KUALA LUMPUR (Feb 27): The latest adjustment of the income tax under the revised Budget 2023 will not impact those with an annual taxable income of below RM230,000, said Treasury Secretary General Datuk Johan Mahmood Merican.
This, he said, is because the tax reduction in the lower taxable income bands offsets the tax increase in the higher taxable income brackets.
“One way of looking at it, if you do the maths, is you won’t be paying additional taxes unless you earn more than RM230,000 [a year], and that is after deducting the reliefs,” he said during a post-budget debate on Monday (Feb 27).
Johan said those earning RM20,000 a month should be able to “contribute a little bit” more in tax.
In the revised Budget 2023, Prime Minister Datuk Seri Anwar Ibrahim announced that the government is reducing individual income tax by two percentage points for the taxable income brackets of RM35,000-RM100,000.
The government will also increase the tax rate by 0.5 to two percentage points for the RM100,000 to RM1 million taxable income bands.
According to Finance Ministry data, the tax hike represents an additional tax of between 0.4% and 4.6% of taxable income for some 150,000 taxpayers in the higher income group.
On the other hand, those who earn below RM100,000 a year — some 2.4 million taxpayers — would enjoy tax savings of between 12.1% and 16.7% of their taxable income.
The tax cuts alone was worth about RM1.2 billion, but partially funded by higher taxes for the higher income groups.
“With that offsetting about RM300 million, there is still a RM900 million impact on the fiscal position,” Johan said.
Entrepreneurs should be taxed too, not just wage earners
At the forum, Johan also addressed concerns over the proposal to impose a capital gain tax on gains relating to transfer of non-listed shares.
Discussions hovered around the impact of the new tax on entrepreneurs and innovation, and whether this is a “teaser” to cover more assets to come.
“We are not going near the listed shares, there is no intention to impact the capital market, so rest assured on that front,” Johan said.
He pointed out that as wage earners shoulder the burden of income tax, the current structure allows others who earn the same amount to escape from paying tax simply because their gains are structured as capital gains.
“Culturally we think of Malaysia as a mercantile economy where we give full incentive to business owners or entrepreneurs who can then help create jobs.
“This is a rhetorical question: is it fair that wage earners pay tax whereas entrepreneurs are able to structure their gains as capital gains and pay virtually no tax?” he asked.
Johan also pointed out that the 150,000 taxpayers in the higher income groups who pay income tax represent just 1% of the entire labour force of 15 million.
“Why is there only 150,000 earning above RM20,000 [per month]? I am fairly sure there are entrepreneurs who are earning more than RM20,000 who are not taxpayers. That’s partly because there is too clinical a division — where salary is taxed and capital gain is zero-taxed,” he said.
This comes back to social justice disparity raised by the new government, Johan said. “There’s just too much discrepancy… that is something we have to consider,” he said.