KUALA LUMPUR, 23 Oct 2009: Prime Minister Datuk Seri Najib Razak, in an effort to improve the people’s well-being, today announced the government’s proposal to increase personal income tax relief from RM8,000 to RM9,000.
At the same time, the government was also proposing to restructure the national fuel subsidy system to be more equitable.
In tabling Budget 2010 in the Dewan Rakyat, Najib also announced other reductions and benefits.
Najib said the personal tax relief increase would mean that each individual tax payer would enjoy an increase of RM1,000 in disposable income. He added that the relief would be from the year of assessment 2010.
Presenting his first budget speech after taking over as finance minister, Najib also announced that to ensure that individual income tax remained competitive and to continue the economic agenda, the government proposed that the maximum income tax rate be reduced from the current 27% to 26% starting next year.
Following this, he said, the maximum tax rate for cooperatives would also be reduced to 26% while the fixed tax rate for non-resident individuals would be reduced, also to 26%.
The government also proposed an innovative and radical tax incentive to attract local and foreign talent as well as to intensify the development of the Iskandar Malaysia development corridor.
“The government proposes income tax on employment income of Malaysians and foreign knowledge workers residing and working in Iskandar Malaysia be imposed at a rate of 15% compared with the maximum rate of 26% for the rest of the country,” said Najib.
However, the prime minister said those eligible for this tax treatment must be engaged in qualifying activities such as green technology, biotechnology, education services, healthcare, creative industry, financial advisory and consultancy services as well as logistic services and tourism.
“They must also add value in their respective fields. This incentive will be available to those who apply and commence work in Iskandar Malaysia before the end of 2015 and they would enjoy this incentive indefinitely,” he added.
Speaking on the restructuring of the fuel subsidy scheme, he said that currently all motorists, including luxury vehicle owners and foreigners, enjoyed the government subsidised fuel scheme and this had put a strain on the government’s coffers.
“To ensure subsidies only benefit targeted groups, the government will implement a fuel subsidy management system in early 2010. This is a more people-friendly system using MyKad and the existing infrastructure.”
Realising that it was important for the people to start saving from a young age to ensure continuous income after retirement, the government has also proposed the setting up of an annuity scheme.
“With the rising life expectancy, savings with the Employees Provident Fund (EPF) may not be sufficient to provide adequate income during their retirement years. Hence the annuity scheme is an appropriate financial instrument for this purpose.
“To encourage more Malaysians to participate in this scheme, the government proposes the existing personal tax relief of RM6,000 for EPF contribution and life insurance premiums be increased to RM7,000. This increase of RM1,000 is for relief on annuity premiums paid from 1 Jan 2010 for retirement schemes offered by insurance companies,” said Najib. — Bernama