20 October 2022
Budget 2023: Bankers, tax experts weigh in on the budget
Datuk Khairussaleh Ramli
Group president/CEO of Maybank Group
Chairman of the Association of Banks in Malaysia (ABM)
Budget 2023 lays the foundations for fiscal reforms, starting with the shift to targeted subsidies. This must be complemented by sustainable revenue sources to reduce dependence on volatile commodity-related incomes and one-off tax revenues as seen in 2022.
Budget 2023 also highlights the latest measures that will be adopted by the banks to combat financial scams. This includes the migration from SMS one-time passwords (OTP) to a more secure authentication method for certain transactions, including fund transfers and payments, change of personal information and account settings. We also welcome the added spend under Budget 2023 to strengthen detection and reporting of cyber threats, including the building of cyber forensic capabilities.
We also support the continued emphasis to drive the ESG (environmental, social and governance) and climate change agenda under Budget 2023, which is a key agenda for the Malaysian financial sector. ABM members have already agreed on a set of seven broad ESG principles for the Malaysian banking industry. This includes the commitment to achieve net zero carbon emissions across the entire business and financed customer portfolio, incorporate
ESG into governance and risk management, as well as the commitment to identify, mitigate and manage risks of modern slavery and human rights across the supply chain.
Tan Sri Dr Teh Hong Piow
Founder, chairman emeritus, director and adviser of Public Bank Bhd
Budget 2023’s spirit of inclusiveness reflects the government’s promise of leaving no one behind. The government’s planned expenditure of a notably higher RM372.3 billion in 2023 with 37.2% allocated for programmes and projects under the social sector shows its resolve and commitment to reducing the income gap between the rakyat and the development gap among the states.
This will help ensure Malaysia progresses successfully and sustainably as a nation. Issues like food security and preparedness for natural disasters were also addressed, in addition to infrastructure spending covering healthcare and education, and digital infrastructure to address development and digital gaps.
We laud the government’s renewed focus on sustainability-based initiatives in Budget 2023, with more emphasis given to enhancing green investments for the development of low-carbon, resilient and healthy urban environments. To this end, the government’s higher expenditure of RM95 billion for development in 2023 will see allocations channelled to programmes and projects with high socioeconomic impact in line with the UN’s Sustainable Development Goals.
Mak Joon Nien
CEO of Standard Chartered Malaysia
As a strong proponent of MSMEs (micro, small and medium enterprises) to get access to financial support, the financing facilities of SemarakNiaga amounting to RM45 billion and the provision of RM9 billion worth of guarantee schemes by Syarikat Jaminan Pembiayaan Perniagaan (SJPP) will aid them in their recovery in the aftermath of the pandemic. The tax reduction rate in taxable income for MSMEs to 15% will help alleviate their cash burdens in the current rising interest rate environment.
The introduction of more efficient tax processes such as e-invoicing and Tax Identification Number (TIN) will elevate the tax experience of and reduce the administrative burden for companies, particularly for smaller businesses. This new tax incentive framework will position Malaysia as an attractive investment destination in the light of global tax developments.As facilitators of cross-border trade, the introduction of an investment fund with an allocation of more than RM1 billion is timely and will enhance Malaysia’s ability to continue attracting quality investments.
Datuk Ong Eng Bin
CEO of OCBC Bank (Malaysia) Bhd
It is heartening to see the needs of the lower-income and marginalised groups continue to be attended to through an emphasis on their well-being. The reduction in personal income tax for those in the RM50,000 to RM100,000 income category is welcome news, even as those in this group continue to face the hardships associated with the ever-rising cost of living.
I am also delighted to see that education continues to be given priority through the increase in budget allocation to RM55.6 billion and the numerous forward-looking initiatives contained in the related plans; the commitment to creating job opportunities for those struggling to find one; and the emphasis on women empowerment. We hope that these will pave the way for further responsiveness and an even more responsible posture while we attend to the underlying needs of the nation as a whole as we renew our journey towards becoming a developed and high-income nation.
Mohd Rashid Mohamad
Group managing director/CEO of RHB Banking Group
We welcome the expansionary nature of Budget 2023, which provides substantial support to ease the financial burdens of the targeted groups. This includes providing the much-needed social assistance while maintaining the government’s commitment to ensuring fiscal sustainability via the review of public expenditure and a plan to have a more targeted subsidy plan aimed at vulnerable groups.
Budget 2023 will increase the momentum for economic recovery with emphasis on structural reforms to strengthen its economic resilience, measures to support the growth of SMEs and priority sectors, as well as improve people’s well-being. Coupled with consumer spending-related measures and targeted tax cuts for certain groups, this would result in multiplier effects on economic activity.
Datuk Sulaiman Mohd Tahir
Group CEO of AmBank Group
The initiative to reduce taxable income for micro SMEs certainly bodes well, particularly within this challenging environment where many businesses are still recovering from the pandemic and are straddled with cash flow issues.
To continue unlocking growth potential and transform as future-ready businesses, it is vital that SMEs embrace digitalisation, while tapping into sectors with strong prospects. In line with this, the government’s establishment of a RM10 billion fund via Bank Negara Malaysia to support the automation and digitalisation of SMEs, as well as the tourism and agriculture sectors is indeed timely and necessary.
As ESG standards continue to gain prominence in the international arena, the RM1 billion allocation under the Low Carbon Transition Financing Fund for SMEs will help to strengthen business resilience and sustainability while contributing to Malaysia’s aspirations towards net zero emissions.
Datuk Wan Razly Wan Abdullah
President/group CEO of Affin Bank
We welcome the expansionary, well-balanced Budget 2023 aimed at sustaining the country’s economic recovery momentum from the Covid-19 pandemic, against the backdrop of sluggish global economic growth and other external headwinds.
The more comprehensive and expanded direct cash assistance amounting to about RM10 billion under Bantuan Keluarga Malaysia and Jabatan Kebajikan Masyarakat will enable the targeted group to meet their most pressing needs according to their priorities, while creating multiplier effects in the local economy.
We also applaud the RM200 million allocation by the government which, among other things, will be utilised to promote and market our tourism industry — especially as international travel is expected to be on the rise with borders reopening across the globe. The growth of our tourism industry will, in turn, spur more demand for our local goods and services.
Sim Kwang Gek
Tax leader of Deloitte Malaysia
The proposal to increase voluntary EPF (Employees Provident Fund) contribution from RM60,000 to RM100,000 a year would encourage Malaysians to build their retirement nest egg, especially for those who made early withdrawals during the pandemic.
To encourage voluntary EPF contribution, the scope for tax relief of RM3,000 for takaful or life insurance premiums will be expanded to include voluntary EPF contribution. In my view, this does not provide much incentive for Malaysians to go for voluntary EPF contribution as the RM3,000 tax relief is not adequate to cover payments for takaful or life insurance premiums and voluntary EPF contribution.
Based on the Household Income and Basic Amenities Survey 2019, the M40 in Malaysia earn between RM4,851 and RM10,970 per month, and represent 37.2% of the total household income in 2019. Taking the lowest income level for the M40 group at around RM58,000 per year, an 11% EPF contribution would come up to RM6,380.
The median income for the M40 group is around RM7,093 per month and an 11% EPF contribution would come up to RM9,363 per year. Hence, increasing the current tax relief for contributions to approved provident funds (including EPF contribution) from RM4,000 to RM10,000 would be more meaningful.
Soh Lian Seng
Head of tax, KPMG Malaysia
Sustainability was certainly a key focus in the Budget 2023 proposals, with the government’s intention to introduce a carbon tax to drive the environment, social and governance (ESG) agenda. Although no specific implementation date has been announced, the government is evaluating the carbon pricing mechanism. Already introduced in various developed countries, the carbon tax will serve as a new source of government revenue and is certainly a step in the right direction to assist our nation in achieving carbon neutrality by 2050.
The extension of the Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) by another two years to Dec 31, 2025, will also continue to incentivise and encourage businesses to accelerate the use of ESG-focused technology and embark on green projects.
As eagerly awaited, the government also announced that the implementation of the Qualified Domestic Minimum Top-Up Tax of 15% will commence in 2024, in line with international tax developments surrounding the Base Erosion Profit Shifting (BEPS) Pillar 2 initiatives. This will combat revenue leakages and profit-shifting activities and allow Malaysia the first right to charge top-up taxes on revenue from entities located in Malaysia that are paying low taxes.
PwC Malaysia tax leader
The M40 group has not been overlooked in Budget 2023. Amid the slew of measures to alleviate the burden of the B40, the two percentage-point reduction in personal tax rates across the RM50,001 to RM100,000 tax brackets is a clear shout-out to the M40. This will result in immediate tax cash savings of up to RM1,000 for individuals within these tax brackets.
However, for individuals in the higher tax bracket, the reduction above is partially set off by the consolidation of the RM250,001 to RM400,000 tax bracket, which was previously taxed at 24.5%, with the RM400,001 to RM600,000 tax bracket at 25%. Nevertheless, there remains a net gain of RM250 for taxpayers with annual taxable income of RM600,001 and above.
There is also a mix of other broad-based and specific measures that would mainly benefit the M40 group and above. This includes an increase in the stamp duty exemption on SPAs and housing loan agreements for properties above RM500,000 to RM1 million from 50% to 75% until Dec 31, 2023, on top of the existing full stamp duty exemption on properties RM500,000 and below, and extension of import duty and excise duty exemptions on imported completely built up (CBU) electric vehicles until Dec 31, 2024.
Malaysia tax leader
Ernst & Young Tax Consultants
The key revenue-raising measures announced were the implementation of the global minimum tax of 15% in 2024, e-invoicing, a potential carbon tax and increased Customs enforcement. Where relevant, appropriate transitional rules should be developed to ensure businesses have adequate time to study the impact and prepare for the implementation of such measures. It is also important that these measures be balanced with initiatives to maintain Malaysia’s attractiveness as an investment destination.
Malaysia will join more than 40 countries that have adopted or will be adopting e-invoicing. Together with the use of the 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.
Budget 2023 also announced major climate change and ESG initiatives. It is very encouraging to see the government taking concrete and strategic steps in promoting the sustainability and ESG agenda. This builds on the proposed launch of the voluntary carbon market exchange by Bursa Malaysia by the end of 2022, which was announced earlier.