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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