INEVITABLY, Budget 2021 will focus on the recovery of the nation from the pandemic-induced recession.

The budget will be expansionary in nature, which would suit the current market where yields for Malaysian government securities are at historical lows.

Thus, increased spending would be driven by measures that are likely to be centred around tackling issues pertaining to the new normal, such as the acceleration of the adoption of digital technology and modification of the home into a learning and working space.

Extension of lifestyle tax deduction

In view of this, our wish list starts off by proposing an extension into 2021 of the additional RM2,500 for purchase of devices, such as smartphones, notebooks and tablets which was introduced effective June 1 for 2020.

This would allow more Malaysians to utilise the tax break, given that current projections point towards a strong recovery in the year 2021.

The lifestyle deduction should also be enriched to include other items which cater for the conversion of the home to learning and working space such as specialised desks and office chairs.

In addition, bills for mobile post-paid lines should also be included in the lifestyle expenses in addition to the current internet bills to cater for the SFH and WFH culture.

Enhanced employment insurance scheme (EIS) & graduate employability  

We further propose that the current employment insurance scheme (EIS) currently under Socso be offered on a voluntary basis to those who are self-employed, which would also cater for those in the gig economy sector.

Furthermore, Socso could propose enhanced options for those who wish to take up enhanced versions of the scheme where the unemployment allowance can be up to 100% of wages for six months rather than the declining approach currently adopted.

In addition, the cap for contribution should be increased to RM8,000 (from the current cap of RM4,000) given that the poverty line has also been revised from RM908 to RM2,208 in July 2020.

Contributions for the EIS including voluntary uptake should also be given tax deductions. The enhanced EIS framework would serve the country well in future crisis as well given the evidence emerging out of countries such as Germany indicate that lessons learnt from the 2008/9 financial crisis lead to an enhanced adoption of such schemes which were heavily relied on during the peak of the job losses due to the current recession.

The wish list continues with the proposal to enhance the graduate employability scheme via increased incentive for hiring of fresh graduates for the employer. This is in line with the current projections by the Higher Education Ministry where graduate unemployment is expected to hit 25% this year as a fallout of the Covid-19 downturn.

Matching grants for EPF contributions

We would also like for the government to provide matching grants in the form of EPF contributions for those who do not meet the basic savings requirement from the B40 and are in the age bracket of 45-55.

This is to cater for an aging society as well as the reliance on EPF withdrawals during times of hardship over the years.

Furthermore, the tax deduction should also be increased to RM6,000 for EPF contributions whilst maintaining a separate RM3,000 for life insurance/family takaful contributions. This would be in-line with the recent revision in the poverty line which was widely applauded.

The deductibility of SSPN savings should also be increased to RM10,000 in order to allow parents to get back on track for accumulation of savings for education to counter potential depletion of savings during the pandemic.

In addition, the quantum for tax deduction for education fees at the post-graduate level to be increased to RM15,000 in order to encourage upskilling of the current workforce in order to reap the benefits of the economic recovery whilst ensuring resilience during future downturns. The deductibility should also be extended to include fees for spouses.

Tax deductions & tax relief efforts to support lower-income families

The tax deduction for voluntary PRS contribution should be made permanent given that the incentive is set to expire.

The quantum for the deduction should also be increased to RM4,500 per year to be in-line with the revised poverty line.

Offerings on the PRS platform should also be enhanced to include more global funds at lower costs. This can be done through reliance on ETFs or inclusion of licensed robo-advisers such as Stashaway and Wahed Invest as providers into the scheme.

It would further boost the popularity of PRS, especially among millennials, given their preference for fintech solutions. When it comes to accumulating retirement savings, starting early is often the best strategy.

The wish list also includes an equal tax relief for spouses for single breadwinners. It is aimed at catering to the projection that there will be an increased shift towards SFH and WFH culture even in a post-Covid-19 world.

In order to further promote domestic tourism, our wish list also includes an extension of the domestic tourism expenses until the end of 2021.

This allows the sector to rejuvenate and partake in the expected economic rebound and thus providing a much-needed boost in spending in the sector which has suffered in the current situation.

Lastly, we conclude our wish list with a special tax deduction of RM5,000 at the individual level in order to boost consumption spending in 2021. – October 30, 2020.

* Dr Hafezali Iqbal Hussain is associate professor at School of Management & Marketing, Faculty of Business & Law, at Taylor’s University.

* 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.