Budget 2014 measures

By KINIBIZ

— Get the latest reactions on Budget 2014 here.

GST (Goods and Services Tax)

— Proposed abolition of sales tax and service tax; to be replaced by Goods and Services Tax (GST) towards addressing weaknesses in current taxation system.

— More than 160 countries have implemented GST, clearly demonstrating GST is proven to be a transparent, effective and fair tax system.

— Proposed GST model for Malaysia includes rate being fixed at 6%, effective April 1, 2015, lowest among Asean countries.

— The current sales and service tax system is flawed and will burden the people. The government is proposing that sales tax and services tax (SST) be abolished and replaced with just one tax known as goods and services tax. GST is not an additional tax but in reality today’s inflation rate is low at 2%.

— The government is convinced that this is the right time for GST due to the low and controlled inflation rate. With GST the government can address various weaknesses in the current taxation system. At present consumers are taxed twice for sales tax and services tax, whereas under GST consumers will only be taxed once. Some goods and services may become cheaper once the SST is replaced with the GST.

INCOME TAX

— Individual income tax rates to be reduced by one to three percentage points for all tax payers.

— Chargeable income subject to maximum rate to be increased from exceeding RM100,000 to exceeding RM400,000.

— Current maximum tax rate at 26% to be reduced to 24%, 24.5% and 25%. These measures to be effective from 2015.

— Corporate income tax rate to be reduced by one percentage point from 25% to 24%.

— Income tax rate for SMEs to be reduced by one percentage point from 20% to 19% from year of assessment 2016.

— Cooperative income tax rate to be reduced by one to two percentage points from year of assessment 2015.

— Special tax relief of RM2,000 for tax payers with monthly income of up to RM8,000 received in 2013.

— SME companies will see lowered corporate taxes from 20% to 19%.

— Households earning below RM4,000 will no longer need to pay income tax.

— To introduce a progressive income tax system the maximum tax rate will only kick in at RM400,000.

RPGT (Real Property Gains Tax)

— For gains on properties disposed within the holding period of up to three years, RPGT rate is increased to 30%.

— For disposals within the holding period up to four and five years, the rates are increased to 20% and 15%, respectively.

— Raise the minimum price of property that can be purchased by foreigners to RM1 million from RM500,000 .

— Prohibit developers from implementing projects that have features of Developer Interest Bearing Scheme (DIBS), to prevent developers from incorporating interest rates on loans in house prices during the construction period.

— Financial institutions are prohibited from providing final funding for projects involved in the DIBS scheme.

— New category of Rumah Mesra Rakyat introduced with sales price from RM45,000 to RM65,000 and subsidy of RM15,000 to RM20,000 per unit.

— Private Affordable Ownership Housing Scheme (MyHome) introduced with subsidy of RM30,000 to private developers for each unit built.

— RM1 billion for Housing Facilitation Fund under Public Private Partnership Unit (UKAS).

— National Housing Council to be set up to further strengthen real estate market and increase opportunities for rakyat to own houses.

— 223,000 units of affordable houses to be built by government and private sector in 2014.

— RM578 million for National Housing Department (JPN) to build 16,473 Program Perumahan Rakyat housing units.

— RM146 million for JPN to build 600 units for Program Perumahan Rakyat Disewa and Perumahan Rakyat Bersepadu.

— RM1 billion for PR1MA to provide 80,000 housing units at prices 20% lower than market prices.

— SPNB to build 15,122 units of affordable houses, 3,000 units of Rumah Idaman Rakyat and 8,000 units of Rumah Mesra Rakyat.

BR1M (Bantuan Rakyat 1Malaysia)

— BR1M to households with a monthly income of below RM3,000 will be increased to RM650 from RM500.

— For individuals aged 21 and above and with a monthly income not exceeding RM2,000, cash handouts will be increased to RM300 from RM250.

— For the first time, cash assistance of RM450 will be extended to households with a monthly income of between RM3,000-RM4,000 due to the rising cost of living borne by the lower middle-income group.

— To implement all cash schemes, government will allocate RM4.6 billion which is expected to benefit 7.9 million recipients.

— RM30 million to open 60 Kedai Rakyat 1Malaysia (KR1M) to help reduce prices of daily necessities.

— RM331 million allocation to continue price uniformity programme and subsidies including transport costs in Sabah and Sarawak.

— RM62 million for ‘park and ride’ facilities at LRT, KTM Komuter and ERL stations.

— RM15.3 million for Centralised Taxi Service System to ensure efficient mobilisation of taxi services.

— RM28 million for building ‘last city terminals’, upgrading of bus stops and providing ‘drop-and-ride’ facilities,

— RM28 million for refurbishing Electric Multiple Unit trains to ensure frequency and efficiency of services.

— RM20 million for Rural Business Challenge programme.

— No more sugar subsidies of 34 sen per kg beginning Oct 26, 2013.

— RM8.8 billion to PDRM and RM13.2 million to ATM in effort to reduce crime rate and improve readiness of the forces. RM48 million allocated for the benefit of 20,000 ATM veterans.

— The government will improve living conditions for rural citizens by spending RM457 million for water projects. RM75 million has been allocated for a Sarawak water tank project. RM179 million is allocated to repair and upgrade houses of the poor nationwide. Sabah and Sarawak Bumiputeras facing difficulties in owning native land will receive RM50 million in aid to promote ownership.

— RM50 million allocated under Graduate Entrepreneurship Fund to provide soft loans of up to RM500,000 at 4% interest rate with a view to reducing graduate unemployment.

— To encourage Minimum Wage Policy compliance, further tax deduction proposed with regard to the difference in the wages paid by employers in 2014.

— RM100 million allocated for creation of Night Market Traders Entrepreneur Scheme; soft loans to carry 4% interest rate, with maximum loans of up to RM30,000.

— Establishment of Integrity Management Unit in each ministry to enhance integrity; officers from Malaysia Anti-Corruption Commission to be represented in the unit.

— Government to conduct audit on projects valued at more than RM100 million during their implementation phase.

— To facilitate tax payers with employment income whose monthly tax deductions (MTD) have been made, it is proposed that they are not required to submit tax returns if satisfied their MTD is a final tax; proposal effective from assessment year 2014.

— Subsidy programme to be gradually restructured; a portion of savings from restructuring to be distributed in the form of direct cash assistance with the other half to finance development projects.

— RM865 million allocated for electricity supply for 16,000 households nationwide.

— RM2.9 billion for the completion of the KTM double tracking project from Padang Besar to Johor Bahru. RM26 million for the construction of park and ride facilities at major rail transit stations. RM28 million for the purchase of electrical multiple units (EMU) trains for KTM.

— Government to allocate RM200 million via SME Bank as loans for development programmes for Malay Reserve Lands in Kampung Baru, Kampung Pandan and Kampung Datuk Keramat.

— Company secretary fees and tax compliance fee will be allowed as a tax-deductible expense from 2015 onwards.

— Scholarship programme MyBrain will be allocated RM120 million. RM100 aid for schoolchildren to continue, costing RM540 million in total for the benefit of about 5.4 million pupils.

— A total of RM264.2 billion allocated in 2014 Budget for the implementation of programmes and projects for the well-being of the rakyat and national development.

— RM 217.7 billion is for operating expenditure while RM46.5 billion for development expenditure.

— RM63.6 billion allocated for emoluments and RM36.6 billion for supplies and services.

— RM29 billion allocated to the economic sector.

— RM10.5 billion allocated to the social sector for education, training, health, welfare, housing and community development.

— RM3.9 billion allocated to the security sector, RM1.1 billion for general administration, RM2 billion for contingencies.

— In 2014, Federal Government revenue collection is estimated at RM224.1 billion, up RM4 billion from 2013.

— Federal Government fiscal deficit expected to further decline from 4% of GDP in 2013 to 3.5% in 2014.

— RM1.2 billion allocated for operating and development expenditure in 2013 and 2014 to implement Visit Malaysia Year 2014 programmes, targeting 28 million tourists.

— RM2 billion to be provided to the Special Tourism Infrastructure Fund to finance the cost of building tourism infrastructure as well as purchasing, replacing equipment related to tourism sector.

— New underwater cables to be laid within 3 years at a cost of RM850 million to increase Internet access in Sabah, Sarawak.

— Government plans to increase its contribution in 1Malaysia Pension Scheme from 5% to 10%, or from a maximum of RM60 to RM120 per year; effective Jan 1, 2014 to end-2017.

— One-off RM500 incentive proposed to contributors in Private Retirement Scheme with a minimum cumulative investment of RM1,000 within a year; to start from Jan 1, 2014 for a period of five years involving an allocation of RM210 million.

— RM6 billion allocated to implement high value-added and commercially viable agriculture programmes.

— RM2.4 billion allocated for subsidies and incentives, including subsidies for fertilisers, seeds, price of paddy and rice as well as incentives for higher production of paddy and fish landing.

— RM243 million allocated for rubber, palm oil and cocoa replanting as well as forest plantation programmes.

— RM634 million allocated under National Key Economic Area to increase productivity and promote agriculture produce with high demand.

— Lobster rearing project to be implemented in Semporna, Sabah, creating 20,000 jobs; to benefit over 6,000 local entrepreneurs.

— 33 new schools will be built via RM831 million allocation.

— Budget 2014 will allocate RM54.6 billion or 21% to the education sector. RM530 million will go towards preschool programmes, adding an additional 93 preschools at national schools. RM209 million will be spent on improving the teaching profession, while RM168 million will go towards net accessibility in schools.

— RM150 million financial aid to SMEs to buy accounting software in 2014-2015.

— Valuecap will allocate RM1 billion to invest in companies that score high on the Environmental, Social and Governance or ESG Index.

— To increase Internet access in Sabah and Sarawak, new underwater cables will be laid within 3 years, at a cost of RM850 million.

— Restructuring of subsidy system. To alleviate impact by cash handouts. The government will maintain a data symtem that is comprehensive for social assistance incentives.

— PCB income tax deductions for taxpayers is deducted at the source. Now, if taxpayers are satisfied with their tax deductions they need not fill in a tax return at all.

— Government to implement second phase of High Speed Broad Band (HSBB), expand coverage in major towns, investment of RM1.8 billion, benefiting 2.8 million households, increasing Internet speed 10 Mbps.

— The HSBB network will be expanded to suburban areas with an Internet access speed increasing to between 4 and 10 Mbps, benefit two million consumers at a cost of RM1.6 billion.

— A sum of RM2 billion will be provided to the Special Tourism Infrastructure Fund under Bank Pembangunan Malaysia, used to finance the cost of building infrastructure such as hotels, resorts and theme parks.

— The government is also allocating a fund of RM100 million under its night market entrepreneur scheme to be managed by Bank Simpanan Nasional (BSN), which will provide easy financing of up to RM30,000 at 4% interest rate for the purpose of covering business costs.

— To maintain the credibility of the public service the government will investigate and act upon the any wrongdoings by civil servants. A centre for integrity will be formed.

— To promote Malaysia as a tourist destination, the government will encourage investments particularly in new four- and five-star hotels, proposes the application period for Pioneer Status and Investment Tax Allowance incentives be extended for another three years until Dec 31, 2016.

— Biotech and research and development (R&D) to be encouraged with tax exemptions. Targeted initiatives to biotech company and import duties eliminated for R&D tools and services.

— Government will replace the existing air traffic control management system in Subang that is almost 20 years old. A new air traffic management centre costing RM700 million will be built at KLIA.

— In 2013, the tourism sector is expected to generate revenue of RM65 billion and has the potential to contribute further. 2014 has been declared Visit Malaysia Year (VMY) targeting 28 million tourists.

— The government would like to encourage more entrepreneurs among our youth so that someday they can be successful businessmen and merchants. Therefore a National entrepreneur development office is to be set-up to execute the proposed Entrepreneur Development Plan with RM50 million initial allocation for this purpose so as to plan all entrepreneurship activities. There will also be a MAGIC centre to watch over entrepreneurs.

— To develop the aviation industry, the Government will formulate a National Aviation Policy, which will outline measures to strengthen the ecosystem and services network in the aviation industry.

— RM243 million for replanting projects of rubber and cocoa.

— Government will formulate a Logistics Sector Master Plan, to provide strategic direction for the development of logistics infrastructure and supply chain as well as review regulations and laws.

— Government will allocate RM3 billion in soft loans under the Maritime Development Fund through Bank Pembangunan Malaysia.

— Investments in agriculture in high multiplier projects. To set up a new agency to facilitate exports. To strenghten FAMA in its farm to table efforts. Durian exports to China would be encouraged. Farm and fisheries subsidies to increase to RM2.4 billion. Lobster farms in Sabah.

— Malaysia ranked 29th in the World Bank Logistics Performance Index Report 2012, lagging behind developed nations.

— The services sector is the key contributor to economic growth, contribution to GDP has increased from 49.3% in 2000 to 55% in 2013. Government will launch the Services Sector Blueprint in 2014, to outlines strategies and measures as well as identifies the following potential sub-sectors to be developed.

— To further encourage more Malaysians to join SP1M, Najib proposes that government contribution be increased from RM60 per year max to RM120 per year. This increase is effective 1 Jan 2014 until end-2017 and is expected to attract 30,000 new members.

— Private Retirement Scheme (PRS) – Najib to encourage retirement saving via one-off incentives of RM500 to young savers aged between 20-30 which will involve 420,000 young savers in five years beginning Jan 1, 2014.

— In the five economic corridors as at end-2012, investments worth RM124 billion or 41% of the total committed investments were realised in the regional corridors.

— In the first nine months of 2013, the regional corridors attracted committed investments of RM53.4 billion with almost 50% realised.

— The government will allocate RM1.6 billion for development in the five regional corridors.

— The government will construct 1,000 telecommunications towers within three years with an investment of RM1.5 billion to widen broadband access to rural areas. Additionally, the government will spend RM850 million to put into place new undersea cables to Sabah and Sarawak.

— The Government’s efforts have led to an increase in private investment. The share of private investment to GDP has grown from 12.4% in 2010 to 16.7% currently.

— In 2014, private investment is expected to increase further to RM189 billion or 17.9% of GDP, particularly in oil and gas, textile industry, transport equipment and real estate development.

— Public investment is estimated to reach RM106 billion. Projects to be implemented include construction of the 316-kilometre West Coast Expressway from Banting to Taiping as well as double-tracking projects from Ipoh to Padang Besar, and later from Gemas to Johor Bahru.

— In the oil and gas sector, among projects to be undertaken by Petronas include the Sabah Ammonia Urea Project (SAMUR) in Sipitang; the integrated oil and gas production development project in Kebabangan; the regasification plant project in Lahad Datu, Sabah; and RAPID in Pengerang Johor, which is the largest investment in Malaysia.

— In 2014, the Federal Government revenue collection is estimated at RM224.1 billion, an increase of RM4 billion from 2013. Taking into account the estimated revenue and expenditure, the Federal Government fiscal deficit will further decline from 4% of GDP in 2013 to 3.5% in 2014.

— The government will set-up a special fund of RM2 billion to provide financing for infrastructure-related construction costs such as hotels, resorts, theme parks as well as the purchase and replacement of tourism-related items.

— High speed broadband – 11.3 billion under the 9th Malaysian plan. In urban areas speeds up to 10 Mbits/s.

— The 2014 Budget will allocate a total of RM264.2 billion to implement programmes and projects for the akyat and national development. Of this amount, RM217.7 billion is for Operating Expenditure while RM46.5 billion for Development Expenditure.

— Under Operating Expenditure, RM63.6 billion is allocated for Emoluments and RM36.6 billion for Supplies and Services. Meanwhile, RM114.5 billion is allocated for Fixed Charges and Grants, while RM1.4 billion is for the Purchase of Assets. The remaining RM1.5 billion is for Other Expenditure.

— From the Development Expenditure of RM46.5 billion, a sum of RM29 billion is allocated to the economic sector. A sum of RM10.5 billion is allocated to the social sector for education and training, health, welfare, housing and community development. In addition, RM3.9 billion is allocated to the security sector. The balance of RM1.1 billion is for general administration and RM2 billion for contingencies.

— 2015 declared as Year of Festival with the organisation and exhibition of various cultural programmes.

— RM1.2 billion allocation for tourism sector in 2013 and 2014.

— In 2014, the domestic economy is projected to grow at a stronger pace of 5% to 5.5%. Growth will be driven by private investment expanding 12.7%, and private consumption at 6.2%.Exports of goods are expected to grow 2.5% due to improving external demand.

— On the supply side, the construction sector is expected to grow 9.6%, followed by the services sector at 5.7%. The unemployment rate is estimated at 3.1% while the inflation rate will remain low between 2% and 3%.

— Economic indicators reflect trends that support growth, the FBMKLCI reached 1,818 points on Oct 24, 2013, with market capitalisation of RM1.66 trillion, a new record high in terms of level and value, which underscores increasing local and foreign investors’ confidence in the economy.

— Net foreign direct investment was higher at RM18.2 billion in the first half of 2013 compared with RM15.9 billion during the same period in 2012. International reserves remained strong at RM444.9 billion at Oct 14, 2013, sufficient to finance 9.7 months of retained imports and is 3.9 times the short-term external debt.

— For the whole of 2013, the domestic economy is expected to expand between 4.5% and 5%. Growth is supported by private investment, increasing 16.2% to an estimated RM165 billion. In addition, private and public consumption are expected to grow 7.4% and 7.3%, respectively mainly supported by strong domestic economic activity.

— Per capita Gross National Income (GNI) had increased from RM24,879 in 2009 to RM30,856 last year and was expected to reach RM32,144 this year.

— The Malaysian economy was expected to grow at a firmer pace to achieve 4.5% to 5% growth for this year amid better growth prospects in the United States, Euro Zone and China in the second half of the year.

— “The investment momentum is expected to accelerate from several projects under the GTP and the ETP. Projects, including the MY Rapid Transit (MRT), Light Rail Transit (LRT) as well as oil and gas projects, will continue to spur the economy,” he said.

— 2014 per capita income expected to hit RM34,000, compared to RM24,879 in 2009.

— 37% rise in 6 years… hopefully per capita income in 2020 will exceed the targeted RM46,500 or US$15,000.

— Prime Minister Najib Razak, who is also the Finance Minister, said the nation’s financial blueprint highlights five thrusts: invigorating economic activity, strengthening fiscal management, inculcating excellence in human capital, intensifying urban and rural development.

— Malaysia’s highly open economy is not spared from the expected global growth of 2.9% this year, the country’s economic fundamentals and accommodative monetary policy should mean growth at a sustainable pace, with the nation’s economy growing at 4.2% in the first half of 2013.