Below, please find comments by Amarjeet Singh, Asean and Malaysia Tax Leader, Ernst & Young Tax Consultants Sdn Bhd (“EY”) on Malaysia’s 2020 Budget proposals tabled this afternoon.
Budget 2020 sends a clear message to the investor community that Malaysia aims to be the preferred investment destination. It is business-friendly and is focused on spurring investments in the right sectors and activities that will culminate in long term and sustainable growth. The Budget emphasises digital, high technology, human capital development, electrical and electronics (E&E), innovation and research and development, all of which are important building blocks for Malaysia to be a knowledge-based and high-value economy.
The various initiatives introduced are clearly targeted at investments which will move us up the value chain, including introduction of customised incentive packages for mega investments, budget allocations to improve infrastructure and digital connectivity, enhancing employment conditions, improving overall ease of doing business and providing various grants for R&D and innovation.
No new taxes were introduced and the tax base was not broadened, save for a 2 percentage point increase in the individual tax rate on taxable income exceeding RM2 million. Further, the Government reiterated that goods and services tax will not be reintroduced. The expectation is that increased private sector investments will translate to enhanced economic growth and hence a corresponding increase in overall tax revenue. Similar experiences have been observed in other countries. For example, the UK had the highest growth in tax revenue from 2010 - 2015 despite reducing its corporate income tax rate significantly.
In line with the recently unveiled Shared Prosperity Vision 2030 (SPV 2030), Budget 2020 outlines various short and medium term initiatives to address the income and wealth gap, including the Malaysians@Work program, modernizing the labour market, targeted subsidies and improving social security coverage. In addition, the Government has also taken a strategic longer term view, by providing the highest budget allocation to the education sector for the second year running. Collectively, these are crucial steps in improving the overall standard of living and reducing the disparities across income groups, ethnicities and regions, in addition to creating a higher skilled work force.
Bold measures were announced to build a Digital Malaysia. This includes a RM21.6 billion investment for the National Fiberisation & Connectivity Plan (NFCP) for comprehensive coverage of high speed and quality digital connectivity nationwide including rural areas. There are several measures introduced to encourage Malaysian individuals and corporates to embrace digitization for a Digital Malaysia. These measures will propel Malaysia into the digital age, removing physical barriers and opening up access to markets, knowledge and opportunities.
Budget 2020 shows courage, foresight and conviction. It sets a clear policy direction, towards reducing reliance on government spending and encouraging private sector investments to grow the economy whilst introducing measures to ensure equitable and sustainable growth for the shared prosperity of the nation.
This Budget takes bold steps to reestablish Malaysia’s position as an Asian tiger.
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