Govt likely to reduce tax burdens of middle-income earners

The Government will reduce the tax burden of the middle-income group in the coming budget after it reduced the tax rates for the high- and low-income groups in the last budget.

Malaysian Rating Corp Bhd (MARC) chief economist Nor Zahidi Alias said in a pre-Budget 2012 report that there might not be any broad-based tax cuts for individuals and corporations, but there could be a reduction in the personal income tax rates for those in the middle-income group.

He said that a reduction of the tax rates for those with chargeable incomes of RM50,001 to RM70,000 and RM70,001 to RM100,000 would be justified to help offset the rising cost of living.

Nor Zahidi said a separation of the reliefs accorded to Employees Provident Fund contributions and insurance premium payments, as well as an increase in the amount of relief provided, would reduce the amount of taxable incomes for individuals and encourage purchases of medical insurance. He pointed out that the budget would be prepared against a backdrop of uncertainty and rising challenges for the domestic and global economies.

“Hence, the Government will have to walk the tightrope between promoting domestic demand and keeping its financial resources strictly in check, with any spending programmes to be based on the twin factors of affordability and economic importance.”

He expects Budget 2012 to focus on alleviating the impact on the rising living costs and addressing imbalances in the economy.

Among the measures that can be implemented are an increase in the housing allowance for civil servants working in high-cost areas as well as measures addressing rising food costs and property prices.

A definitive time frame for the implementation of the goods and services tax could be announced in order to prepare businesses sufficiently.

There could be measures to support the National Housing Policy that was announced in February including formal, contractual arrangements for cess-fund contributions from developers that would be standardised across states which then would be used for low-cost housing. - from thestar.com.my