KUALA LUMPUR – The prospect of tax cuts in Budget 2025 appears remote, as the government is expected to concentrate on reform measures aimed at strengthening the nation’s economic framework.
Global Asia Consulting’s senior consultant, Samirul Ariff Othman, said that with Budget 2025 set to be tabled in Parliament on October 18, there is no clear indication that existing taxes will be revoked.
Instead, the focus is likely to be on reforms and the introduction of new taxes designed to foster a more sustainable and inclusive economy.
Key priorities for the budget, he noted, would include addressing the rising cost of living, improving governance, and enhancing economic resilience, particularly within the framework of the MADANI Economy, introduced by Prime Minister Datuk Seri Anwar Ibrahim in July last year.
The framework is regarded as an integral part of the government’s ongoing rollout of policies and initiatives to help sustain the growth and resilience of the nation’s economy.
“Tax reforms (in Budget 2025) may focus on providing targeted relief to businesses, particularly small and medium enterprises (SMEs), as well as improving compliance and enforcement mechanisms across sectors,” Samirul said.
He noted, however, that there has been “strong opposition” to the introduction of new taxes, particularly the inheritance tax, which previously courted backlash after a local daily cited an analyst who said it could be one of five new taxes Anwar’s administration would implement in a bid to raise revenue and reduce fiscal deficit.
In response to the report, five Sarawak DAP MPs said that they will vote against levies on inheritance if it is included in Budget 2025, with the party’s state chief Chong Ching Jen claiming that such a tax would be unfair for parents who have already paid income tax on their assets to face additional taxation upon transferring wealth to their children.
Transport Minister Anthony Loke, who is also DAP secretary-general, has since dismissed rumours of the inheritance tax making a return, stressing that the tax was never discussed during previous Cabinet meetings while urging for the “non-issue” to not be made into a polemic.
Samirul also pointed out that there has been widespread discussion on the possible reintroduction of the goods and services tax (GST) as a way to widen the tax base and reduce the budget deficit.
“If (GST) is implemented it is likely to be set at a low initial rate to ease public adjustment and limit inflationary pressures,” he said.
However, economist Geoffrey Williams said that not only is a comeback of the GST unlikely to happen, the high value goods tax (HVGT), which was previously known as the luxury goods tax, is also likely to be further delayed.
When Anwar had initially announced the HVGT during his tabling of the 2024 budget in October last year, the prime minister and finance minister said that the tax, proposed to be set between 5% and 10%, would be applied to items such as jewellery and watches that exceed a certain price threshold.
While the implementation of HVGT was originally slated to commence on May 1 this year, this has yet to happen as the bill for the tax has not been tabled in Parliament, with the Finance Ministry saying in July that relevant policies and legal frameworks are still being fine-tuned.
Prior to the ministry’s written parliamentary reply on the matter, The Edge reported in March that the government, retail industry and tax experts are unable to agree on the definition of ‘high value goods’ and the price range of the items to be taxed.
Previously, the Finance Ministry said that Putrajaya is expected to collect tax revenue of RM700 million a year from the implementation of the HVGT.
Williams, who is also founder and Director of Williams Business Consultancy Sdn Bhd, added that in the event of current conventional consumption and income taxes being rescinded, the government could introduce an e-payments tax (EPT), a “tiny tax” on all electronic payments at the point of electronic transaction.
This includes pay-wave, credit and charge cards, debit cards and ATMs, e-money and e-wallets and normal bank payments as well as e-checking accounts online while cash payments would be exempt.
In a previous statement, Williams said that the current value of these transactions is RM1.4 trillion according to data from Bank Negara Malaysia, noting that simply paying a small tac on everything removes complex regulations, exemptions and multiple tax rates.
He said that the simple structure of an EPT would enhance compliance, cut collection costs, ease administrative burden and allow robust enforcement while its broad-based nature and low rates would minimise market distortion and tax evasion.
“A 0.25% EPT could abolish all of the ad hoc taxes introduced so far, such as the low value goods tax, the sales and service tax (SST), the delayed HVGT, the digital goods tax, the tourist tax and the capital gains tax. All could be replaced,” he told Scoop.
“Alternatively, the same 0.25% EPT could abolish income tax for everyone below the T20 income threshold (while) a 1.5% EPT could replace SST altogether.”
He also said that he hopes for the upcoming budget to have a focus on pensions for ordinary Malaysians as well as reforms for the National Higher Education Fund Corporation (PTPTN) and help for SMEs, especially to cut taxes and regulations to help businesses grow. – October 15, 2024