GST brings bigger savings

Pay less for phone bills, food and beverages.

Telephone bills, food and beverage may become cheaper but computers, properties and gym memberships could cost more with a Goods andServices Tax (GST).

Analysts say this is the expected impact of the GST, which the government plansto introduce in 2011 as it seeks to widen its revenue source.

As it is, only a tenth of all workers pay income tax while earnings from oil make up about 40 per cent of federal government revenue.

The GST will replace the current sales and service taxes. At four per cent, it would be lower than the current sales and service taxes of five to 10 per cent, although essential goods like cooking oil would be exempt from GST.

PricewaterhouseCoopers senior executive director Wan Heng Choon said however,several other things would be more expensive, among them computers and houses.

“The rich will have to pay higher tax as they consume more. The lower incomegroup will benefit from the GST."

As for businesses, companies with revenues of less than RM500,000 would not have to pay GST. Wan said the GST, which taxes money spent, would have a neutral effect on businesses, but this would also depend on whether the companies understood how the tax worked.

He said the GST would hurt companies that did not put into place processes that would allow them to claim the input tax on time and monitor cash- flow.

"GST is a credible tax. People should give the tax a chance and not dismiss it for the wrong reasons. Companies should understand the tax and implement it properly so no one loses out."

Wan said businesses could benefit from the GST, provided they had good control over their taxes.

"If they don't do that, then the tax will become embedded and businesses will pass it on to consumers. If companies do not claim properly, it would be their loss."

The Real Estate and Housing Developers' Association Malaysia (Rehda) expects developers to pass on cost increases to buyers to maintain their profits.

Datuk Richard Fong, a developer, said houses would cost more from 2011, but he did not expect a severe effect on property transactions as the market was improving.

"Whether the GST will affect sales and how it will impact the industry, we have to wait and see until it is introduced," said Fong, who is Glomac Bhd group executive vice-chairman.

Deloitte Malaysia country tax leader Ronnie Lim said companies should take action soon to ensure they were GST- compliant.

"Businesses have to start upgrading their systems now."

"We advise businesses to start early as resources, especially the personnel and information technology, will be stretched when it comes to the crunch."

"Australia introduced GST in 2000. As demand within a limited period outstripped supply, GST experts from Britain, South Africa, Canada and New Zealand were brought in to augment the supply. Imagine the costs involved in the Malaysian context."

GST implementation requires two main services experts, for which there are not many in Malaysia.

"There are also not enough experts to modify the software to cater to the new tax regime."

Second Finance Minister Datuk Seri Ahmad Husni Mohammad Hanadzlah said the implementation of GST was a means of placing the country's economy at a level that was at par with those of developed nations and in keeping with changing times.

It gave the government an advantage, particularly in enhancing income flow, which could then be used to implement projects for the benefit of the people, he told Bernama in Ipoh yesterday.

"Only three Southeast Asian countries do not practise this taxation system, and they are Malaysia, Brunei and Myanmar."

"We will join 143 other countries in implementing the GST," he said after a gathering at the Tambun parliamentary constituency mobile service centre here yesterday.

Ahmad Husni said the people were becoming more rational now and those groups who wanted the government to postpone or review the implementation should have a strong reason for it.

Malaysia will cut up to 40pc carbon emission by 2020

COPENHAGEN: Malaysia will voluntarily slash by up to 40 per cent her carbon emission by 2020 compared with 2005 levels.

Prime Minister Datuk Seri Najib Razak, who made this commitment today, said this was part of Malaysia’s contribution to global efforts to combat climate change.

He said, however, the reduction was conditional upon the transfer of technology and adequate financing from developed and industrialised countries and economies.

Addressing the United Nations Climate Change Conference 2009 (COP15) here, Najib said Malaysia was committed to doing its best to combat climate change.

“We realise this is nothing short of a herculean endeavour, but Malaysia is committed,” he said, adding COP15 offered the best hope for a global framework of cooperation.

He said COP15 presented fair principles of equity and historical responsibility due to the need of parties in the Annex 1 category (industrialised countries and economies in transition) to repay their climate debt.

“The key to our future cooperation is to recognise, adopt and work out the realisation of the principle of fair shares to the atmospheric space and resource.

“At the same time, we must have ambitious environmental aspirations,” he said, adding that these two factors would ensure COP15’s success.

Najib later described the proposed US$10 billion (RM3.4 billion) fast track funding for developing nations to control emissions as a “mere pittance and woefully inadequate”.

He said developing countries required long-term financing of some US$800 billion a year for adaptation and mitigation of climate change.

The funding, he added, was linked to the target of limiting global warming to a 2°C temperature rise.

However, the figure could hit US$1.5 trillion annually based on scientific endeavours to cap the rise at 1.5°C.

“If we think about it, this is not too high when compared with the trillions of dollars recently used in bailing out banks and companies.” Najib urged developed countries to commit US$200 billion annually by 2012 until US$800 billion annually thereafter.

He also spoke on the looming threat of trade protection under the guise of addressing climate change.

For COP15 to work, there must be a clear statement that developed countries would not take trade-related measures such as carbon tariffs and border adjustment measures against the products, services and investments of developing countries.

“Otherwise, we would have an unacceptable situation where developed countries give one dollar with one hand and remove 10 dollars with the other.”

RM20 or lower electricity bills waived until Dec 2010

KUALA LUMPUR: The energy, green technology and water ministry will continue exempting payment of domestic electricity bills of less than RM20 until next December.

In a press statement today, minister Datuk Seri Peter Chin Fah Kui said the government had agreed to this move, in view of the recovering economic situation and concern for the low-income group.

He said, such exemption was given to domestic consumers based on the actual monthly claims, adding that an average of 1.05 million consumers enjoyed the exemption since the programme was introduced in October last year.

"Assuming each household consists of between two to five people, the privilege is enjoyed by more individuals," added Chin.

Meanwhile, he said the government had to bear an average of RM11.95 million in expenses each month to cover the electricity bill exemptions offered to consumers in the Peninsular, Sabah and Sarawak.

As of September this year, Chin said RM143.4 million was paid by the government since the exemption programme was introduced.

"The government is expected to cover an additional cost of RM143 million to continue the exemptions from January to December 2010," he said. - Bernama

Johor folk welcome fuel cap ruling, others feel 20 litres not enough

JOHOR BARU: Singapore-registered vehicles have been exempted from the 20-litre cap, a move that has been welcomed by various quarters here.

Johor Baru MP Datuk Shahrir Samad said it was an excellent decision as the ruling allowing foreigners to buy only 20 litres of petrol within 50km of the border was impractical.

“It would have caused congestions at the Sultan Iskandar Customs, Immigration and Quarantine (CIQ) and the Second Link,” said the former Domestic Trade and Consumer Affairs Minister.

State Ministry of Domestic Trade, Co-operatives and Consumerism director Che Halim Abd Rahman confirmed the exemption.

Singaporean Patrick Ng, 56, said even if the ruling had been implemented, it would not have affected most Singaporeans travelling to Johor.

In Bukit Kayu Hitam, the 20-litre ruling received mixed reactions from motorists through the Malaysia-Thai border.

Sutham Charchan, 68, a retired bus driver from Haadyai, said he was not concerned as long as he could purchase fuel anywhere.

Housewife Siti Aishah Abdullah, 39, however, complained that 20 litres was too little for her to commute from Haadyai to her house, saying: “By the time I reach my house, I have to fill petrol again.”

Meanwhile, Bernama reported that a petrol kiosk operator here was the first offender of the 20-litre ruling.

Domestic Trade, Cooperatives and Consumerism Ministry’s Kedah enforcement chief, Suhaimi Mat Sari said offenders could be fined up to RM100,000 or three years’ jail or both while kiosk operators could be fined RM250,000 and have their licence revoked.

4% GST expected to come into effect in middle of 2011

KUALA LUMPUR: The 4% Goods and Services Tax (GST) is expected to be implemented by the middle of 2011.

The GST Bill was tabled for the first reading in Parliament by Finance Minister II Datuk Seri Ahmad Husni Hanadzlah yesterday.

He told the house that the second reading of the Bill was scheduled for March next year.

Speaking to reporters at the Parliament lobby later, Husni said the GST implementation would be a win-win situation for all, as the Government would receive an additional RM1bil in revenue for the first year while the business and export sectors would save RM4.1bil and RM1.4bil, respectively.

“The Government is proposing GST at a rate lower than the (current) sales and services tax rates, and to allow certain exemptions from GST, especially on essential goods such as padi, vegetables, basic food (rice, sugar, flour, cooking oil), fish, meat and chicken, to ensure it will not burden the rakyat, especially the lower income group.

“The main purpose for introducing GST is to make the current taxation system more comprehensive, efficient, effective, transparent and business friendly. The sales and services tax will be abolished and replaced with GST,” he said.

The current sales and services tax is from 5% to 10%.

“Based on the proposed model, businesses are expected to benefit in terms of lower cost of doing business.

“GST will be able to reduce bureaucratic practices in the management and administration of the country’s tax system, and overcome various inherent weaknesses that exist in the sales and services tax.”

He said companies with a revenue of RM500,000 and below would be exempted from GST, and also, about 70% of SMEs would be exempted.

Husni said the Government had done a comprehensive study on the GST.

“Under the sales and services tax system, the burden on the poor is 2.38%, but under the GST, it will be 2.17%.

“For the higher income group, their tax burden will be reduced from 3.13% to 2.74%,” he added.

“The overall savings for households will be between RM14.52 and RM346.92 yearly. On all grounds, we will benefit more from the GST,” he said.

Crying foul over fuel rule

JOHOR BARU: Many foreigners feel that the new ruling for pumping petrol for their vehicles is confusing and impractical.

Singaporean Ahmad Amir, 60, said the ruling was unfair and would not be beneficial to the state. He said the Singaporean government already has a ruling that all foreign vehicles must have their tanks at least 70% full before entering the country and there was no need for an additional ruling.

“Most of us only visit the shopping complexes in the city centre and we definitely will have more than 20 litres of petrol when leaving the country,” he said.

On Wednesday, the domestic trade, cooperative and consumerism minister Datuk Seri Ismail Sabri Yaakob said that foreign-registered vehicles would only be allowed to pump a maximum of 20 litres of fuel at petrol stations within a 50km radius from the border.

He said that enforcement authorities at the checkpoints would also be directed to ensure that foreign vehicles leave the country with no more than 20 litres of fuel in their tank.

Another Singaporean, Richard Tan, 40, said the ruling was impractical and very inconvenient.

“It is going to cause more jams at immigration,” he said.

For Chinese national Li Xu Hui, 30, who works in Singapore and often visits Johor, the ruling would be difficult to enforce.

“What about foreign vehicles that have already filled their tanks to the brim before crossing the border and do not use up all their petrol before returning?

“Does this mean they have to drive in circles to ensure that their petrol level reaches less then 20 litres before returning to their country?” he said.

He explained that the ruling would bring up all sorts of problems and eventually deter tourists from entering the country.

Govt may impose GST at 4%

The government plans to impose goods and services tax (GST) at 4%, said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah.

“We are replacing the current sales and services tax, which is currently at 5% to 10%,” he told reporters at the Culture, Ideas and Values Workshop organised by Foundation For the Future at Country Heights Resorts in Kajang.

He said the GST implementation was important for the country’s future.

“The revenue source must be sustainable. If we can get sustainable revenues, we can get a good budget,” he said.

He said the Consumer Price Index (CPI) would not increase as a result of the GST implementation.

Some selected items especially essential goods like rice, sugar, cooking oil and flour as well as domestic transportation would not be subject to GST.

Husni said the Bill on GST would be tabled in Parliament for the first reading this year while the second reading in March next year.

GST would be implemented 18 months after the second reading.

The government expected an additional RM1bil revenue annually after the first year of its introduction. -- Bernama

How GST affects small, medium businesses

Awareness of compliance requirements vital before it’s introduced

THE goods and services tax (GST), if implemented, will not only affect big businesses. The compliance requirements apply once a business achieves a certain prescribed annual sales turnover level. This registration threshold has not been announced.

However, it is worthwhile noting that the licensing threshold for sales tax and service tax, which GST will replace, currently ranges from RM100,000 to RM300,000. If this is any indication, GST registration will be an obligation for many smaller businesses. This is taking into account that GST will be imposed on practically all supplies of goods and services and at every stage of the supply chain.

Credit offset mechanism: In simple terms, businesses supplying taxable goods and services have to charge GST on supplies made (referred to as output tax). The GST paid on purchases (input tax), including capital equipment, supplies and materials can be offset against the output GST. This is referred to as the credit offset mechanism.

The net amount would have to be remitted to the Royal Malaysian Customs. Businesses that are largely export-oriented are likely to be in a refund position. To claim the credit offset, businesses are required to obtain and keep tax invoices from suppliers. While this may sound simple, the tracking, record keeping and reporting can be a challenge to many businesses.

Below are some thoughts for small and medium-scale enterprises (SMEs) as the Government ponders on the implementation of the GST, particularly the registration threshold.

Awareness of responsibilities:

Notwithstanding the size of the business, the law imposes the same compliance obligations once the registration threshold is reached. Once the registration threshold is announced, affected businesses will need to follow closely the developments and to understand their responsibilities under the GST regime.

While the business is essentially just collecting and remitting GST for the Government, non-compliance will result in penalties on the business itself.

It is hoped that the Government would leverage off the experience from other countries that have successfully implemented GST and roll out comprehensive awareness programmes to help, in particular SMEs, prepare for the GST. These could include organising briefings at various locations, setting up small offices, kiosks, helpdesks and hotlines throughout the country.

Compliance cost:

GST imposes additional compliance costs for businesses. These come in the form of additional work to account for the tax, tracking of the input taxes paid, undertaking reconciliations and filings of GST returns.

In addition, where a business pays cash or has short credit periods from its suppliers, this may result in the business needing extra finances to purchase supplies when GST is first introduced. This is a timing issue which should iron itself out over time as credits are claimed. In this respect, there have been requests that the tax return cycles for SMEs be extended to ease the cashflow burden under the GST regime.

Customer reactions:

As often happens, customers react to news of discounts or price increases. It is generally anticipated that GST will result in a price hike on certain goods.

The level of increase depends partly on the rate of tax announced. Experiences in other countries have shown that customers generally go on a shopping spree shortly before the introduction of the tax, followed by a period of relative inactivity after the tax is introduced.

Anticipating this, it may be necessary to do some stock planning to cater for a pre-GST rush. This, however, has to be balanced by the fact that stock in hand when GST is introduced, may not be entitled to any input tax credit.

Purchase of business assets:

Like customers, businesses should also plan their purchases during the GST transition period. This is because currently many goods (particularly capital goods) have an embedded sales tax in them which is not deductible or creditable.

On the other hand, buying the same goods by the business after GST would allow the business to claim a credit for the GST (which will replace sales tax). This is an advantage for the business and the effective cost of the goods would then be lower (other things remaining equal).

As a rule of thumb, while household consumers are likely to shop before GST is introduced, businesses which are GST registration candidates should perhaps delay purchases to a time when GST is effective. This does, however, require some assumption that prices will otherwise remain static.

To register or not to register:

Some businesses will inevitably fall below the registration threshold. While it may appear a good thing that the business is not subject to the compliance burden of the tax, other factors need to be taken into consideration whether or not to register.

For one, unless the business is licensed, it would not be entitled to claim the input tax credits on purchases. This leads to input tax paid being a cost to the business (this may be a good thing from the customers’ perspective; GST is not imposed when they purchase the goods).

However, in a situation where the customers of the business are other GST registered businesses, the supplier may be obligated to license itself as it is likely that the customer would insist on buying from another registered person to enable him to claim the input tax credit.

Noting the additional burden that GST puts on SMEs, the Government could consider making concerted efforts in conducting education campaigns as well as addressing and deciding on compliance issues before the introduction of GST. Treatment of specific transitional issues needs to be announced upfront to facilitate a smooth transition to the GST regime.

The writers are executive directors of KPMG Tax Services Sdn Bhd.

Bill on goods and services tax to be tabled

Prime Minister Datuk Seri Najib Tun Razak said a bill relating to the proposed introduction of the goods and services tax (GST) will be tabled for first reading at the end of the current Dewan Rakyat sitting.

The Prime Minister said the move was agreed to at the last Cabinet meeting.

"This will allow the public to give their comments, engage them, and if we find it necessary to fine tune it, we'll do so," he told Malaysian journalists covering his working visit to New York on Monday.

Najib, who is Finance Minister, met the press after attending a series of gatherings and meetings with American investors and fund managers as well as top corporate figures.

He stressed that if the government decided to introduce the GST in Malaysia, it would do so "very gently".

"It's not going to be an abrupt introduction," Najib said, adding that if the GST materialised, the rate would not burden the poor or middle-class Malaysians.

"And, it would not lead to inflation," he added.

The proposed GST would replace the current sales and service tax.

The Prime Minister pointed out that Malaysia was one of the few countries in the Southeast Asian region that had yet to implement the GST.

"Basically, the whole world has introduced the GST," he said.

While tabling Budget 2010 in October, Najib said the government would take firm measures to strengthen its financial position and recognised that adequate revenue collection was vital to support rising expenditure as well as reduce the nation's increasing debts.

Approved Permits (AP) to be scrapped in 2015

KUALA LUMPUR: The controversial Approved Permits (AP) system will be scrapped in 2015 while foreign firms will be given manufacturing licenses to hold 100% equity in firms, which produce luxury vehicles with an engine capacity of more than 1,800cc and costing more than RM150,000 under the review of the National Automotive Policy announced Wednesday.

Under the review announced by International Trade and Industry Minister Datuk Mustapa Mohamed, the import duties of all completely-built-up (CBU) and completely-knocked-down (CKD) cars will be maintained.

Incentives and exemptions will be increased to develop local auto parts so that there would no longer be parts imports by 18 months’ time, a move which help do away with imported and used spare parts outfits.

Vehicles which are 15 years and above would also have to go through mandatory testing to ensure their roadworthiness but provisions would be made for vintage cars, he told a press conference to announce the long-awaited review of the NAP.

He said that the review was undertaken after extensive discussions with industry players including manufacturers, assemblers, auto parts makers, non-governmental organisation as well as car associations.

Mustapa said that there were 18 new policies and measures covering licencing, duties, incentives, technology and environment, safety and standards and APs introduced under the NAP review.

New policies and measures would be effective from Jan 1, 2010.

Under the new measures new strategic partnership between Proton and a global established Original Equipment Manufacturer (OEM) will be established.

Currently, Proton is in talks to establish strategic partnership with international partners.

“Up to now, Proton has yet to find a strategic partner,” he said.

Elaborating on APs, he said the AP system for imports of CBU vehicles will be terminated whereby open APs for used vehicles will be terminated by December 31, 2015, which means importation of used vehicles using the AP permit would no longer be allowed after 2015.

“No new applications for open APs will be considered and franchise APs will be terminated by Dec 31, 2020,” he said.

Mustapa said as part of ongoing efforts to help Bumiputera entrepreneurs in the automotive industry, a Fund for Bumiputera Development will also be established.

Besides this, he said that a charge of RM10,000 for each open AP will be introduced as announced in the 2010 budget last week whereby under current status, APs are issued for free.
A fund will be established to assist Bumiputera companies venturing into the automotive and other related businesses, he said.

The government would also introduce a mechanism to prohibit the import of used parts and components effective June 2011, said Mustapa.

Currently, imports of new and used parts and components were allowed without any restrictions and might in some cases affect safety and environment, he said.

A new measure under the review of the NAP is the establishment of a gazzetted price for imported used CBU motor vehicles by the Royal Customs, a move designed to stop the under-declaration of imported used-cars and abuse of the AP system.

Currently only prices for new imported CBU motor vehicles are gazetted for the purpose of duty compilation, he said. - Bernama

Petrol price at pump may follow market price next year

KUALA LUMPUR: Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah Tuesday did not discount the possibility that petrol price at the pump could follow the market price or without subsidy once the restructuring of petrol subsidisation is implemented early next year.

He said with the new structure, the offer of subsidy will be more targeted to the qualifying group or the holders of MyKad to enjoy the subsidised petrol price.

"The system is being developed and will be implemented between the first and second quarter," he told reporters after officiating the National Taxation Seminar 2009 here. - BERNAMA

Broadband users relieved over RM500 tax relief

BROADBAND Internet users are relieved with the RM500 tax relief granted to them, but they want the Government to go one step further – and compel the service providers to improve the quality of service.

Random interviews conducted by Star In.Tech revealed that most agreed that the tax relief would help boost the national broadband penetration rate.

But they feared that service quality might suffer with a sudden surge in subscribers.

“I am overjoyed that the Government is going to subsidise my broadband service,” said a housewife who asked to be identified only as Adelina.

“But if my Internet speed is going to stay put as it is now, I think the Government won’t be getting its money’s worth.

“It would be a waste of public funds,” she said.

A media relations executive, who wanted to be known as Belinda, wanted the Government to spend more to get Internet service providers (ISPs) to improve broadband speed.

“If broadband quality goes up markedly, people will be queing up to subscribe to the service,” she said.

“There would then be no need to dangle tax relief as a carrot, she added.

Actor Fish Fazil hoped that any increase in broadband service subscribers would spur ISPs to improve services and infrastructure.

“Broadband is becoming an essential utility now, like electricity and water,” he added.

The broadband tax relief incentive will be implemented from January 2010 to 2012. The current broadband penetration rate in Malaysian households is 26%, against 88% in Singapore and 95% in South Korea.

Maximum tax rate brought down, and more relief for middle income group

BUDGET 2010 will see a personal income tax cut of one percentage point and increase in tax relief.

This should bring cheer to the middle income group, who have often complained about not receiving much good news in past Budgets.

The reduction in personal income tax by one percentage point to 26% will ensure that the individual income tax remains competitive.

To improve the well-being of the rakyat, the Government will raise personal relief from RM8,000 to RM9,000. This means that each taxpayer will enjoy an increase of RM1,000 in disposable income from the 2010 year of assessment.

The cut in personal tax rate is for people earning above RM100,000 per annum.

“Given the amount of stress that the Government has been facing due to the economic crisis, it is heartening to note that it has still allowed for a 1% reduction of the top marginal tax rate for individuals from 27% to 26%,’’ said one tax expert.

The expert said the move to increase the personal relief would allow families with a household income of about RM24,000 a year to be free from income tax.

The biggest drop in personal income taxes, however, is for locals and foreigners who are working and staying in Iskandar Malaysia.

For those who apply and start work in Iskandar Malaysia before 2015, the Government has proposed the maximum tax rate of 15% compared with 26% for the rest of the country.

To be eligible for this tax treatment, they must be engaged in sectors such as green technology, biotechnology, education services, healthcare, creative industry, financial advisory and consultancy services as well as logistic services and tourism.

The innovative and radical tax incentive is seen as a boost to Iskandar Malaysia.

And to encourage people to start saving at a younger age, the Government has declared that the existing personal tax relief of RM6,000 for EPF contribution and life insurance premiums be increased to RM7,000 from January next year for people with annuity schemes.

RM50 service tax for card holders

SERVICE tax of RM50 will be imposed on each principal credit card every year beginning Jan 1.

For every supplementary card, a RM25 service tax will be charged yearly.

The move to impose this tax is to promote prudent spending as the use of credit cards is extensive. The number of cards increased from two million in 1997 to 11 million as of August this year. They exclude the 285,000 charge cards already issued.

Muslim Consumer Association of Malaysia secretary-general Datuk Dr Ma’amor Osman said it would encourage consumers to limit the number of credit cards they hold.

“Instead of having five or six credit cards, it will encourage consumers to reduce their cards to only one or two because it will be costly to pay service tax, interest, finance charges and so on,” he said.

Penang Consumer Protection Association president K. Koris said the service charge would not deter people from continuing to use their cards.

He added that the Government should instead re-look at imposing a restriction for credit cards and allow only those earning a minimum salary of RM5,000 a month to qualify for cards.

KPMG partner Ooi Kok Seng said the RM50 service tax would burden the lower income group but many would continue applying for multiple credit cards as they depended on the credit facilities.

He added that a significant number from the lower income group paid their credit card bills via installments and would not be able to write off the cards immediately.

Meanwhile, in a statement, the Penang Chinese Chamber of Commerce urged the Government to review the proposal as it would hinder domestic spending.

It suggested that the Goverment impose service charge on the second and subsequent cards.

Meanwhile, office clerk S. Siva, 48, plans to return eight of his nine credits on Monday morning.

“I definitely won’t be able to afford the service charge if I keep all my nine cards,” he said.
Siva said although he had nine cards, he only used one and only signed up for the rest after being told that all fees would be waived for life.

Budget 2010: "1Malaysia, Together We Prosper"

Prime Minister Datuk Seri Najib Tun Razak has tabled Budget 2010 with the theme "1Malaysia, Together We Prosper". Totalling RM191.5 bil, he said it would be the foundation of a new economic model and precursor to the 10th Malaysia Plan.

These are the main highlights of the speech as per delivery.

* Time for country to move to an economy of innovations to face the challenges of the future
* GDP for 2009 expected to be -3%, better than previous projections of -4% to -5%
* Focus of Budget 2010 will be on well-being of the people
* Three strategies:
- driving the country towards a high-income economy,
- ensuring holistic and sustainable development,
- focusing on the well-being of the rakyat.
* Government to make it easier for skilled/qualified people to get permanent residence status. Visa to be granted for family within 14 days.
* CSR Fund of RM100mil to be set up to carry out social programmes.
* Tax breaks for registration of patents and copyrights.
* Big scale factory outlets to be set up to boost tourism besides having major events like KL Grand Prix Fest, National Water Festival, Malaysia International Golf Exhibition and Rain Forest Eco-Challenges
* Taxpayers will get tax relief on broadband subscription fee of up to RM500 from 2010 to 2012. Civil servants can apply for computer loans up to a maximum of RM5,000 from the govt once in every 5 years.
* RM6bil for agriculture sector for irrigation of paddy fields, fish production, fruit farming, livestock farming infrastructure, training
* RM2bil subsidy for farmers and fishermen including subsidies for fertilisers, incentives for padi yields and allowances for fishermen
* RM9bil to finance infrastructure projects including road and bridges projects and rail, sea ports and airports facilities
* RM1.5bil fund to promote green technology by providing soft loans to companies that supply and use green technology
* RM200mil Creative Industry Fund to finance film, drama, music productions, animation, advertisements through Bank Simpanan Nasional
* RM30bil to be allocated to enhance primary and secondary school education nationwide
* Rewards for students who excel in studies:
- 30 National Scholarships for the creme de la creme of students, stictly based on merit
- Conversion of PTPTN loans to scholarships for students who graduate with 1st class honours degree, beginning from 2010,
- Offer of netbook package, including free broadband service, to university students for RM50 per month for 2 years.
* The Permata programme, which emphasises on early childcare and education, including the gifted child programme, to get RM100mil
* Insurance industry to be improved to meet market demand.
* Govt to clamp down on the abuses committed by Ah Longs by enforcing Anti-Money Laundering and Anti Terrorism Financing Act 2001. Moneylenders Act 1951 to be also reviewed.
* Allow 100% foreign equity participation in corporate finance and financial planning companies compared with the present requirement of at least 30% local shareholding.
* To ensure rapid development of financial services, the existing tax incentives to be extended to 2015.
* Among steps to combat corruption is to set up 14 Special Corruption Sessions Courts and 4 Special Corruption Appeal High Courts.
* Tax of 5% to be imposed on gains from the disposal of real property from Jan 1, 2010. Existing tax exemption will be retained for gifts between parent-child, husband-wife, grandparent-grandchild.
* To promote prudent spending, a service charge of RM50 a year to be imposed on each principal credit card and charge card; and RM25 a year on each supplementary card, effective from Jan 1, 2010.
* To ensure that fuel subsidies only benefit targeted groups, Govt will implement a fuel subsidy management system in early 2010, which will utilise the MyKad.
* All ministries and govt departments are required to provide day care and education centres for children of civil servants.
* The maximum income tax rate for individuals to be reduced to 26% from assessment year 2010. Personal relief increased to RM9,000.
* Police force to get RM1bil to improve its services in govt's efforts to reduce crime. Major measures include to increase police presence, including mobile police stations in 50 crime hotspots.
* To promote house ownership, Govt will launch a scheme that enables EPF contributors to utilise current and future savings in Account 2.
* Employees' EPF contribution to be increased to 11% again, on a voluntary basis, effective immediately. However, from Jan 1, 2011 employees' EPF contribution will revert to 11%.
* Personal relief for EPF and life insurance schemes to be increased to RM7,000.

Price of RON 95 at RM1.80 from 01/09/2009

The newly introduced RON 95 fuel is now priced at RM1.80 - five sen higher than the previous RM1.75.

Meanwhile, RON 97 is upgraded as a premium product and has gone up to RM2.05 from RM1.80.

Domestic Trade, Cooperative and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said the new prices were decided based on the current method of Automatic Pricing Mechanism (APM).

“Although the price is now 5 sen higher, the Government is still subsidising 33.81 sen per litre (of RON 95) which is equivalent to RM304mil monthly,” he told reporters after the launch of Primax 95 by Petronas here on Monday.

Currently, the Government is subsidising RON 97 by 42.72 sen per litre.

The cost for RON 95 went up 102% from USD$ 40.75 per barrel to USD$ 82.30 in December last year and August respectively.

“If there is any changes in the global prices, we would revise it accordingly. It is up to the Economic Council to decide.

“RON 95 also adheres to the EURO2M specification where it can lessen pollution,” said Ismail Sabri, adding that consumers would get quality petroleum at a subsidised price.

With the new pricing, Ismail Sabri added that RON 92 was phased out from the market as the usage was only 5% from total petrol sale in the country.

In April last year, then Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said the Government was considering the use of petrol with higher research octane number (RON) to reduce fuel subsidies without hurting the lower-and-medium income groups.

A higher octane number means higher resistance to engine “knocking”. “Knocking” could possibly damage the engine over time.

Petrol Dealers Association of Malaysia president Datuk Hashim Othman said petrol stations could easily recalibrate their pumps to adjust to the new price.

“With technology, all you need to do is push some buttons. It is almost automatic in most stations now, except for a few in the rural areas which are still using the manual system,” he said.

He added that petrol dealers would make a slight gain with the price increase as they had bought their current stock at the old price.

“It is only a little as the price increase is small,” he said.

RON97 to cost more from September 2009

PUTRAJAYA: The RON97 petrol will be sold at RM2 per litre effective Sept 1, which is 20 sen more than its current selling price once the RON95 version is available nationwide.

The RON97 will be sold as a premium petrol product while RON92, the cheapest petrol currently available, will be removed from the market.

Domestic Trade and Consumer Affairs Minister Datuk Seri Ismail Sabri Yaakob said that RON95, to be sold at RM1.75, would be available to consumers in stages effective today and all petrol stations nationwide would sell the product by Sept 1.

“By Sept 1, RON97 will be the alternative petrol and a premium product. Instead, the RON95 petrol will be the choice petrol for consumers and rest assured, the product is of high quality and is good enough to be filled in even luxury and high-powered cars,” he told reporters after the soft launch of RON95 here yesterday.

Prime Minister Datuk Seri Najib Tun Razak is expected to launch the nationwide sale of the petrol in September.

Ismail Sabri said the decision to phase out RON92 would not affect consumers as statistics show that only 5% to 10% of vehicle owners use the petrol, adding that by paying only five sen more for a litre, consumers would get to enjoy better quality petrol.

He said that at RM1.75 per litre, the Government has to fork out three sen in subsidy for RON95 while a subsidy of six sen is paid for every litre of RON97, adding that it could not be determined yet if there would be revenue for the Government when RON97 is sold at RM2 as it depended on the global petrol price.

He said the Government, through his ministry, has implemented various programmes to help the public cushion the effect of an increase in the cost of living, including allocating RM812mil for projects such as distribution of essential goods including rice, cooking oil, sugar, flour and liquified petroleum gas.

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Bank Negara cuts OPR by half percentage point

Worried about a growing risk of an economic contraction this year, Bank Negara has cut the overnight policy rate (OPR) by 50 basis points, or half a percentage point, to 2% as the global economy continues to deteriorate.

In a statement yesterday, the central bank announced the statutory reserve requirement (SRR) would also be cut from 2% to 1% from March 1 to reduce the cost to banks.

The ceiling and floor rates of the corridor for the OPR were correspondingly reduced to 2.25% and 1.75% respectively.

“The major advanced economies are experiencing a deepening economic contraction, while the regional economies are experiencing a rapid slowdown,’’ said Bank Negara in its monetary policy statement.

“The impact of the rapid decline in global demand on trade, production and investment activities in the Asian region has intensified.”

It said domestic economic conditions were expected to continue to remain challenging in the coming quarters with the continued deterioration of the global economy.

“While this has raised the risk of an economic contraction in 2009, the prospects remain intact for an economic recovery once global conditions stabilise given that the economy is not over-leveraged, the financial system remains sound, and the external position is healthy,’’ Bank Negara said.

The central bank said the turmoil in the international financial markets had also been protracted and that while a number of economies had put in place stimulus measures to manage the downturn, their impact on the economy had yet to take effect.

“The downside risks to the global economic outlook have increased significantly,’’ it added.

On Jan 21, Bank Negara cut the OPR by 75 basis points to 2.5% and slashed the SRR from 3.5% to 2%.

“This is the first time since the crisis erupted that the central bank has acknowledged the possibility of the economy registering a contraction this year,’’ said Maybank Investment Bank chief economist Suhaimi Illias.

“They are also reacting to the fourth quarter GDP number that will be released this week.’’

Bank Negara said the international economic and financial environment had deteriorated sharply in the recent quarter and that the Malaysian economy had been adversely impacted by these global developments.

“Exports and industrial production have declined steeply, while private investment activities have slowed down in recent months as businesses scaled back their spending. Consumer sentiment has also been affected by the weakening conditions in the labour market,’’ it said.

With inflation on a moderating trend, Bank Negara said the task of macroeconomic policy was to support domestic demand until conditions in the global economy show signs of normalisation.

“Further measures will be introduced to ensure continuous access to credit as well as to minimise the impact of the economic downturn on specific affected groups,’’ it said.

Bank Negara cuts OPR by 75 basis points

News: Bank Negara has reduced the overnight policy rate (OPR) by 75 basis points to 2.5% and reduced the statutory reserve requirement (SRR) from 3.5% to 2%, effective from Feb 1.

It said on Wednesday the ceiling and floor rates of the corridor for the OPR were correspondingly reduced to 2.75% and 2.25% respectively.

“With the heightened downside risks to growth, the magnitude of the reductions in the OPR and the SRR are aimed to be pre-emptive in providing a more supportive monetary environment for the domestic economy,” it said in a statement released after the Monetary Policy Committee (MPC) meeting.

Bank Negara said the international economic and financial conditions had deteriorated much more significantly in the recent period.

It said the contraction in global demand and trade, combined with the reduction in global commodity prices, had affected the export earnings of many of the regional economies, including Malaysia.

“These contractionary factors have been exacerbated by the protracted turmoil in the international financial markets,” it said.

The central said the urgent implementation of policy measures will be key towards ensuring the Malaysian economy would continue to experience positive growth in 2009.

On inflation, it said the moderating growth and the significantly lower commodity prices had impacted the inflation rate which had continued to decelerate to 4.4% in December 2008.

“This deceleration is expected to continue with the weaker demand conditions and lower imported inflation,” it said.

Bank Negara said given that the Malaysian banking system remained fundamentally sound, the central bank would continue to ensure access to credit to all sectors of the economy, and that the reduction in interest rates would be reflected in lower borrowing costs.