An insightful discussion on “Malaysian budget 2021: A Rakyat –Centric Budget during the Pandemic?”
Budget 2021, unveiled on 6 November 2020 by the Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz, was undoubtedly an expansionary budget that aimed to revitalise the economy and help Malaysian tide over the difficulties of COVID-19 pandemic. Budget 2021 was indeed expansionary as it came with an allocation of RM322.5billion, the highest in Malaysia’s history. It also saw an increase of 8.6% compared to Budget 2020 which was RM297billion.
Themed ‘Resilient as One, Together We Triumph’, Budget 2021 was formulated based on three integral goals, namely Rakyat’s wellbeing, Business Continuity and Economic Resilience. The Budget 2021 was also said to be a Rakyat-centric budget that strived to achieve a balance by managing the government’s financial sustainability, ensuring social well-being, and reviving the economy.
In view of this matter, UTAR Institute of Management and Leadership Development (IMLD), Belt and Road Strategic Research Centre (BRSRC) and the Department of Economics jointly organised a forum titled “Malaysian budget 2021: A Rakyat –Centric Budget during the Pandemic?” on 13 November 2020.
The forum saw around 140 participants and it was conducted via Zoom. The speakers were Deloitte Tax Services Sdn Bhd Executive Director Stefanie Low Geok Ping and SME Association Malaysia National Vice President Chin Chee Seong. It was moderated by Faculty of Accountancy and Management lecturer Prof Dato’ Dr Tai Shzee Yew. The forum saw the two panellists, Stefanie Low and Chin highlighting the key measures of Budget 2021 and sharing their thoughts on how the budget benefitted the rakyat.
Stefanie Low presenting the budget’s allocations and salient tax –centric proposals
Stefanie Low said, “The budget is presented annually at the end of October or November and it is tabled under the supply bill. The legislation such as the Income Tax Act and Companies Act needs to pass the Parliament; the same goes to budget, it needs to be presented and debated. Once the members of the Parliament vote, it will become law and effective. As far as I know, the budget will normally pass but it will require some modification.”
She added, “The supply bill refers to the spending of the government. In addition to that, there is also a finance bill that needs to be debated. Wherever the budget is presented, the finance bill will come along. The finance bill will make an amendment to the Income Tax Act 1967 (ITA), Real Property Gains Tax (RPGT), Stamp Act 1949, Sales and Services Tax to either tighten the rules or deny deduction on the increased revenue of the country.”
Stefanie Low also talked about the budget allocations; Salient tax-centric proposals, namely individual tax, tax incentives, stamp duty and indirect tax. Speaking of the budget allocations, she said, “Our government expected to raise RM236.9billion for income but the expenditure allocated was RM322.5billion. Hence, we are running a deficit, our expenditure is more than our income by 5.4%, and it is a deficit in profit and loss.”
Stephanie Low breaks down the key to various segments of the budget’s allocation
“The key revenue of the country is taxation. The revenue comes from income tax and indirect tax. Income tax is the tax of earning and the profit of a company or individual. Indirect tax, on the other hand, comes from sales and service tax,” she explained.
Review of the income tax rate for resident individual
Review of resident individual income tax relief for self, spouse, children, medical expenses and lifestyle expenses
Reduction of employee’s contribution to Employee’s Provident Fund (EPF)
Stephanie Low then moved on to speak about tax incentives. She said, “Tax incentives are given to attract companies that are interested to invest in Malaysia or individuals that have invested in potential companies in Malaysia.”
Government giving tax incentives for companies that are manufacturing pharmaceutical products, companies that are relocating their operations to Malaysia and companies that are undertaking new investments
Government encouraging individual investors to invest in Equity Crowd Funding (ECF)
Government giving incentives for the employment of new graduate
Government giving stamp duty exemption for first residential property up to RM500,000
Chin sharing the challenges faced by the SMEs
Chin, on the other hand, commented on budget 2021 from the perspective of small and medium-sized enterprises (SMEs). He said, “This overall budget is the largest budget allocation. It looks big but when we drill down to the details, we can barely see how the budget benefits the SMEs. In my opinion, the government should provide direct incentives for various programmes. We want a targeted fund or effort that would help SMEs to grow and survive. And we would also like to bring attention to the government that the incentives given need to reach on time in order to support the operations of the SMEs and for them to survive. The SME Association Malaysia also constantly engaged with the government especially during this pandemic situation to understand how the grants can bring benefit to all the SMEs.”
He also emphasised on the press statement given by SME Association Malaysia President Datuk Michael Kang, “Datuk Michael Kang said that 100,000 small and medium enterprises (SMEs) may have closed down since March. The figure mentioned was three times the statistics reported by the Companies Commission of Malaysia’s (SSM), which showed 32,469 SMEs have wound up between March and September. The SSM provided official statistics but the unofficial number is much higher as many SMEs have some loose ends to tie up after pulling down their shutters before submitting the documents to SSM.”
Chin highlighted the challenging situation faced by the SMEs, “Many SMEs in the food and beverage businesses have closed their shops for the time being following the implementation of the conditional MCO in a number of states in the Peninsula because there are no customers. For the retailers, especially those who are doing business in malls, they had gone through too much owing to the recent rise in cases. The SMEs are still struggling with cash flow up till today; there are bills to pay while sales haven’t fully recovered for some of them.”
“We will strongly engage with the government to let them know what is actually happening on the ground and what the SMEs are facing. We do hope the budget with whatever amount will quickly pass and will be quickly implemented to help the SMEs,” he concluded his thought.
The one-hour discussion then saw an active interaction between the speakers and the participants. The talk was concluded with an extensive yet insightful Q&A session.