Theme: 1Malaysia, Together We ProsperTotal budget allocation: RM191.5 billionOperating expenditure: Allocation of RM138.3 billion, of which RM42.2 billion is for emoluments, RM20.8 billion for supplies and services, and RM73.9 billion for fixed charges and grants. There is also RM524 million for purchase of assets and RM800 million for other expenditures.
Development expenditure: Allocation of RM53.2 billion, of which RM25.4 billion is for the economic sector to support the needs of infrastructure, industry and agriculture as well as rural development. A sum of RM20.3 billion for the social sector, encompassing education and training, health, welfare, housing and community development. In addition, RM3.7 billion is for the development of the security sector, RM1.8 billion for general administration and RM2 billion for contingencies.Three main strategies: 1. Driving the nation towards a high-income economy2. Ensuring holistic and sustainable development 3. Focusing on the well-being of the rakyat
FOR THE GOVERNMENT Service tax • RM50 service tax per year to be imposed on on the principal card of credit cards and charge cards. Supplementary card will be taxed at RM25 per year. The tax is also imposed on credit cards and charge cards that are issued free of charge.
Upstream petroleum companies• Assessment system on income derived from upstream petroleum companies under the Petroleum (Income Tax) Act 1967 to be changed to the current year of assessment and self-assessment system. Income tax for the year of assessment 2010 based on income received in 2009 is to be paid by instalment over five years.
Approved permits (AP) • The government will impose a sum of RM10,000 for each AP to AP holders effective Jan 1, 2010. A portion of the collection from the APs will be channelled to the bumiputera development fund in the automotive sector.Real property gains tax• A fixed rate of 5% is imposed on gains from the disposal of property. It is done through a collection mechanism whereby the purchaser withholds 2% of the purchase price and pays it to the Inland Revenue Board.• Exemption up to RM10,000 or 10% of the gains, whichever is higher, is given to individuals.• Existing exemptions involving gifts between parent and child, husband and wife, grandparent and grandchild are retained.• Existing exemption involving disposal of a residential property once in a lifetime for an individual who is citizen or permanent resident is retained.
FOR THE MAN IN THE STREETPersonal tax incentives• Tax rate for chargeable income group exceeding RM100,000 to be reduced by one percentage point to 26%.• Personal relief to be increased from RM8,000 to RM9,000.• Personal relief of RM6,000 on EPF contributions and life insurance to be increased to RM7,000.• Tax relief on broadband subscription fees of up to RM500 per year.• Employment income of Malaysian and foreign knowledge workers residing in Iskandar Malaysia and working in qualifying activities be taxed at 15% indefinitely. Qualifying activities include green technology, biotechnology, educational services and healthcare services.1Malaysia sukukThe government will issue a 1Malaysia sukuk totalling RM3 billion to all Malaysians aged 21 and above, with a minimum investment of RM1,000 and maximum of RM50,000. The bonds will yield 5% to be paid quarterly and with a tenure of three years.
Public transport• To acquire eight new electric multiple units (EMUs) and refurbish nine EMUs by KTMB to increase frequency and efficiency of commuter services.• To fast track construction of the Integrated Transport Terminal in Gombak, which will significantly reduce congestion in the city centre.Fuel subsidy scheme• The government will implement a fuel subsidy scheme management system early next year which will utilise MyKad and benefit the target groups. At the moment, all motorist, including owners of luxury vehicles and foreigners enjoy subsidised fuel.
Civil servants and pensioners• Eligible to apply for computer loans up to a maximum of RM5,000 from the government once in three years instead of five years previously.• Intan will be upgraded to a school of government with autonomy power, administered professionally and facilitated by experienced lecturers. It will promote collaborations with renowned international institutions.• Establishment of a 1Malaysia retirement scheme for those without fixed incomes, such as farmers, hawkers and taxi drivers, to be administered by the Employees Provident Fund (EPF). Under the scheme, the government will contribute 5% for every RM100 contributed to the retirement scheme, subject to a maximum of RM60 per annum. The government will only contribute for five years and contributors may withdraw their savings upon reaching 55 years of age. For example, a fisherman aged 35 who contributes RM100 monthly for 20 years will accumulate savings of about RM40,000 at the age of 55.• A special payment of RM500 to be extended to all civil servants from Grade 41 to Grade 54 or equivalent, as well as those on mandatory retirement. Previously, the RM500 payment was only limited to support staff of the civil service.Combating corruption• Formulate a Whistle Blower Act that will be introduced in 2010 to encourage informers to disclose corruption and other misconduct.
Eradicating urban poverty• The Ministry of Federal Territories will be known as Ministry of Federal Territories and Urban Well-being, and its responsibility includes the preparation of a comprehensive action plan and implementing suitable programmes to address urban poverty.
Home ownership• The National Housing Department (JPN) will provide 74,000 low-cost houses for rent in 2010.• The government will launch a scheme in 2010 that enables EPF contributors to utilise current and future savings in Account 2 to obtain higher financing to purchase higher value or additional properties.
Knowledge-based economy• Companies participating in strategic knowledge-intensive activities will either be eligible for pioneer status with income tax exemption of 100% of statutory income within a period of five years, or investment tax allowance of 60% on the qualifying capital expenditure incurred within a period of five years.• Expenditure incurred by a company for drafting the individual corporate knowledge-based master plan is allowed as tax deduction in the computation of income tax.
FOR CORPORATES/BUSINESSESElectricity • Tenaga Nasional Bhd will spend RM5 billion to implement electricity generation, transmission and distribution projects in 2010 to ensure smooth business operations.• Sabah Electricity Sdn Bhd will increase electricity generation capacity as well as strengthen delivery and distribution system in Sabah.Cooperative tax incentives• Tax rate for chargeable income group exceeding RM500,000 incurred by cooperatives is reduced by one percentage point to 26%. This is in line with the reduction in personal income tax.
Stock market• Liberalise the commission-sharing agreement between stockbrokers and remisiers in a two-stage process to encourage retail participation. First stage takes effect immediately by allowing flexible sharing of commission at a minimum rate of 40% for remisiers. In the second stage, which will take effect from Jan 1, 2011, the commission-sharing will be fully liberalised.• Allow 100% foreign equity participation in corporate finance and financial planning companies compared with the present requirement of 30% local shareholding.• Require all public-listed companies to offer e-Dividend to their shareholders in an effort to increase efficiency of the payment system.Small and medium enterprises (SMEs)• The government will consolidate 79 SME funds and grants managing RM8.8 billion to only 33 funds. These funds will be coordinated by SME Corp.• The government will allocate RM350 million to SME Corp, of which RM200 million is for SME soft loans, RM100 million for capacity enhancement, and the balance for branding and promotion.
Export of financial services• Tax incentives to be given to banks, such as tax exemptions on profits of newly established overseas branches or income remitted by new overseas subsidiaries now to be extended to insurance companies and takaful companies.• The effective period of the five-year tax exemption to be given flexibility by being deferred from the date of commencement of operations to begin not later than the third year of operations. Green technology• The government will establish a fund amounting to RM1.5 billion to provide soft loans to companies that supply and utilise green technology.• Owners of buildings awarded the Green Building Index (GBI) certificate to be given tax exemptions equivalent to 100% of the additional capital expenditure incurred to obtain the GBI certificate. Exemptions are allowed to be offset against 100% of the statutory income for each year of assessment. • Buyers of buildings and residential properties awarded GBI certificates bought from real property developers are eligible for stamp duty exemption on instruments of transfer of ownership of such buildings. Incentive to be given only once to the first owner of the building.Islamic Financial Services and Islamic Financial Centre• Stamp duty exemption of 20% on instruments of Islamic financing to be extended to Dec 31, 2015.• Double deduction for the purpose of income tax computation to be extended for the establishment of Islamic stockbroking companies, but such application is effective only if it is received by Securities Commission Malaysia by Dec 31, 2015.• Deduction for the purpose of income tax computation to be given on expenses incurred on the issuance of Islamic securities is extended until year of assessment 2015.• Deduction for the purpose of income tax computation to be given on expenses incurred on the issuance of Islamic securities approved by Labuan Offshore Financial Services Authority for the year of assessments 2010 to 2015.• Double deduction incentive to be given on expenses to promote Malaysia as an International Islamic Financial Centre is extended until the year of assessment 2015.• Offshore Special Purpose Vehicles (SPVs) established to channel funds for the purpose of issuance of Islamic securities are also given tax breaks under the Offshore Companies Act 1990.• Tax exemption on profits derived from the issuance of sukuk approved by Securities Commission Malaysia to be extended to the issuance of sukuk approved by the Labuan Offshore Financial Services Authority.
FOR FARMERS Agriculture sector• Felda, Federal Land Consolidation and Felcra will form a consortium to implement various high-impact projects in downstream and upstream industries of the agriculture sector. This consortium will have a paid-up capital of RM300 million with each agency contributing RM100 million.• The government will provide subsidies, incentives and assistance amounting to almost RM2 billion to safeguard the interest of farmers and fishermen.• A company that invests in its subsidiary company engaged in forest plantation activities is granted either tax deduction equivalent to the amount of investment made in that subsidiary, or group relief on losses incurred by its subsidiary company before it records any profit.• A subsidiary company undertaking forest plantation activities to be granted income tax exemption for 10 years commencing from the first year the company derives profits.• An existing forest plantation company that reinvests for purpose of expansion of the forest plantation project to be granted income tax exemption of 100% on its statutory income for five years, commencing from the first year the company derives profits.• Companies, individuals or cooperative societies undertaking consolidation of management of smallholding or idle land to be given tax exemption of 100% of statutory income for a period of five years.
THE EDUCATION SYSTEMIncentives for pre-schools and principals • The government will incorporate pre-school education as part of the mainstream national education system.• All pre-school facilities and curriculum under Kemas and other agencies to be revamped.• The government will establish centralised pre-schools in existing school premises as well as provide training and courses to government and private school teachers.• Introduction of the “New Deal” or Bai’ah as appreciation for the contribution and performance of principals and head teachers. The government will determine the performance targets that must be achieved. Necessary action will be taken on those who fail to meet the target for two consecutive years.• Award of national scholarships to 30 crème de la crème students strictly on merit.• Convert the National Higher Education Fund Corp (PTPTN) loans to scholarship for students with first-class honours degrees or equivalent beginning next year.• Provide 50% discount on fares for long-distance services of Keretapi Tanah Melayu Bhd (KTMB) to students aged 13 and above.
This article appeared in The Edge Malaysia, Issue 778, Oct 26-Nov 1, 2009.