THE state of taxes in Malaysia is truly shocking. Only 61,000, or 7.8%, of companies registered with the Inland Revenue Board (IRB) were subject to taxes as of end-2017. For personal income tax, only 16.5%, or less than 2.5 million, people were subjected to taxes.

Is it due to the companies not being profitable or individuals are paid very low or is it tax evasion and worse if it is tax evasion? A simple look will show that even some of the top 20 or T20 are not paying taxes because only 16.5% are paying.

The justification for companies is because the current set of rules allows for a generous set of incentives and relief that allows companies to minimise or evade their tax bill. These benefits should trickle down to the owners, shareholders or employees but still only 16.5% are paying.

There were calls for the government to widen its tax base to strengthen the fiscal position but there were no new tax measures in Budget 2020.

Surprisingly, the government “enhanced the RPGT treatment” by setting the market value on Jan 1, 2013 as the property acquisition price for properties acquired prior to Jan 1, 2013 compared to the previous base year of Jan 1, 2000. This runs counter to expanding the tax base and will definitely shrink the government coffers. For information, there is a one-time exemption on gains from the disposal of one residential property in one’s lifetime.

For housing, I am not sure why the government is still giving a “blue-eyed boy” treatment to developers. 

Early 2019, there were overhang properties and the government helped with a home ownership campaign (HOC). As at September 13, sales hit RM14.65 billion, surpassing initial, conservative target of RM3bil with about 90% of units sold. 

Overall sentiment is that business performance is expected to improve in the first half of 2020. Report says, in the first half of 2019, total sales performance increased to 58% from the 43% in the second half of 2018. Yet the HOC is now extended to December 31. 

The main incentive of the HOC is stamp duty exemption on property sales and purchase agreements for properties priced up to RM1mil. In a survey of 144 respondents who are Rehda members, only 41% of respondents reported to have affordable housing components in their projects.

The budget also reduced the threshold for foreigners to purchase urban high-rise properties from RM1 million to RM600,000. Even the minister in charge of housing was not aware of the decision. The prime minister justified it by saying it was intended to reduce the supply overhang. We have built so many houses, but they were not sold and causes the country to suffer losses, he added.

Another surprise is a proposal by the transport minister that housing developers be allowed to dispense with complementary parking lots in their projects to not only lower the cost of the property but also to encourage the use of public transport. 

The best part is the government had launched a RM500 million public transport fund to get commuters to use buses and trains. Were there any contributions from the developers?

For the rent to own (RTO), a financing scheme has been set up with financing of up to RM10 billion provided by financial institutions with the support from the government via a 30% guarantee.

Bottom-line, government coffers reduced, house prices not reduced, negative impact on the fiscal position but players in this sector laugh all the way to the bank and are not really assisting the government on affordable housing. By the way, why should the country lose money due to miscalculations by the players?

It seems all major risks in this sector are borne by somebody else but not the players. Housing must be the best business in Malaysia.

Shouldn’t budgets be used to help governments to identify areas of weakness and allocate resources in a useful and sustainable manner? 

Was there a subtle form of bias?

What say you…

*Saleh Mohammed reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.