Budget 2014_??????

Most Malaysians were more anxious about our most recent Budget 2014 than budgets of previous years; especially with Fitch downgrading our sovereign credit outlook, similarly so was yours truly. Below, some that caught my attention.

1. GST

The Goods and Service Tax(GST) will be implemented on 1st April 2013 at 6%. A consumption tax, it will be zero rated for basic food, domestic water, 200 units of electricity, transport services, residential properties, tolls; exemptions will be for education, healthcare and financial services.

Our fiscal deficit and debts have been too high and with the GST implementation, the government's coffers will improve. Let us hope that the additional tax collected willl be put to good use (improving the economy, fighting crimes and corruption, better education, health care and transportation) instead of some illegitimate or some undeserving pockets. Being a broad base tax, GST will hit all consumers. So how will the poor cope?

Assuming that most consumption from the lower income, for example rice, meat and other essential items are zero rated some will still fall under the GST net. Assuming that only RM400 of their monthly expenditure is subjected to the 6% GST, that works out to be RM288 per year, the one-off cash assistance would cover that nicely. But what if it is RM800, the monthly GST that they will be paying would be RM48 or RM576 per year. Depending on the list of goods zero rated and those exempted, (details of which would be disseminated) it could be much higher. Hopefully, the list of zero-rated goods and services will be long, as even exemptions may have some tax depending on their inputs.

How badly GST will affect the poor waits to be seen, hopefully there will be measures to relieve the poor and the struggling middle class too.

2. Sugar Subsidy

Sugar subsidy has been removed and the price per kg. now stands at  RM2.84, up by 34 cents. It is a healthy move, too many of us are taking too much sugar. There should not be any price increase in our drinks or food.

A tablespoon of sugar is approximately 12 -13 gms., Even if assuming it is 14 grams to 1 tabsp, a kilogram of sugar would give you about 70 tablespoons of sugar, each tabsp of sugar will cost at the most 0.5 (half) cent extra with the subsidy removal of 34 cents. On the same note, if you do not want any sugar in your drinks, you become healthier and you save +/- 4 cents. But I am sure you would not ask the poor vendor to reimburse you 5 cents for your sugarless drinks.

3. Real Property Gains Tax(RPGT)

RPGT has been increased to 30% for properties disposed within 3 years, 20% for the 4th year, 15% for the 5th year, and tax free after 5 years for Malaysians(individuals). Foreigners are subjected to 30% RPGT for disposal within 5 years, thereafter it will be at 5%. Companies too will have to pay 5% from the 6th year. Someone I know was asking why is it 30% and not 50%? Why not when properties are have risen so much that most of us are finding it difficult to own one. Hooray! for the prohibition for Developers Interest Bearing Scheme. Hooray! too for measures to boost affordable housing. I think it is a bit too little and a little too late for some of us.

4. Foreign Ownership of Properties

The minimum price of properties that can be purchased by foreigners has been raised from RM500,000 to RM1 million. Is it high enough? Not for some locations.

5. Broadband Phase 2

RM3.4bil allocated for high speed broadband. That is just great, isn't it, hope we do not have to wait too long for the roll out. How many of us have been experiencing broadband speeds that literally makes us so very mad!

6. For the Middle Income Earners

A special Tax Relief of RM2000 for tax payers earning up to RM8000 per month for year 2013. The  tax rates for various income tax brackets and maximum chargeable threshold has been amended, but the date of implementation is unclear.

  

:-) Well, go shopping early for those items that will be subjected to GST before implementation date, those big item purchases and that you cannot do without or have been thinking of buying. Buy less of those that you can do with less if you have to pay for GST after 1April 2014. My guess is that consumption for Christmas and the coming Chinese New Year will be higher. Maybe I should upgrade my hand phone now too. 

Wonder how GST will affect home renovations? That would fall under residential properties, so material and labour inputs are tax free? What about renovations for non-residential properties? The small contractor will have more clerical work segregating their accounting.