UNLIKE the budgets of previous years, Budget 2018 offers a slew of incentives to middle-income earners, starting with a 2% tax cut on taxable income

Ahead of the elections which must be called by next August, the government has provided tax cuts that will translate into more disposable income for Malaysians earning RM20,001-RM70,000 a year.

“This measure will increase the disposable income of the rakyat by between RM300 and RM1,000 per person.

“It is estimated that the rakyat will have an additional disposable income of RM1.5 billion to spend,” said Najib in Dewan Rakyat yesterday.

He did not specify how many Malaysians were in the three income brackets in his budget speech.

This is the first time personal taxes have been reduced since the government rolled out the goods and services tax in 2015.

In Budget 2015, the government cut 1%-3% in personal taxes for all income earners with a maximum tax rate of 25%. 

Although there was no further reductions over the next two years, the band was extended to 28% last year.

PricewaterhouseCoopers Malaysia tax leader Jagdev Singh said he expected a reduction in personal tax rates after the implementation of the GST in 2015, which Budget 2018 had delivered.

“However, there were no changes to existing reliefs,” he said.
 
Another benefit targeted at the M40 group, (Malaysians with household income of RM3,860-RM8,319) was the 50% tax exemption for rental income.

This will save a maximum of RM2,000 rental income a month for the next three tax assessment years.

Middle-class working parents are also expected to welcome the move to allow them to hire domestic workers from nine countries without the need of an agent.

The nine countries, however, were not named in the budget speech.

Najib said this was part of the government’s plan to lower the cost of hiring foreign domestic workers, which could be as high as between RM12,000 and RM18,000 per worker.

Women working in the private sector will also finally get to enjoy 90 days of maternity leave like their counterparts in the public sector starting next year, Najib said after declaring 2018 to be Women Empowerment Year during the budget speech.

The government also made it compulsory for government-linked companies (GLCs), government-linked investment companies (GLICs) and statutory bodies to have at least 30% female representation on their board of directors by the end of 2018.

Women who return to the workforce in 2018 to 2020 after a career break of at least two years will enjoy personal income tax exemption for 12 consecutive months, Najib added.

Meanwhile, GLCs employees will also benefit from several perks including profit-sharing through gradual payment of salaries and allowances and flexible work arrangements such as a compressed work week and flexible and part-time working hours.

Jagdev described it as a “bold move” that was “in line with Malaysia’s gradual move from a developing country to a service-oriented developed economy”. 

“A number of initiatives, like compulsory childcare facilities in new office buildings would certainly provide an environment that encourages mothers to be back at work and contribute towards nation-building,” he said. 

GLCs are now expected to provide childcare centre at their main offices, shorter working hours for pregnant employees and increase training for their employees, including providing education assistance for their employees’ children.  

Other benefits for GLCs employees in the budget include the option to substitute annual and medical leave for cash, and leave for umrah. – October 28, 2017.