(KUALA LUMPUR 10 October) Socio-Economic Research Centre (SERC) set up under the Associated Chinese Chamber of Commerce and Industry Malaysia (ACCCIM) has submitted a list of proposals to Finance Ministry for Budget 2018 including an additional interest payment of 1 % for 50-year-old Employees Provident Fund (EPF) contributors with more than RM50,000 savings in their accounts.
SERC is of the view that the additional 1% of interest rates would offer more security to contributors when they retire.
Income tax rebate for parents’ medical expenses should be increased to RM7,000
SERC executive director Lee Heng Guie said with the increase in medical costs, income tax rebate for individual taxpayers on parents’ medical expenses should be revised from RM5,000 to RM7,000. Other proposals included rebate for medical expenses on non-chronic diseases should be increased from RM6,000 to RM8,000. Apart from life insurance, medical insurance should be exempted from goods and services tax (GST).
“An individual taxpayer enjoys tax rebate of RM6,000 on EPF and life insurance. These two items should be separated. Similarly, tax rebate of RM3,000 for medical and education insurance should also be separated. For citizens aged 45 and above, the budget should cover portions of medical insurance that they purchase and the rest by premium.”
He said as life expectancy of citizens is longer, tax rebate for private retirement fund and annuity plan should be increased from RM3,000 to RM6,000.
In releasing the quarter report of economic performance for June to September this year, Lee said SERC has submitted its proposal and ACCCIM’s proposal for Budget 2018 to the Finance Ministry.
Propose implementation of Aged-Caring Scheme
One of the proposals is the drafting of Aged-Caring Scheme where a company with less than 25 staff is encouraged to provide medical insurance coverage for staff. The company would enjoy up to 50% of business tax rebate and also reduce its costs spent on insurance.
He said the Budget 2018 should also encourage employers to pay high sum of EPF contribution for senior staff.
“As aging in Malaysia will speed up in 2030, senior citizens aged 60 and above would make up 15% of population by then (In 2016 the figure is 9.3% or 3 million). Medical expenses will increase and thus SERC proposes this in Budget to assist the government to create a more secured retirement life, improved welfare and medical service with better quality of life.”
Personal income tax and corporate tax should be lowered
Lee said Budget 2018 should lower personal income tax by 1 to 2 %. The government should also consider reduce corporate tax by 1%. The existing 24% of corporate tax is relatively higher when compared to Vietnam (20%), Thailand (20%), Singapore (17%), Cambodia (20%) and Brunei (18.5%).
If private sector enjoys a lower tax rate, competitiveness would be upgraded, this in return will stimulate investment and product, he said. United States plan to lower corporate tax from 35% to 20% while United Kingdom is set to reduce corporate tax by 1 % to 17% in 2020.
He said the Budget 2018 should focus on development in digital economy including tax exemption on online purchase from Digital Free Trade Zone should be revised from existing RM500 to RM1,200.
“The eco-system of Alibaba and e-commerce in Malaysia should be inclusive and capable of boosting and enhancing the networking of 1,500 small and medium enterprises (SME) in the country such as creating partnership for SMEs.”
Living costs keep increasing, people do not feel good about economy
On costs of living, Lee said despite the economic growth rate has improved with good prospect on economy, people do not detect the positive side of rebound in economy as prices of goods have not been adjusted downwards. People generally are burdened by the increase of costs of living.
“Export sector can be impressive in performance and private consumption is driving economic growth but this relates to confidence issue of people. They are not convinced that the national economy is gradually growing. Instead people are facing pressure of increase in prices of goods. They do not feel good about the economy. The government should find way to resolve this.”
Moreover, statistics on household income and expenditure 2016 show great imbalance in distribution of income of Chinese families. Lee said this could be interpreted as the rich get richer, earning higher income while the Middle 40 (M40) and the Bottom 40 (B40) households are under pressure due to escalating costs of living.
He said the opportunity for middle income group to create wealth is not plenty and such money-making opportunities have since reduced.
“Nevertheless we need to explore where the medium income group families spent their money.”
Tax on net profit of first RM500,000 for SMEs should be lowered to 17%
On corporate tax for SMEs, Lee said SERC is proposing to lower tax on net profit of first RM500,000 by 1% from existing 18% to 17%.
He said the Budget 2018 should also revise taxable sum for first RM500,000 profit to RM1 million to RM2 million.
Prime Minister cum Finance Minister is scheduled to table Budget 2018 by end of this month. It will be a people-friendly and painless budget. While the government can be submitting a populist Budget, it should also comply with economic concept.