Wednesday, October 30, 2013

Why cut tax rates of very rich - this really must be increased.

It is absurd for the government to reduce amount of taxes paid by the rich...the very rich, i.e. those whose chargeable personal income is more than RM50,000 per annum.[Note the table deals with "chargeable personal income", i.e. actual income less all them tax exemptions]

Note that the reduction for those whose chargeable personal income of up to RM50,000 was reduced only 1%, but for those very rich it was reduced so much more. Why? Let us look at the amount of reduction, i.e. % of reduction

RM50,000 - 70,000   - 3%
RM70,000 - 100,000 - 3%
RM100,000 - 250,000 - 2%
RM250,000 - 400,000 - 1.5%
RM400,000 and more - 1%

This is indicative of the fact that this BN government is yet again helping the very rich... 


Rightly, at this time when Malaysia is suffering 'financially' so much so subsidies from sugar and cooking oil, amongst others are being removed, taxation of the richer Malaysian should be increased....

What I would propose is that:-

1. For those with chargeable personal income RM20,001 - RM35,000, tax rate should be 3%
2. For those with chargeable personal income RM35,001 - RM50,000, tax rate should be 10%

3, Now for those with chargeable personal income more than RM50,000, it should be higher

RM50,000 - 70,000   - 15%
RM70,000 - 100,000 - 20%
RM100,000 - 250,000 - 25%
RM250,000 - 400,000 - 30%
RM400,000 - 600,000 - 35%
RM600,000 - RM1,000,000 - 40%
Above RM1 million - 50% 

There really is no justification for the reduction of the tax rates of the really rich on account of the introduction of GST or for any other reason.

Money from income tax is used by the government to expend on matters for the entire population... making even introducing no GST for telecommunication, and maybe even radio/TV which are really essentials today in Malaysia. It could also be used to subsidize cooking oil and sugar.

Handphones is a necessity as the government failed to ensure adequate public phones...Even many of the ones that are around are not maintained. 
TV - today thanks to Malaysian governments failings, we really have no choice by to rely on ASTRO Satelite TV. Surely Malaysians should not be required to pay GST for this.

The source of the table above is a Malaysiakini article, which is also included for your reading pleasure

Malaysia should also consider increasing personal taxes, and guarantee that Malaysians would always have free universal healthcare, free education (inclusive of tertiary education in Malaysia), unemployment benefits, old age welfare and benefits(maybe even guaranteed monthly payments for old folks who do not get pensions and have no other source of income/support - noting that the days when parents could depend on their children are fast disappearing. Even government initiated housing schemes do not take into account a room for elderly parents/relatives..)

New income tax structure savings won't offset GST
  • Aidila Razak
  • 7:47AM Oct 29, 2013
Savings that households stand to make with the introduction of the new income tax structure proposed in Budget 2014 are not likely to offset the amount paid when the Goods and Services Tax kicks in beginning April 2015.

However, according to Chartered Tax Institute Malaysia president SM Thaneermalai, this is to be expected as the government would not have introduced the GST, unless it meant more revenue.

"We must accept that by introducing the GST, the government will be making more in tax revenue," Thaneermalai said when contacted.

Malaysiakini estimates that for some income brackets, the amount of GST to be paid annually can be almost three times the amount of savings made under the new income tax structure, depending on the income level.

Using consumption data published in the Bank Negara Malaysia 2012 annual report, it can be extrapolated that those in the middle income - the RM4,000 to RM5,000 a month income bracket - may pay around RM200 to RM260 in GST per month.

This means they will pay between RM2,400 and RM3,120 in GST annually, but only save RM1,050 under the new income tax structure.
However, this does not take into account savings that may be made from the scrapping of the sales and services tax. The government argues that some goods will be cheaper as a result.

This also does not take into account food items such as meat, fish and vegetables, which mostly have zero GST. However, Bank Negara estimates that a great bulk of spending by those in this income bracket is not on food.

In addition, those in the RM4,000-RM5,000 bracket pay more GST, as a proportion of their income, compared with those earning higher than RM5,000 a month.

Likewise, they will pay less GST as a proportion of their income, compared with a person earning RM4,000 and below.

The same finding was found by Penang Institute fellows Lim Kim Hwa and Ooi Pei Qi in their study published earlier this month.

Although their research used a GST rate of seven percent - one percent higher than that proposed by the government last Friday - a similar pattern can be found with GST at six percent.

Who to pay the most GST?

Using the Department of Statistics household expenditure survey, the Penang state think-tank also found that these households with the following profile will pay a higher GST as a proportion of their income:
  • Single person
  • Young (aged less than 24 years old)
  • Bumiputera
  • Clerical workers, skilled agricultural and fishery workers
By the same measure, households that meet the following profile will be the largest contributors to the government's GST revenue:
  • Chinese-led households
  • Head of household aged between 35 and 44 years
  • Professionals, managers, senior officers and legislators
NONEMeanwhile, Thaneermalai pointed out that in the initial stages, the middle and lower income groups would be beneficiaries of about RM5 billion in welfare aid and tax breaks to cushion the GST blow.

"The estimate revenue from GST at six percent is RM8 billion, but we cannot forget the reduction in income tax, tax breaks for those earning RM8,000 and below, the expansion of the Bantuan Rakyat 1Malaysia and the RM300 additional one-off assistance to those already receiving BR1M.

"For 2014-15, the government will be paying roughly RM5 billion, bringing the (initial) net effect of the GST to about RM3 to RM4 billion," he said.

Thaneermalai said what people needed to accept was that government would not put everybody through the pain of the GST if it did not mean more money in the coffers by implementing it.

"So, on the revenue side, things are looking better for the government but it will have to watch the spending side," he said.


1 comment:

Becoming Ren said...

How is it fair that 10% of hardworking Malaysians (I am talking about those who earn high but honest salaries after being denied government tertiary education, scholarships, bumi perks etc) pay for the rest of the 28ish million? I support the GST, even if my daily costs increases, at least the freeloading Malaysians can feel it too. We have been footing the bill for them for too long. I hope GST is implemented asap.