Budget 2021 : Give the rakyat, businesses tax breaks

By Zaidi Isham Ismail

All eyes are on Budget 2021 this Friday and one of the highlights include more funding to combat COVID-19.

But due to the tough times right now, many quarters are also calling for a reduction in personal income tax and corporate tax.

The Federation of Malaysian Manufacturers said last week that businesses should be given tax waivers in 2020 and 2021.

This is because COVID-19 is far from over and businesses are still struggling.

Tax breaks is a feasible idea as it will help alleviate the financial burden of both individuals and companies.

This will put more money in the pockets of the rakyat and allow them to spend on food and use it for other activities with their children and other family members subject to strict stand operating procedures (SOPs) of course.

Money spent domestically will spur the local economy shielding the country from the weak global economy.

Companies meanwhile can use the money waived from paying tax to bolster their business activities such as intensifying their online presence on social media.

With aggressive marketing, firms can register more sales sparing it from a slowdown enabling it to pay workers salaries.

"With the tax waiver, business activities will intensify and a there will be a reduction in laid off workers and companies will help the country's economy to move forward," an Inland Revenue Board official told DagangNews.com.

Towards that end, the Finance Ministry should lower corporate tax on firms during this time and revert back to the previous rate once COVID-19 is over.

"A reduction in corporate tax will attract foreign investors and spur the country's economy," said Asia Pacific Investment recently.

Malaysia currently slaps a 24 percent tax on its companies while Singapore (17 percent), Thailand (20 percent) and Vietnam (20 percent).

Tax breaks is not alien in Malaysia as the relaxation measure was carried out before.

The Employees Provident Fund for example also lowered the workers contribution to 10 percent from 12 percent before.

A two percentage basis point lowerage in EPF contribution will put more cash in the rakyat's pockets of a few hundred ringgit enabling them to circulate more ringgit in the system.

The money will then be channelled back into the economy providing it resilience and sustainability.

However, tax breaks must be handled delicately to prevent the government from spiralling into bankruptcy.

"The government must not be allowed to be too lenient in offering the tax breaks.

If the authorities bend backwards too much, its collection of income tax will be less and this will affect the government's fiscal position," said the Inland Revenue Board source.

He added a weak fiscal position will set a disastrous course as the economy can collapse and this will be a calamity for the country and the rakyat.

So tax breaks must be conducted judiciously balancing the needs of the government as well as provide tax relief for companies and the rakyat.

Tax breaks can be a tool for the government to lighten the financial burden of the rakyat and small and medium scale enterprises during this difficult time. - DagangNews.com

The writer is former NST Business assistant editor.