1 00:00:00,568 --> 00:00:04,710 Speaker 1: This is a podcast from BFM 89.9 The business station. 2 00:00:05,429 --> 00:00:09,869 Speaker 1: This BFM budget 2024 special is brought to you by 3 00:00:09,880 --> 00:00:10,649 Speaker 1: massing 4 00:00:11,170 --> 00:00:14,909 Speaker 1: 7 49 Monday, the 16th of October, and we continue 5 00:00:14,970 --> 00:00:17,549 Speaker 1: our look at budget 2024 with a deep dive on 6 00:00:17,559 --> 00:00:20,430 Speaker 1: the tax measures that were announced on Friday because the 7 00:00:20,440 --> 00:00:24,239 Speaker 1: government is looking to raise total revenue by 1.5% from 8 00:00:24,250 --> 00:00:29,000 Speaker 1: 2023 levels to just over 307 billion ringgit. And while 9 00:00:29,010 --> 00:00:31,329 Speaker 1: there was no mention of the GST in the prime 10 00:00:31,340 --> 00:00:34,580 Speaker 1: minister's budget speech, the government is hiking the services tax 11 00:00:34,590 --> 00:00:36,339 Speaker 1: from 6% to 8%. 12 00:00:36,569 --> 00:00:38,630 Speaker 1: But this will not apply to F and B services 13 00:00:38,639 --> 00:00:39,930 Speaker 1: or telecommunications. 14 00:00:39,939 --> 00:00:42,529 Speaker 2: There were also more details about the proposed capital gains 15 00:00:42,540 --> 00:00:46,110 Speaker 2: tax and luxury tax first announced in budget 2023. Now 16 00:00:46,119 --> 00:00:49,400 Speaker 2: has the government adequately used the tax measures and incentive 17 00:00:49,409 --> 00:00:52,979 Speaker 2: levers to achieve the goals of the Mada economic framework 18 00:00:52,990 --> 00:00:53,189 Speaker 2: and how 19 00:00:53,293 --> 00:00:57,154 Speaker 2: how do ordinary Malaysians stand to benefit from budget 2024? 20 00:00:57,584 --> 00:01:00,134 Speaker 1: Joining us on the line to discuss this is Sim KG, 21 00:01:00,145 --> 00:01:03,814 Speaker 1: country tax leader of Deloitte, Malaysia. Good morning Kwan. Thanks 22 00:01:03,825 --> 00:01:06,304 Speaker 1: so much for joining us again. Now give us your 23 00:01:06,315 --> 00:01:11,464 Speaker 1: overall impressions of budget 2024. Did you feel it? Hit 24 00:01:11,474 --> 00:01:14,315 Speaker 1: the mark in terms of what the government hopes to achieve? 25 00:01:15,760 --> 00:01:19,919 Speaker 1: Morning. Good morning, everyone. Thanks for having me on this show. Um, well, 26 00:01:19,930 --> 00:01:24,419 Speaker 1: broadly budget 2024. I think it's focused on a few 27 00:01:24,430 --> 00:01:28,389 Speaker 1: things here. The first one is on continuing its effort 28 00:01:28,400 --> 00:01:34,620 Speaker 1: in fiscal consolidation. So we are targeting a 4.3% fiscal 29 00:01:34,629 --> 00:01:35,330 Speaker 1: deficit 30 00:01:35,669 --> 00:01:39,959 Speaker 1: compared to 5% last year. And there are some measures 31 00:01:39,970 --> 00:01:45,319 Speaker 1: to restructure the economy in line with the Madani economy 32 00:01:45,330 --> 00:01:49,379 Speaker 1: framework as well as the new industrial master plan. Some 33 00:01:49,389 --> 00:01:53,459 Speaker 1: measures on driving ESG agenda and of course, the lower 34 00:01:53,470 --> 00:01:57,459 Speaker 1: income groups are not forgotten. We see increase in cash 35 00:01:57,470 --> 00:01:59,510 Speaker 1: AIDS is about 10 billion 36 00:01:59,879 --> 00:02:05,349 Speaker 1: and there's some some news on subsidy rationalisation facing out 37 00:02:05,360 --> 00:02:10,419 Speaker 1: diesel subsidies and hopefully there'll be more information on subsidy 38 00:02:10,429 --> 00:02:15,059 Speaker 1: rationalising coming soon from a tax perspective, I think this 39 00:02:15,070 --> 00:02:17,978 Speaker 1: time around there are a number of measures to widen 40 00:02:17,990 --> 00:02:21,350 Speaker 1: the tax base as the Prime Minister has mentioned right 41 00:02:21,360 --> 00:02:25,070 Speaker 1: in his speech that our tax to GDP ratio is 42 00:02:25,080 --> 00:02:27,949 Speaker 1: only about 11.8% which is low 43 00:02:28,059 --> 00:02:32,639 Speaker 1: than that of Singapore and Thailand, right? And measures such 44 00:02:32,649 --> 00:02:37,039 Speaker 1: as the capital gains tax, the service tax rate hike, 45 00:02:37,360 --> 00:02:42,250 Speaker 1: the invoicing luxury goods tax as well as global minimum 46 00:02:42,258 --> 00:02:48,000 Speaker 1: tax should increase tax collection. But there's just a projected 47 00:02:48,008 --> 00:02:52,160 Speaker 1: marginal increase I see in tax collection by about 6.4%. 48 00:02:52,169 --> 00:02:56,239 Speaker 1: That's about 14.6 billion compared to 2023 49 00:02:56,630 --> 00:02:59,679 Speaker 1: um, and if you look at the component of the 50 00:02:59,690 --> 00:03:04,359 Speaker 1: government's revenue right tax collection remains the largest component is 51 00:03:04,369 --> 00:03:09,389 Speaker 1: close to 80% of total revenue, and this will bring 52 00:03:09,399 --> 00:03:14,369 Speaker 1: you to a tax to GDP ratio of about 12.3% 53 00:03:14,449 --> 00:03:17,720 Speaker 1: which is higher than the 11.8% mentioned just now, right. 54 00:03:17,889 --> 00:03:18,919 Speaker 1: But this is still 55 00:03:19,014 --> 00:03:25,674 Speaker 1: relatively lower than the Asia Pacific average of 19.8% and 56 00:03:25,684 --> 00:03:30,013 Speaker 1: OECD average of 34%. So more needs to be done 57 00:03:30,024 --> 00:03:34,365 Speaker 1: in terms of broadening our tax base. So you're saying 58 00:03:34,375 --> 00:03:37,574 Speaker 1: that doesn't really move the needle, the increase in service 59 00:03:37,585 --> 00:03:39,675 Speaker 1: tax rate from 6 to 8%. So I was wondering, 60 00:03:39,695 --> 00:03:44,835 Speaker 1: with the impact of businesses, does it really does it 61 00:03:44,845 --> 00:03:46,615 Speaker 1: really do any good. What are your thoughts on it? 62 00:03:48,160 --> 00:03:50,789 Speaker 1: Yeah. So to widen the tax base, I think the 63 00:03:50,800 --> 00:03:53,929 Speaker 1: government is proposing to increase the rate right service tax 64 00:03:53,940 --> 00:03:58,600 Speaker 1: rate from 6 to 8%. If you look at how 65 00:03:58,610 --> 00:04:02,770 Speaker 1: much this is going to bring, it's about 900 million 66 00:04:02,779 --> 00:04:04,789 Speaker 1: The way I see it, because there's some increase in 67 00:04:04,800 --> 00:04:08,830 Speaker 1: service service tax revenue in 2024 is about 900 million, 68 00:04:09,250 --> 00:04:09,990 Speaker 1: although 69 00:04:10,072 --> 00:04:13,792 Speaker 1: yes, it boosts your tax collection by about 900 million. 70 00:04:13,802 --> 00:04:16,691 Speaker 1: But I think the impact on the businesses has to 71 00:04:16,702 --> 00:04:21,412 Speaker 1: be considered, has to given equal weight and definitely rising 72 00:04:21,423 --> 00:04:25,572 Speaker 1: cost of business will happen because service tax, as we 73 00:04:25,583 --> 00:04:29,893 Speaker 1: all know it has got the tax on tax effect right, 74 00:04:29,903 --> 00:04:31,972 Speaker 1: the tax cascading effect we call 75 00:04:32,686 --> 00:04:37,614 Speaker 1: and it will definitely result in higher prices. So cost 76 00:04:37,626 --> 00:04:42,265 Speaker 1: of doing business will definitely go up. And to cushion this, 77 00:04:42,276 --> 00:04:46,505 Speaker 1: then perhaps the government can expand the B to B 78 00:04:46,515 --> 00:04:53,365 Speaker 1: exemptions that is currently applicable on certain prescribed taxable services. 79 00:04:53,376 --> 00:04:53,914 Speaker 1: Only 80 00:04:54,609 --> 00:04:57,160 Speaker 2: now the government gave more details on the capital gains 81 00:04:57,170 --> 00:05:00,359 Speaker 2: tax on the disposal of unlisted shares, which was announced 82 00:05:00,369 --> 00:05:03,540 Speaker 2: in February this year. How will the CGT be implemented? 83 00:05:03,549 --> 00:05:05,669 Speaker 2: How does it compare with regional peers? 84 00:05:06,570 --> 00:05:07,738 Speaker 1: All right, so first, 85 00:05:08,820 --> 00:05:15,329 Speaker 1: um, So it will take place on disposal of unlisted shares, 86 00:05:15,428 --> 00:05:21,109 Speaker 1: effective from 1st March 2024. OK, And the rate? What 87 00:05:21,119 --> 00:05:23,489 Speaker 1: is the CGT rate? It depends on 88 00:05:26,799 --> 00:05:29,799 Speaker 1: Hello. Can you hear us? I think her line then 89 00:05:29,809 --> 00:05:36,659 Speaker 1: the taxpayer can choose can choose between a 2% CGT 90 00:05:36,928 --> 00:05:43,690 Speaker 1: or 2% CGT on gross sale proceeds or 10% on 91 00:05:43,700 --> 00:05:44,579 Speaker 1: the net gain. 92 00:05:45,390 --> 00:05:48,690 Speaker 1: Can you hear me? Clearly we can. We can please continue. OK, 93 00:05:48,820 --> 00:05:52,179 Speaker 1: all right. So if the shares were acquired before 1st 94 00:05:52,190 --> 00:05:57,078 Speaker 1: March 2024 the taxpayer can choose two rates. You can 95 00:05:57,089 --> 00:06:00,440 Speaker 1: choose between a 2% on gross sale proceeds or 10% 96 00:06:00,450 --> 00:06:04,109 Speaker 1: on that game. If the shares were acquired after or 97 00:06:04,119 --> 00:06:07,730 Speaker 1: from 1st March 2024 onwards, the rate is just 10% 98 00:06:07,738 --> 00:06:08,488 Speaker 1: on the net game 99 00:06:08,839 --> 00:06:12,779 Speaker 1: and there are some exemptions available for IPO and as 100 00:06:12,790 --> 00:06:17,219 Speaker 1: well as internal restructuring exercise. The devil is always in 101 00:06:17,230 --> 00:06:19,760 Speaker 1: the details and we need to look at the finance 102 00:06:19,769 --> 00:06:23,289 Speaker 1: bill for more clarity as we speak. The bill is 103 00:06:23,299 --> 00:06:27,859 Speaker 1: not out yet. Um some issues or challenges, I would say, 104 00:06:28,040 --> 00:06:31,179 Speaker 1: would be the cost base cost base of the shares 105 00:06:31,190 --> 00:06:34,839 Speaker 1: where the shares have been acquired for many, many years, right? 106 00:06:34,850 --> 00:06:35,859 Speaker 1: Is there a possible 107 00:06:36,626 --> 00:06:41,664 Speaker 1: of an inflation adjusted cost base? Because shares are quite 108 00:06:41,675 --> 00:06:44,675 Speaker 1: many years ago is very low. It could the cost 109 00:06:44,686 --> 00:06:46,316 Speaker 1: could be very low. And if you end up a 110 00:06:46,325 --> 00:06:50,186 Speaker 1: net gain, a very substantial net gain and applying a 10% 111 00:06:50,196 --> 00:06:51,906 Speaker 1: of it is going to be so high, right? So 112 00:06:51,915 --> 00:06:56,115 Speaker 1: if you look at Australia, Australia has a similar mechanism 113 00:06:56,126 --> 00:06:58,985 Speaker 1: for long term capital gains. They have this thing called 114 00:06:58,996 --> 00:07:03,226 Speaker 1: the 50% CGT discount, or they also 115 00:07:03,332 --> 00:07:06,492 Speaker 1: to allow an indexation of the cost base of assets. 116 00:07:06,690 --> 00:07:10,481 Speaker 1: So hopefully there are some measures on that. The other 117 00:07:10,492 --> 00:07:14,661 Speaker 1: one is on treatment of the losses arising from disposal 118 00:07:14,671 --> 00:07:16,782 Speaker 1: of shares. How do you treat these losses? Can you 119 00:07:16,791 --> 00:07:22,152 Speaker 1: offset this against a subsequent gain arising from disposal of shares, 120 00:07:22,242 --> 00:07:25,592 Speaker 1: or can it be offset against other sources of income? 121 00:07:25,601 --> 00:07:29,761 Speaker 1: So these are few issues or questions that we have 122 00:07:29,772 --> 00:07:30,511 Speaker 1: in our mind 123 00:07:30,820 --> 00:07:33,970 Speaker 1: just now, the question of looking at regional peers. I 124 00:07:33,980 --> 00:07:37,760 Speaker 1: think CGT is not new. It has been implemented in 125 00:07:37,769 --> 00:07:42,809 Speaker 1: countries like Indonesia, Thailand, Vietnam, Philippines, Australia and UK. And 126 00:07:42,820 --> 00:07:46,220 Speaker 1: the scope is actually much, much wider than unlisted shares. 127 00:07:46,269 --> 00:07:49,690 Speaker 1: And the rate actually ranges from as low as 0.1% 128 00:07:49,700 --> 00:07:53,429 Speaker 1: to 30% depending on the type of assets disposed. OK, 129 00:07:53,440 --> 00:07:55,589 Speaker 1: in the minute or so that we have left the budget, 130 00:07:55,600 --> 00:08:00,179 Speaker 1: 2024 actually have any noteworthy goodies for the ordinary Malaysian citizen, 131 00:08:01,660 --> 00:08:05,730 Speaker 1: right? For for. For the individuals this time around, there 132 00:08:05,739 --> 00:08:09,329 Speaker 1: isn't much. There isn't much. I would say it's just 133 00:08:09,339 --> 00:08:13,109 Speaker 1: some expansion of the scope of the relief as well. 134 00:08:13,119 --> 00:08:15,359 Speaker 1: As one thing I want to call out is here 135 00:08:15,369 --> 00:08:19,109 Speaker 1: is that there's a new tax relief for sports enthusiast. 136 00:08:19,230 --> 00:08:21,850 Speaker 1: It's about it's about 10 1000 137 00:08:21,925 --> 00:08:26,626 Speaker 1: tax relief for purchase of sports equipment for gym membership, 138 00:08:26,635 --> 00:08:30,566 Speaker 1: fees for entry fees to sports facilities and registration fees 139 00:08:30,575 --> 00:08:35,744 Speaker 1: for participation in sports competition. These were actually included as 140 00:08:35,755 --> 00:08:39,575 Speaker 1: part of the lifestyle tax relief last time. Lifestyle tax 141 00:08:39,585 --> 00:08:42,185 Speaker 1: relief was about 2005 right, but now 142 00:08:42,261 --> 00:08:45,341 Speaker 1: this one has been carved up under a separate tax 143 00:08:45,351 --> 00:08:51,030 Speaker 1: relief groups under sports equipment and activities. Um, there's another 144 00:08:51,041 --> 00:08:54,271 Speaker 1: one on medical treatment for self or your spouse and 145 00:08:54,280 --> 00:08:59,242 Speaker 1: your Children. It is 10,000 maximum right now. It includes dental, 146 00:08:59,252 --> 00:09:02,481 Speaker 1: dental examination and treatment of 1000. 147 00:09:02,880 --> 00:09:06,299 Speaker 1: The other one is on medical treatment or care for 148 00:09:06,309 --> 00:09:10,349 Speaker 1: your parents. Ah, it is a maximum of 8000. Right now, 149 00:09:10,359 --> 00:09:15,580 Speaker 1: the scope has been expanded to include parents full medic 150 00:09:15,590 --> 00:09:18,539 Speaker 1: medical examination up to 1000. 151 00:09:19,049 --> 00:09:20,830 Speaker 1: All right, thank you very much for your time. There 152 00:09:20,840 --> 00:09:24,260 Speaker 1: was Sim Kwang Gate, country tax leader for Deloitte Malaysia, 153 00:09:24,270 --> 00:09:27,669 Speaker 1: running through all the tax initiatives announcements that the government 154 00:09:27,679 --> 00:09:29,409 Speaker 1: has made, I think the biggest surprise, of course, was 155 00:09:29,419 --> 00:09:32,520 Speaker 1: the rise in sales and service tax from 6 to 8%. 156 00:09:32,530 --> 00:09:35,710 Speaker 1: And I think questions about the capital gains tax and 157 00:09:35,719 --> 00:09:39,150 Speaker 1: also the implementation of some we didn't unfortunately get to 158 00:09:39,159 --> 00:09:42,429 Speaker 1: it the tier system of tax incentives for whether that's 159 00:09:42,539 --> 00:09:46,219 Speaker 1: going to be enough for investors. Of course. Up next, 160 00:09:46,229 --> 00:09:50,390 Speaker 1: the Breakfast Grill with Johan Marika, Treasury secretary general of 161 00:09:50,400 --> 00:09:53,260 Speaker 1: the Ministry of Finance. Stay tuned for that. That's happening 162 00:09:53,270 --> 00:09:56,140 Speaker 1: after the ad M news bulletin. Keep it here BFM 163 00:09:56,150 --> 00:10:01,289 Speaker 1: 89.9 This BFM budget 2024 special was brought to you 164 00:10:01,299 --> 00:10:05,799 Speaker 1: by masing Reinvents enhance life 165 00:10:07,169 --> 00:10:11,289 Speaker 1: You have been listening to a podcast from BFM 89.9 166 00:10:11,299 --> 00:10:14,270 Speaker 1: the business station for more stories of the same kind, 167 00:10:14,280 --> 00:10:15,858 Speaker 1: download the BFM app.