LETTER | The state of taxes in Malaysia is truly shocking. Only 61,000 or 7.8 percent of companies registered with the Inland Revenue Board (IRB) were subject to taxes as of end-2017. For personal income tax, only 16.5 percent or less than 2.5 million people are subjected to taxes.
Is it due to the companies not being profitable or individuals are paid very low or is it tax evasion and worse if it is tax evasion? A simple look will show that even some of the top 20 or T20 are not paying taxes because only 16.5 percent are paying.
The justification for companies is because the current set of rules allows for a generous set of incentives and relief that allows companies to minimise or evade their tax bill. These benefits should trickle down to the owners, shareholders or employees but still, only 16.5 percent are paying.
There were calls for the government to widen its tax base to strengthen the fiscal position but there were no new tax measures in Budget 2020.
Surprisingly, the government “enhanced the RPGT treatment” by setting the market value on Jan 1, 2013, as the property acquisition price for properties acquired prior to Jan 1, 2013, compared with the previous base year of Jan 1, 2000.
This runs counter to expanding the tax base and will definitely shrink the government coffers. For information, there is a one-time exemption on gains from the disposal of one residential property in one’s lifetime.
For housing, I am not sure why the government is still giving a “blue-eyed boy” treatment to developers.
Early this year, there were overhang properties and the government helped with a Home Ownership Campaign (HOC). As of Sept 13, sales hit RM14.65 billion, surpassing the initial conservative target of RM3 billion with about 90 percent of units sold.
The overall sentiment is that business performance is expected to improve in the first half of 2020. The report says, in the first half of this year, total sales performance increased to 58 percent from 43 percent in the second half of last year. Yet the HOC is now extended to Dec 31.
The main incentive of the HOC is stamp duty exemption on property sales and purchase agreements for properties priced up to RM1 million. In a survey of 144 respondents who are Rehda members, only 41 percent of respondents reported having affordable housing components in their projects.
The budget also reduced the threshold for foreigners to purchase urban high-rise properties from RM1 million to RM600,000. Even the minister in charge of housing was not aware of the decision. The prime minister justified it by saying it was intended to reduce the supply overhang. We have built so many houses, but they were not sold and causes the country to suffer losses, he added.
Another surprise is a proposal by the transport minister that housing developers be allowed to dispense with complimentary parking lots in their projects to not only lower the cost of the property but also to encourage the use of public transport.
The best part is the government had launched a RM500 million public transport fund to get commuters to use buses and trains. Were there any contributions from the developers?
For the Rent To Own, a financing scheme has been set up with financing of up to RM10 billion provided by financial institutions with the support from the government via a 30 percent guarantee.
Bottom-line, government coffers reduced, house prices not reduced, negative impact on the fiscal position but players in this sector laugh all the way to the bank and not really assisting the government on affordable housing. By the way, why should the country lose for miscalculations by the players?
It seems all major risks in this sector are borne by somebody else but not the players. Housing must be the best business in Malaysia.
Shouldn’t budgets be used to help governments to identify areas of weakness and allocate resources in a useful and sustainable manner?
Was there a subtle form of bias?
What say you?
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