Table of Content
No
1.0
Content
Page Number
Introduction
2-6
1.1 Meaning of National Budget
1.2 Components of National Budget
1.3 Types of National Budget
1.4 Types of National Budget
2.0
Budget Revenue
7-8
2.1 Types of Revenue
2.2 Types of Revenue with amount
3.0
Expenditure
9-13
3.1 Types of Expenditure
3.2 Expenditure Amount
4.0
Conclusion
14-15
4.1 Findings
4.2 Suggestions
1
1.0 Introduction
1.1 Meaning National Budget
Budgeting is the process of estimating revenue and expenses during a specific period of time.
A national budget is the budget of a country. The government gets money from taxes and fees,
and spends it on things like national defense, infrastructure, grants for research, education, and
the arts, and social programs such as Social Security and Medicare. The Finance Minister will
announce the national budget in September or October each year in Parliament (Malaysia).
1.2 Components of National Budget
The main components in the budget are revenues and expenditure and presently every two
years public sector entities have to go through the budget process, which starts in January and
ends in December
1.3 Types of National Budget
Type of budget divided to three balance budget, surplus budget and deficit budget. A balance
budget occurs when the government total revenue is equal to its total expenditure. Surplus
budget occurs when the government total revenue is more than its total expenditure. Deficit
budget occurs when the government total revenue less than its total expenditure.
1.1 Type of National Budget 2023
The government will allocate RM372.3 billion for Budget 2023, lower than Budget 2022’s
allocation of RM385.3 billion. Of the allocation for Budget 2023, about RM272.3 billion has
been allocated for operational expenditure and RM95 billion for development.
Housing
The stamp duty discount on the instruments of transfer and loan agreements for residential
property worth between RM500,000 and RM1 million will be increased from 50% to 75% until
end-2023. Stamp duty will be set at RM10 for properties transferred between family members.
RM367 million has been allocated to build People’s Housing Projects (PPRs) in urban areas,
including new projects in Marang, Terengganu, and Arau, Perlis, which is set to benefit 12,400
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people. Some 4,250 housing units worth RM358 million will be built under the Rumah Mesra
Rakyat programme
Cash aid
Bantuan Keluarga Malaysia (BKM) aid: Up to RM2,500 aid for households with five or more
children and earning less than RM2,500 per month; RM3,000 aid for single parents; and up to
RM1250 BKM aid for singles. M40 ePemula Initiative: eWallet credit worth RM100 for the
M40 income group with an annual income below RM100,000, benefiting eight million
individuals. Those aged between 18 and 20 and full-time students above 21 years old will
receive RM200 eWallet credit allocation via the ePemula initiative. One-off RM500 incentive
for female Bantuan Keluarga Malaysia (BKM) recipients who give birth in 2023. RM10
million in e-hailing vouchers for the disabled.
Tax
Personal income tax will be reduced by 2%:– For those with taxable income of between
RM50,001 and RM70,000, the personal income tax rate will be lowered from 13% to 11%
– For those with taxable income between RM70,001 and RM100,000, the personal income tax
rate will be lowered from 21% to 19%. Those in RM250,000 to RM400,000 income tax range
together with the RM400,000 to RM600,000 range will be subject to a 25% tax rate.
Tax exemptions of up to RM3,000 for kindergarten and day-care fees.
Infrastructure And Public Transport
RM16.5 billion out of the RM95 billion allocated for development expenditure in the Budget
2023 has been provided for the transport sector through major infrastructure projects, especially
the Pan Borneo Highway, the Gemas-Johor Bahru Electrified Double Track project, East Coast
Rail Link (ECRL), RTS Link and Central Spine Road. The government is committed to
completing the Kuala Lumpur rail network with a 50.8km-long line under the MRT3 Circle
Line project. MRT3 Phase 1 is expected to complete in 2028 while Phase 2 in 2030. This
project involves a cost of RM50.2 billion with a projected expenditure of RM3.3 billion ringgit
in 2023. Phase 2 of the Mass Rapid Transit (MRT) 2 project involving the Kampung Batu
station to Putrajaya Sentral is almost complete and is expected to start operating in January
2023 for the benefit of the people of the Klang Valley. RM11.4 billion for maintenance and
repair of existing government buildings.
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The Pan Borneo Highway project in Sarawak is expected to be fully completed soon, while the
highway project in Sabah will be completed by 2024. RM20 million to develop a drag race
circuit. RM16.5 billion for major transport infrastructure projects. RM472 million to improve
rural electric infrastructure. RM2.55 billion for Sabah and Sarawak. RM1.5 billion to improve
transport infrastructure in Sabah and Sarawak. RM150 million for the maintenance and repairs
of educational facilities under Jakim. RM500 million on G1-G4 infrastructure projects. RM3.7
billion for small and medium projects across the nation.
Flood mitigation
RM15 billion allocated for flood mitigation plans until 2030, with RM700 million allocated
for 2023 alone. RM400 million has been set aside for National Disaster Management Agency
(NADMA) to increase disaster preparedness.
Federal Territories
RM100 million will be allocated for the Jualan Murah Keluarga Malaysia programme, where
groceries and daily necessities will be sold at 20% cheaper compared to the normal retail price
in 600 DUN and 13 Federal Territories Parliament constituencies. RM10 million was allocated
to Think City for the Kuala Lumpur rejuvenation initiative to transform Kuala Lumpur into a
creative and cultural hub.
Job Opportunities
Social Security Organization (SOCSO) will provide incentives for employers to hire jobless
youths. The government will bear the costs of e-hailing, taxi, and motorcycle licenses for
youths. The government has allocated RM305mil for youths under BSN and Mara to take loans
of up to RM50,000 to start businesses. Over 10,000 youth are expected to benefit.
RM50 million for the young trader scheme under Bank Simpanan Nasional (BSN). SOCSO to
provide incentives for employers to hire the disabled, Orang Asli, ex-convicts and women
returning to work. The incentive worth to RM750 a month will be given for three months per
employee. It will involve RM150 million and is expected to benefit 70,000 job-seekers.
The MyStep programme will provide 50,000 jobs including 15,000 in the public sector and
35,000 in government-linked companies (GLCs). RM750 million to upskill 800,000 workers.
Employees Provident Fund (EPF) The limit for voluntary EPF contributions will be raised from
RM60,000 to RM100,000 a year.
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RM30 million will be spent to improve EPF’s i-Saraan programme which will benefit 100,000
people. RM120 million for the Kasih Suri Keluarga Malaysia programme, benefiting 200,000
housewives.
Women
Income tax exemptions for five years (from 2023 to 2028) for women who return to the
workforce after taking a “career break”. RM235 million funds to help women build, upgrade
and market their businesses. Breast and Cervical Cancer – RM11 million for subsidies for
screening (mammogram/pap smears). Securities Commission Malaysia to offer training
programmes to increase the number of women on boards/leadership.
Family
RM188 million has been allocated to increase early childhood education programmes for
children. 10 more Taska under Kemas will be built. This will also help mothers get back into
the workforce. Allowances for Taska staff will also be upped.
Food Security
A total of RM55 billion has been allocated for government subsidies, aids and incentives.
RM200 million has been allocated to subsidise logistics costs for the distribution of essential
goods. The Malaysian government will hold Keluarga Malaysia sales offering essential items
at more affordable prices.
Education And Higher Education
Ministry of Education receives the biggest allocation of RM55.6 billion, the biggest allocation
in the budget for a ministry. RM825 million for aid for students. All students will receive
RM150 in education aid regardless of their parent’s incomes. RM2.3 billion to ensure students
have a conducive and safe learning environment. RM777 million for supplementary food
programme (RMT), benefiting 800,000 students and 7,300 canteen operators. RM1.2 billion
allocations to upgrade dilapidated school buildings and infrastructure, especially in Sabah and
Sarawak. Ministry of Higher Education gets RM15.1 billion, up from RM14.5 billion in 2022.
15% to 20% discounts for PTPTN repayments from 1 November 2023 to 30 April 2023. RM3.8
billion was allocated for scholarship and education loans; RM6.7 billion was allocated for
various TVET initiatives, with RM180 million and 12,000 trainers allocated for the TVET
training fund (Program Persijilan Kemahiran Malaysia).
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Tourism
RM200 million has been allocated to the tourism sector to promote tourism recovery. RM90
million allocations to boost tourism and tourism activities including chartered flight services,
especially from the Middle East and East Asia. RM20 million for Malaysia Healthcare Travel
Council to promote Malaysia as a premier healthcare travel destination. RM500 million in
tourism financing from Bank Negara Malaysia (BNM). RM25 million for domestic tourism
which includes discounts, vouchers and rebates of up to RM100. RM10 million to promote
eco-tourism.
Transport
The government to continue with the My50 monthly pass that will benefit some 180,000
commuters. RM209 million has been allocated for air transport subsidies in rural Sabah and
Sarawak. RM180 million has been set aside for city buses (bas henti-henti) to add more routes
in Melaka, Kota Kinabalu and Kuching; and replace 18 MARA buses in Kedah. The
government will improve the infrastructure at seven airports in Sabah and Sarawak by building
the wheelchair ramp, benefitting 2,300 community members who use a wheelchair with
MASwings, the regional airline operating the Rural Air Services in East Malaysia. RM90
million for JKR Sipitang, Kelantan to replace the 34-year-old ferry between Tak Bai,
Narathiwat Province in Thailand and Pengkalan Kubor, Tumpat District, Kelantan for some
30,000 residents in Tumpat. Excise duty and sales tax exemption expanded from only
individual taxi owners who change ownership or dispose of their taxis to include owners of
exclusive taxis and airport taxis.
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2.0 Revenue
Budget 2023 is comprehensive, disciplined and forward-thinking, with a spotlight on reforms
to make resilience and weather uncertainties amid an more and more difficult international
economic and political science outlook. The Budget conjointly lays the inspiration for future
growth and fight in strategic areas like property and medical care.
(a) Types of revenue
The International Monetary Fund (IMF) reported that global economic growth is forecast to
grow at a slower pace at 2.9% in 2023 compared to 3.2% in 2022 amid expectations that pentup global demand dissipates, geopolitical tensions prolonged and monetary policies tightened.
In line with this, Malaysia’s expected economic growth between 4% and 5% coupled with the
anticipated moderation in global commodity prices, will result in a slower growth of the Federal
Government’s tax revenue at 3.7% amounting to RM205.6 billion or 11.3% of GDP. However,
non-tax revenue is estimated to decline to RM67 billion or 3.7% of GDP, offsetting the increase
in tax revenue. Consequently, the Federal Government’s revenue is projected to decline by
4.4% to RM272.6 billion.
(b) Types of revenue with amount
Direct tax is estimated to increase by 3.5% to RM152.4 billion, representing 74.1% of total tax
revenue. The bulk of the increase is attributed to better collection expected from CITA and
individual income tax. The higher CITA, estimated at RM88.9 billion is in line with stable
corporate earnings prospects, as well as the Prosperity Tax due to be collected in 2023.
Similarly, individual income tax is expected to grow by 9.8% to RM33.6 billion on account of
steady wage growth and anticipated further strengthening of the job market. Meanwhile,
revenue from other direct tax comprising of stamp duty, RPGT and other taxes is expected to
register RM9.9 billion consistent with continuous growth of residential building subsector, the
increase supply of affordable houses and the Government’s initiatives to address property
overhang.
Indirect tax is estimated to increase by 4.3% to RM53.2 billion in tandem with steady
consumption and trade growth. SST is forecast to record RM32 billion or about 1.8% of GDP
7
of which sales tax and service tax are projected to increase to RM16.3 billion and RM15.7
billion, respectively, while excise duties is expected to improve to RM12 billion or 0.7% of
GDP. The expected increase in service tax will be mainly from the tourism sector in
anticipation of higher tourists arrival in 2023 supported by the implementation of the Tourism
Recovery Framework. Similarly, the projected increase of sales tax and excise duties collection
are primarily contributed by continuous demand for motor vehicles as well as machines and
spare parts. The MAA anticipates TIV for 2023 to reach 636,300 units due to the introduction
of new model as well as fulfillment of backlogged vehicles orders and promotional campaigns
by car companies.
Non-tax revenue is estimated to decline by 23% to RM67 billion or 3.7% of GDP. The lower
collection is due to lower proceeds from investment income, particularly dividend from
PETRONAS which is projected to be lower at RM35 billion. In contrast, licences and permits
is expected to increase steadily by 3.4% to RM13.8 billion despite lower contribution from
petroleum royalty. The increase is mainly driven by motor vehicle licences and levy on foreign
workers. Revenue from motor vehicle licences is estimated to increase to RM3.2 billion in
tandem with higher car registration in 2023. Likewise, levy on foreign workers is projected to
rise to RM2.9 billion on account of the anticipated greater number of foreign workers.
Meanwhile, the Government is expected to receive RM3 billion from KWAP and RM5 billion
dividend from Bank Negara Malaysia.
In 2023, petroleum-related revenue is expected to register RM58.9 billion or 21.6% of total
revenue in line with the assumption of lower global crude oil prices averaging at USD90 per
barrel. However, non-petroleum revenue is projected to increase by 3% to RM213.7 billion,
supported largely by CITA, individual income tax and SST, in tandem with sustained trade and
economic activities. As a percentage of GDP, non-petroleum revenue is expected to remain
resilient at 11.8%. The Government is committed to widen its nonpetroleum revenue to
generate a sustainable revenue stream through the adoption of the Medium-Term Revenue
Strategy (MTRS) and the review of tax expenditure.
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3.0 Expenditures
3.1 Types of expenditure
Government expenditure is often divided into two main categories, namely operating
expenditure and development expenditure. The Budget 2023 is formulated in anticipation of a
more challenging environment due to slower global growth prospect and prolonged
geopolitical tensions. With persisting global inflationary pressures and limited fiscal space, the
Government has to balance between sustaining economic growth and safeguarding the
wellbeing of the rakyat. Allocation will be channelled towards facilitating post-pandemic
recovery to enhance business competitiveness and strengthening of the nation’s economic
resilience. At the same time, the Government is embarking on Public Expenditure Review
(PER) and targeted subsidy initiatives to consolidate fiscal position. This is in line with the
Government’s commitment to maintain fiscal prudence and discipline in order to ensure fiscal
sustainability in the long-term.
3.2 Expenditure with amount
Malaysia's economy estimated to grow 6.5%-7% in 2022, and 4%-5% in 2023.Fiscal deficit
expected to shrink to 5.5% of GDP in 2023 from 5.8% of GDP in 2022.Federal government
revenue expected to drop 4.4% to RM272.57 billion in 2023, from a growth of 22.0%
(RM285.22 billion) in 2022.RM372.3 billion allocated under Budget 2023 — RM272.3 billion
for operating expenditure, RM95 billion for development expenditure, RM5 billion for Covid19 fund and RM2 billion for contingency savings. Ministry of Finance is the biggest recipient
of Budget 2023 allocation at RM67.2 billion, followed by Ministry of Education (RM55.6
billion), and Ministry of Health (RM36.1 billion); these three constitute 43.3% of total budget
expenditure
RM18.3 billion allocated to Ministry of Home Affairs (KDN). Ministry of Defence to get
RM17.4 billion allocation. From 2023, electricity bill subsidy of up to RM40 will be provided
for households with income of RM1,169 and below, compared to the present RM980 and
below. 2% income tax cut for RM50,000 to RM100,000 income bracket, but 0.5% rise for
RM250,000-RM400,000 RM2,500 for Bantuan Keluarga Malaysia — highest one-off
assistance for households with five children or more, with income of less than RM2,500 per
month
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RM235 million allocated towards funding women entrepreneurs. RM400 million allocated to
e-Pemula for one-off RM200 credit to e-wallets for those aged 19 to 20 years, and full-time
students aged 21 and above. Those paying for daycare and kindergarten fees to get RM3,000
tax write-off for Tax Assessment Year 2024. M40 e-Pemula Initiative: e-Wallet credit worth
RM100 for the M40 group with annual income below RM100,000, to benefit 8 million
individuals
Budget 2023 provides RM55 billion for subsidies, social assistance and incentives. Women to
be exempted from income tax for assessment years of 2023 to 2028, to encourage them to
return to work after taking a career break. RM150 million allocated to employment incentives
under PERKESO, for as much as RM600 to RM750 a month for three months to the vulnerable.
Total holding limit for Amanah Saham Bumiputera (ASB) and ASB2 increased from
RM200,000 to RM300,000. Those with annual income brackets of RM250,000-RM400,000
and RM400,000-RM600,000 to be subject to 25% tax rate. Middle income group gets up to
RM1,000 tax savings, high income group gets up to RM250. Voluntary EPF contribution limit
to be increased to RM100,000 per year from RM60,000. One-off RM500 cash aid for mothers
from Bantuan Keluarga Malaysia households who give birth in 2023. Government to bear cost
for B40 youths to get taxi, bus, e-hailing licences via MyPSV programme.
Graduates with first-class bachelor's degrees exempted from repaying PTPTN loans. RM3.8
billion allocated for scholarships and educational loans. RM6.7 billion allocated to implement
various technical and vocational education and training (TVET) initiatives through the National
TVET Council.
Government to gradually make Self-Employment Social Security Scheme (SKSPS)
contribution mandatory for all self-employed sectors from 2023. RM1.2 billion allocated to
upgrade old school buildings and infrastructure, especially in Sabah and Sarawak; RM1.1
billion allocated for school repairs and maintenance. RM3 billion for Government guarantee
through Syarikat Jaminan Kredit Perumahan (SJKP) that will help 12,000 borrowers
In relation to real estate transfer documents and loan agreements for homes worth more than
RM500,000 to RM1 million, the stamp duty exemption will be increased from 50% to 75%
until Dec 31, 2023
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RM1 billion grant for one-off RM1,000 aid to all registered micro, small and medium
enterprise (MSMEs) and registered taxi drivers, to benefit 1 million recipients. Bantuan
Keluarga Malaysia (BKM) to be improved with an allocation of RM7.8 billion, to benefit 8.7
million recipients. Bank Negara Malaysia (BNM) to allocate RM10 billion funding for SMEs
for automation, digitalisation, tourism and agriculture. SemarakNiaga 2023 is enhanced with a
total value of RM45 billion compared to the RM40 billion announced for 2022. This value
includes direct loans, alternative financing and financing guarantees.
RM500 million allocated under BNM Tourism Financing Fund.RM256 million in monsoon
season assistance to small rubber farmers, to benefit 320,000 small farmers. Guarantee limit of
up to RM9 billion via Business Financing Guarantee Company to make it easier for SMEs to
get financing. Securities Commission Malaysia to introduce special training programme for
women's skill levels to increase number of women eligible to be appointed as board members
MSMEs to get income tax reduction to 15% from 17% for first RM100,000. Government
targets arrival of more than 15 million tourists with income value of RM47.6 billion in 2023.
RM1.8 billion allocation for building of new hospitals, clinics and facilities, as well as for
procurement of medical equipment. RM4.9 billion to expand capacity of public health services,
up 12% from 2022. Petronas to contribute RM2 billion Kumpulan Wang Amanah Negara
(KWAN) fund for 2023. RM1 billion allocation for BNM Agrofood Financing Scheme to help
SMEs increase agro-food production. Government to provide RM30 million to Malaysia Coinvestment Fund (MyCIF). Government proposes to expand scope of tax incentives for
individual investors in start-up companies via equity crowdfunding. Supplementary Food Plan
rate raised from RM2.50 to RM3 in Peninsula, and from RM3 to RM4 in Sabah, Sarawak and
Labuan. 'Bantuan Awal Persekolahan' aid will be extended to all pupils, irrespective of their
parents' income level. Khazanah to invest RM1 billion under Dana Impak in 2023; RM230
million for investments in locally owned, high tech companies
RM700 million allocated for flood mitigation plans. RM73 million to improve Malaysia's
cybersecurity by strengthening monitoring, detection and reporting of threats, as well as
building cyber forensic system capabilities. RM15 billion allocation for Flood Mitigation Plan
till 2030, a long-term strategy throughout the country to adapt to climate change
Government will extend tax deduction of up to RM1.5 million for listing expenses involving
ACE and LEAP markets until assessment year 2025. Government will also expand tax
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deductions for companies to include the listing cost of tech-based companies on the Main
Market of Bursa Malaysia. RM100 million allocation to Domestic Investment Strategic Fund
(DISF) to support the development of domestic tech-based companies. Government proposes
special status for Pengerang, as well as chemical and petrochemical industry investment
incentives to develop Pengerang as petrochemical hub. Government to provide RM700 as
special financial assistance to 1.3 million civil servants grade 56 and below, and RM350 to 1
million Government pensioners next year; these provisions will amount to RM1.3 billion.
RM145 million allocation for maintenance, upgrading and construction of sports facilities.
RM102 million allocation for digital content fund to help the marketing of artistic products.
RM364 million allocation for R&D under Ministry of Higher Education and Ministry of
Science, Technology and Innovation. RM2.6 billion allocated to Federal Land Development
Authority (Felda), Felcra Bhd and Rubber Industry Smallholders Development Authority
(RISDA). RM50 million allocated to Cradle Fund Sdn Bhd. RM6.3 billion for Sabah's
development expenses; RM5.4 billion for Sarawak. Exemption of import duties and excise
taxes for imported completely built-up (CBU) electric vehicles extended until Dec 31, 2024.
RM700 million allocation for National Digital Network (JENDELA) in 2023, to implement
digital connectivity in 47 industrial areas and nearly 3,700 schools. Digital Nasional Bhd to
expand 5G network nationwide to cover 70% of highly populated areas, infrastructure
expenditure allocation worth RM1.3 billion in 2023. Approved Permit (AP) exemption for
electric vehicles (EVs) importation until Dec 31, 2023. Manufacturers of EV charging
equipment are given 100% income tax exemption on statutory income from assessment year
2023 to 2032 and 100% investment tax allowance.
Extension of incentive application period for Green Investment Tax Allowance (GITA) and
Green Income Tax Exemption (GITE) until Dec 31, 2025, by increasing the incentive period
to five years (from three years previously) for eligible green activities, including solar activities
and Battery Energy Storage System. Government plans to introduce carbon tax and will study
the feasibility of a carbon pricing mechanism. To support the implementation of this
mechanism, the Government will provide RM10 million as matching grant to help SMEs
prepare for carbon assessments. RM235 million financing will be available for women —
under the Semarak-Nita BSN Scheme, Tekunita TEKUN, DanaNITA MARA, and Bank
Rakyat's Biz Lady — to encourage more women to increase business capacity and improve
marketing strategies. To encourage more young people to do business, RM305 million will be
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made available as a special loan facility for youths through SME Bank, TEKUN, MARA, BSN
and Agrobank. For 2023, RM1.7 billion is to be made available as micro-loan funds and
business facilities for the benefit of small businesses. For Bumiputera entrepreneurs, the
Government, via TERAJU with a fund of RM135 million, will provide financing facilities
(including under the Bumiputera Prosperity Fund). A total of RM200 million will also be
provided under Perbadanan Usahawan Nasional Bhd (PUNB) to provide financing and
entrepreneurship development programmes for Bumiputeras in the retail and distribution trade
sectors. Extension of 100% stamp duty exemption on loan restructuring or rescheduling
agreement, or financing, until 2024. The i-Saraan program will be extended to 2023 and
improved by increasing the matching contribution from RM250 to RM300. With an allocation
of RM30 million, this is expected to benefit more than 100,000 contributors. The Public Private
Partnership (PPP) Master Plan 2023-2032 will be launched to introduce a new PPP model
capable of driving infrastructure projects based on user pay (e.g. highways) and in-kind
payment (e.g. land swap). To support the implementation of high-impact PPP projects in the
infrastructure, social and security sectors, RM250 million will be provided via the
Infrastructure Facilitation Fund. The multi-tiered levy for foreign workers is targeted to be
implemented by 2023. Companies with a high number of foreign workers such as the plantation
and construction sectors will be charged a higher levy rate. The government plans to
redistribute the additional levy revenue to support employer's automation initiatives. The
government plans to attract electrical and electronics (E&E) sector investors affected by
geopolitical uncertainty and supply chain disruptions to relocate to Malaysia by extending
existing tax incentives and 15% tax rate to C-Suite levels until 2024.
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4.0 Conclusion
4.1 Finding
Taxpayers can expect a heightened compliance environment and potentially more tax measures
going into 2023 to sustain government revenue. Looking at the measures announced in the
budget, it does provide many measures that are aimed at protecting the welfare of the man in
the street, who has been hit by a higher cost of living due to rising interest rates and inflationary
pressures.
Experts and observers note that Budget 2023 includes measures for the middle-income group
(M40), who usually had been left out of previous budgets. This time around, those in the tax
brackets of RM50,001 to RM100,000 saw a reduction of two percentage points in personal
income tax. Tax consultants view this as a good move as it would be the most direct way to
help alleviate the financial burden of this income group. PwC Malaysia tax leader Jagdev Singh
says the measure will result in an immediate tax cash savings of up to RM1,000 for individuals
in those tax brackets.
Those in the tax bracket of RM250,001 to RM400,000, who are currently taxed at 24.5%, will
now join those in the RM400,001 to RM600,000 tax bracket, where the rate is 25%. But, says
Jagdev, there remains a net gain of RM250 for taxpayers with annual taxable income of
RM600,001 and above.
As for those looking to purchase a property above RM500,000 to RM1 million, they will see a
higher exemption on stamp duty for sales and purchase agreements and housing loan
agreements, from 50% to 75% next year, which will likely benefit the M40 and above.
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4.2 Suggestion
With the proposed reduction in personal income tax, estimated to cost the government about
RM800 million, the government has projected an increase in tax collection across the various
taxes imposed. Estimated tax revenue collection in 2023 is expected to increase to RM205.58
billion, higher than the RM198.23 billion in 2022.
This could be a reflection of the government’s confidence that the economy will continue to
recover to pre-pandemic levels, resulting in higher tax collections contributed by individuals
returning to the workforce at higher wage levels, profits from recovering businesses and
increased audit activities by the tax authorities.
While tax revenue collection is expected to increase, the total revenue of the federal
government is expected to be lower at RM272.57 billion in 2023 from RM285.22 billion in
2022, as the dividend expected to be received from Petronas in 2023 would be less than the
RM50 billion contribution in 2022. Malaysia will join more than 40 countries that have adopted
or will be adopting e-invoicing. Together with the use of the Tax Identification Number (TIN),
this will reduce the shadow economy, increase compliance and expand the tax net. This
reinforces other initiatives of the Inland Revenue Board (IRB) such as the Tax Corporate
Governance Framework (TCGF), which promotes better governance and transparency, and
cooperation between the IRB and taxpayers. New measures such as the implementation of einvoicing and TIN should provide more room for the tax authorities to shore up tax revenue.
However, in the longer term, Malaysia needs to consider a broader-based tax system such as
the GST to have a more sustainable source of revenue
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