KUALA LUMPUR (Oct 7): The government will extend tax relief for costs incurred in initial public offering (IPO) exercises on the ACE and LEAP Markets until the year of assessment 2025, said Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz when tabling Budget 2023 on Friday (Oct 7).

The government will also expand tax cuts arising from listing costs for tech-related companies on the Main Market of Bursa Malaysia, said the finance minister.

To support the development of local technology-based companies, Tengku Zafrul said the government will also allocate RM100 million under "Dana Pelaburan Strategik Tempatan".

The government also committed to implementing a multi-tiered levy system in foreign labour recruitment next year, said the finance minister.

"Through this approach, companies with a higher number of foreign workers such as those in the plantation and construction sectors will [have a higher rate of levy imposed on them]," he said.

The government proposed to channel proceeds raised from this additional levy to support employers that have undertaken automation initiatives in a bid to reduce the country's reliance on foreign workers.

Meanwhile, to widen the tax base while continuing to remain competitive in attracting foreign direct investment, Tengku Zafrul said the government will introduce a global minimum effective tax rate as recommended under the Pillar Two of Inclusive Framework on Base Erosion and Profit Shifting.

The government is also planning to implement Qualified Domestic Minimum Top-up Tax in 2024 after further studies are completed, he said.

In the backdrop of supply chain disruptions and geopolitical uncertainties, Tengku Zafrul said the government has prepared incentives to encourage affected electrical and electronics (E&E) sector investors and move their operations to Malaysia.

These incentives include extension to the existing tax incentives and 15% tax rate to these companies' C-Suite until 2024.

For 2023, Tengku Zafrul said the government will allocate RM20 million of matching grants to support product development and produce local talent in the medical device industry.

"The government will also prioritise procurement of pharmaceutical products and medical devices from local manufacturers," he said.

To encourage pharmaceutical development, Tengku Zafrul said income tax incentives for local pharmaceutical product manufacturers are extended until the end of 2025.

The government will also extend income tax incentives and investment tax allowances for aerospace companies until Dec 31, 2025, to attract new entrants and encourage growth by existing industry players.

"A matching grant of RM50 million was also provided to support the development of the aerospace industry. The area around KLIA Sepang will continue to be developed as an aerospace industry cluster, especially for maintenance, repair and overhaul operations," he said.

Meanwhile, the Securities Commission Malaysia (SC) will launch a multi-year programme to build a sustainable pipeline of graduate talent for the capital market. Funded by the Capital Market Development Fund, this programme — The Capital Market Graduate Programme — will be a private-public sector collaboration to improve the marketability of graduates in the industry. This will amount to RM30 million over a three-year period and benefit up to 9,000 participants.

A public-private partnership will also be established by the Ministry of Finance, with the cooperation of the SC and other stakeholders, to provide a structured training programme for women talent and expand the talent pool with qualified and experienced women for leadership positions, including as directors on boards.

"The establishment of the graduate talent programme will help to champion the building of a sustainable skilled talent pipeline for the capital market. This will contribute to nation building and address the talent deficit," said SC chairman Datuk Seri Dr Awang Adek Hussin, adding the Budget also supports and strengthens the contribution of women in both the public and private sectors.

"The talent deficit is a global phenomenon that will impact the growth trajectory of economies globally. Therefore, it is apt that Budget 2023 prioritises the boosting of the talent pool across the various economic sectors," he added.

He also noted that the additional RM30 million allocated to Malaysia Co-Investment Fund or MyCIF will further support the funding needs and catalyse growth of micro, small and medium enterprises.

"Measures aimed at encouraging the growth of alternative financing for these companies will provide new solutions to aid in their recovery, which has been lagging behind the wider economy," he added.

Meanwhile, Bursa Malaysia chairman Tan Sri Abdul Wahid Omar described Budget 2023 as “overall a positive”, citing commitment towards sustainable development, commitment to reduce fiscal deficit and absence of additional tax on the corporate sector.

The commitment to reduce fiscal deficit to 5.5% of GDP in 2023 from 5.8% in 2022 and further to an average of 4.4% for 2023-2025 must be lauded,” Abdul Wahid said in a statement.

“One huge positive factor for the corporate sector is the absence of prosperity tax in Budget 2023 which would have potentially shaved off the FBMKLCI’s 2023 earnings per share (EPS) forecast by 5%-6%.

“Without such tax being imposed, analysts have a consensus forecast EPS growth rate of 11.5% for 2023 compared to -1.1% for 2022. This augurs well for the capital market,” he added.

"The continued commitment towards sustainable development is also most welcomed. Overall a positive Budget 2023," he said.

Get our comprehensive coverage of Budget 2023 here.