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Experts see gains in M'sian tax cut
Publication Date : 01-10-2012
Malaysian households will be able to save an average of 1,000 ringgit (US$325.79) a year with individual tax rates slashed by one percentage point from next year, say experts.
Those in the middle and lower-middle income groups stand to benefit the most from the reduction.
“Taxpayers who fall within the 35,000 ringgit to 50,000 ringgit income band, will save a minimum of 475 ringgit, without the inclusion of other tax relief and rebates,” Inland Revenue Board corporate communications director Norazirah Mohd Said told The Star.
According to chartered accountant and consultant economist Dr Lau Ban Tin, middle income families with a combined monthly household income of between 6,000 ringgit and 7,000 ringgit a month are expected to get the most savings from the tax cut.
“A significant number of Malaysian families fall into this group and they will be able to save an average of 1,000 ringgit on their tax payments each year,” he said.
Dr Lau said this group usually comprises graduates aged between 27 and 35 who have just been married or have a young family.
“It is a good move that will benefit the majority of middle income earners, but will not make much difference to the very rich or the poor,” he said.
However, Dr Lau said more was needed to be done to improve the country's tax structure.
“Something is still wrong with the system because the highest income bracket for individual tax is 26 per cent while companies only pay 25 per cent.
“This gives the very wrong impression that individuals are earning more than companies and is unfair to Malaysian taxpayers,” added Dr Lau, who is also a fellow of the Chartered Tax Institute of Malaysia.
Prime Minister Najib Tun Razak announced a reduction of the individual income tax rate by one percentage point for each grouped annual income tax between 2,500 ringgit and 50,000 ringgit in his 2013 budget speech on Friday.
He cited an example of an unmarried young professional with a monthly income of 5,000 ringgit, being able to save about 425 ringgit a year.
The reduction has also removed 170,000 Malaysians from the list of taxpayers.
Deloitte Malaysia country managing partner Tan Theng Hooi said although the one percentage point reduction was a minor one, it was a good move which would benefit the masses and not just the rich.
“Even if these households are able to save only an average of between 900 ringgit and 1,000 ringgit a year, it will still mean there is more money for other expenses,” he said.
However, Tan said he believed that the reduction was in line with the Government's plan to introduce the goods and services tax (GST) soon.
“If GST is to be introduced, there must be further reductions to the tax rates across the board and not just to the income bracket of up to 50,000 ringgit,” he said.