This article first appeared in The Edge Financial Daily on June 7, 2018

KUALA LUMPUR: There is no concern over contributions to Tabung Harapan Malaysia — which reached RM43.16 million yesterday and are fully tax-deductible for donors — denting personal or corporate tax collection because net contributions to the government’s coffers would still be higher.

“The contributions to Tabung Harapan Malaysia will not eat into our net revenue because these are contributions made from the savings and cash reserves of patriotic Malaysians,” Ong Kian Ming, special officer to the minister of finance, told The Edge Financial Daily.

He gave a simple example of someone with RM100,000 taxable annual income donating RM10,000 to Tabung Harapan. At a theoretical 20% tax rate, the donor’s taxable income would be reduced to RM90,000 and his payable personal income tax would fall by RM2,000 from RM20,000 to RM18,000. This means that the net revenue collection by the government is still RM8,000 higher, Ong explained.

“Furthermore, there is a very high possibility that many people won’t want to claim for this tax deduction if their main goal of donating to this fund is to help the country’s finances,” added Ong, who is also member of parliament for Bangi.

All contributions to the government are fully tax-deductible according to Article 44 (6) of the Income Tax Act 1967. Finance Minister Lim Guan Eng told reporters on May 31 that there is “no cap” to tax deductions for contributions to the “Hope Fund” launched on May 30 by Prime Minister Tun Dr Mahathir Mohamad for the sole purpose of collecting money to help the federal government reduce its over RM1 trillion debt burden. Guan Eng on Tuesday said an external auditor would be appointed to audit Tabung Harapan.

Tabung Harapan collected RM7.08 million within the first 24 hours of its launch, reaching RM18.6 million last Friday, RM31.44 million on Monday and RM35.77 million on Tuesday.