Today’s Budget 2023 represents a holistic, effective budget that attends to key critical parts of our society and economy. For many, this budget reminds us of the budget presentations in the 1990s when Datuk Seri Anwar Ibrahim was our finance minister, where he played an instrumental role in shaping Malaysia’s strong economic growth then. Budget 2023 continues to carry the hallmark of Anwar’s legacy in building a great nation. This is evident from his emphasis on good governance by reiterating his firm stand to combat corruption and laudable proposals to strengthen our economy and alleviate the impact of cost of living increase on the rakyat. Some of the key points are:

1. Ending the speculation on goods and services tax (GST) implementation. A right move in the present economic circumstances as GST would impact all Malaysians including the lower income group. However, the proposal to impose additional tax on luxury goods was unexpected, but there is no major downfall to this as luxury watches and bags are non-essential goods and consumers wanting to purchase them are likely to be in the high income bracket.

2. While the anticipated capital gains tax will not be implemented across the board, the introduction of a low-rate capital gains tax in 2024 for non-listed companies' shares is being studied. Currently, Malaysia's taxes gain from disposal of non-listed real property company shares.  

3. The 2% reduction for individual income tax will benefit many middle class taxpayers with an additional disposable income of up to RM1,300.

4. The commitment to a sustainable economy is clear from the green investment tax allowance and exemption extension. Recognising that carbon capture and storage technology as a new source of economic growth, various attractive tax incentives including full import duty and sales tax exemption will be made available.

5. The increased tax deduction on listing expenses on the ACE and LEAP Markets including the listing of technology-based companies will hopefully encourage more local SMEs to list their business as an avenue to grow their business. The SME sector will also enjoy a tax rate reduction to 15% on the first chargeable income of RM150,000.

6. The manufacturing sector received a number of tax incentives as the government is determined to attract immediate high-value investment like the manufacturing of electric vehicle charging equipment. The upcoming New Industrial Master is expected to outline the direction of industrial development by focusing on high-quality activities and the recruitment of local talent. The various tax incentives for the electrical & electronics and aerospace sectors are also extended.

7. The creative industry stands to benefit from the granting of tax deduction for contributions made to the Film Community and National Film Development Fund, in addition import duty and sales tax exemption on studio and production filming equipment.

8. The move to impose excise duty on nicotine-based liquids or gels used in electronic cigarettes and vapes is a spot-on measure to increase revenue.

Finally, the tax amnesty move with 100% penalty remission for voluntary declarations from June 1, 2023 to Dec 31, 2024 is unexpected, but it is certainly a smart move to encourage taxpayers to do the right thing by taxing their undeclared income.  

S Saravana Kumar is a tax, SST and customs partner at RDS