KUALA LUMPUR: The National House Buyers Association (HBA) is asking the government to consider granting an income tax ‘wholesome’ waiver or a reduction of 50 per cent for the first RM100,000 of chargeable income tax for the next two years.
The suggested amount is used as it is the threshold to receive the RM30 e-wallet in Budget 2020 and RM50 under the ePenjana initiatives.
HBA honorary secretary-general Datuk Chang Kim Loong said based on the chargeable income of RM100,000 and the tax rate for 2020, the income tax payable is RM10,900 or about RM908 per month.
“Our proposal for a 50 per cent tax reduction/waiver will translate into annual tax savings of RM5,450 or additional disposable income of RM454 per month which will greatly add to the monthly cash flow and result in a boost to retail spending and uplift the economy,” he told Bernama.
However, he explained the 50 per cent income tax reduction should not be restricted to those earning below RM100,000 but applicable the first RM100,000, meaning anyone earning more than RM100,000 would also be able to enjoy this proposed temporary tax reduction/waiver.
“Many people who supposedly earn more than RM100,000 a year are just salaried employees who are in the ‘sandwich’ group, supporting elderly parents and young children, and consider themselves to still be in the ‘middle income’ group although they may fall under the so-called Medium 40 (M40) group or even Top 20 (T20) group,” said Chang.
Noting that the Covid-19 pandemic not only impacted the Bottom 40 (B40) income group, he said the proposal is not asking the government to provide ‘handouts’ or cash assistance but instead acknowledged that the middle-income segment is also affected by the post-Covid-19, which it hopes the government could give a temporary tax relief during this difficult period.
“As we do not have the inside knowledge of the breakdown of the personal income tax collection, we cannot ascertain the full impact of the proposed tax exemption.
“However, assuming that this tax exemption will result in a fall of up to 50 per cent in personal income tax collection, we believe that the actual fall would be much less than 50 per cent,” said Chang.
The drop of up to a maximum of 50 per cent would amount to revenue loss of about 6.7 per cent which seems manageable as the money would be injected back into the local economy, and possibly generate more economic activities which can offset the reduction in government revenue.
He said there would definitely be a multiplier effect when the monies from the tax relief are being injected back into the economy through spending and can expedite the country’s economic recovery.
Similarly, Chang said the expense that companies cannot afford to reduce is the corporate income tax, hoping that the government should also consider giving tax reliefs to small and medium enterprises (SMEs).
Chang said companies could reduce headcount to cut cost but they have to also pay corporate income tax so long as these companies record a taxable profit.
SMEs are currently taxed at 17 per cent for the first RM600,000 in taxable income and the balance at 24 per cent.
“The government could consider giving a 100 per cent tax relief on the first RM1.0 million in taxable income and the balance to be taxed at 24 per cent for the next three years.
“However, this tax relief should come with some strings attached which is, the said SME should not retrench any local employees during the tax relief period,” he added.
Meanwhile, Chang opined that the government must also push ahead with the implementation and execution of the digital tax as more and more businesses move to online strategy to cut cost and also due to Covid-19.
Technology giants have been known to use various innovative methods as they move their goods and services worldwide in order to avoid paying tax.
“The government must ensure that all providers of online goods and services that are used by consumers in Malaysia pay the required taxes so that the government does not lose out on much-needed revenue during these challenging times.
“Banks had given a six-month loan repayment moratorium to their borrowers to help ease the burden of Covid-19 and we are urging the government to also show some compassion across the board to ease the people’s suffering by granting a temporary tax (income) holiday,” he added.
For 2019, corporate income tax amounted to 26.9 per cent of the federal government revenue; granting a tax relief could result in loss of revenue of about 8.1 per cent, which is slightly more compared to the personal income tax relief of 6.7 per cent.
HBA is a non-governmental and not-for-profit organisation manned wholly by volunteers. – Bernama