Maybe it is the opportune time to propose to the govt to revise some of the individual tax relief
pic by MUHD AMIN NAHARUL
THE COVID-19 contagion impact on economic activities will witness Prime Minister Dr Mahathir Mohamed unveil a stimulus package on Feb 27 to help sectors devastated by the outbreak.
The threat is real. Retail mall tenants are seeking rebates on rentals from their landlords. The Malaysian Employers Federation is asking the government to consider delaying the minimum wage increase to RM1,200 a month starting February until industries return to normal.
The good part is, the government seems to be in a better financial position. The Inland Revenue Board collected some RM145 billion in taxes last year with individual taxes accounting for about 25% of the amount traditionally.
Tax refunds amounted to about RM1.6 billion, according to news reports quoting Finance Minister Lim Guan Eng.
With various groups proposing various measures, now maybe the opportune time to propose to the government to consider revising some of the individual tax relief as the high cost of living continues to pressure households while wage growth plays catch up.
As it stands, the personal income tax filing period has begun with some RM25,000 worth of tax relief available for a single healthy resident taxpayer. If married with children and parents to care for, the tax relief amount is much higher.
Thus, we can start by considering revising the Employees Provident Fund (EPF) contribution relief limit.
At present, the EPF relief limit is set at a miserly sum of RM4,000, while the government has been far more generous with its relief for the Skim Simpanan Pendidikan Nasional set at RM8,000 and RM3,000 for the deferred annuity and private retirement scheme investments.
With employers facing challenges giving yearly wage increases for many employees, raising the EPF relief limit, say by 100% to RM8,000 a year, would help a certain section of taxpayers have a little more in refunds, if any, which can help boost consumption.
The higher limit is probably a safer stimulus option than cutting the employee’s EPF contribution rate, which hits the retirement savings amount.
The middle 40% section of the society would welcome a higher relief rate as they usually gain little or nothing from the annual budget measures announced to shore up the vote bank with the bottom 40% segment.
Furthermore, government coffers are estimated to get a RM2.4 billion boost from the digital tax collection this year, according to reports quoting tax experts.
The move to charge a 6% digital tax is a tax on the public as foreign digital service providers like Netflix are passing on the service tax to their customers here. The higher relief limit in some ways can act as a refund on the digital tax.
Bhupinder Singh is the corporate desk editor of The Malaysian Reserve.