95, LPG (liquefied petroleum gas) and diesel have been given special relief in that no GST will be levied at the petrol stations. It is interesting that it appears that will be given via a special relief order different from the zero-rating list, although in practice the result should be the same. Perhaps this will allow flexibility in amending the position in the future, if required,” she says.  

Deloitte’s Yee highlights that the expanded GST-exempt list will benefit consumers, not just the poor but also the middle-income group — which often complains of being overlooked — and the rich. He says the inclusion of 2,900 medicine brands in the list was a surprise.   

“Originally, medicine purchased from hospitals was exempted. But the new proposal seems to indicate that even medication [under the 2,900 brands] that are bought over the counter or at pharmacies will not be subjected to GST as well. Clearly, the consumer stands to gain from this,” explains Yee.

When tabling Budget 2015 in the Dewan Rakyat last Friday, Prime Minister Datuk Seri Najib Razak said the government’s net revenue collection from the GST would only be RM690 million after taking into account the RM3.8 billion on GST-exempt goods, RM13.8 billion in foregone revenue from sales and service tax which will be abolished and RM4.9 billion worth of assistance programmes for the rakyat.

With the seemingly meagre net amount of GST to be collected next year, perhaps the rakyat will keep a close watch on whether the next budget will bring more goodies.

This article first appeared in The Edge Malaysia Weekly, on October 13 - 19, 2014.

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