Introduction

On 15th October 2010, the 2011 budget was tabled before the Parliament by our Prime Minister cum Minister of Finance, Y.A.B Dato Sri Mohd Najib Tun Abdul Razak. This clip about, the accent on transforming Malaysia into a high-income state and this is evidenced by the budget subject “ Transformation Towards a Developed and High-Income Nation ” . Under the umbrella of the new budget 2011, authorities have increase the disbursement of the operating outgo where they are increased RM 10.7 billion in twelvemonth 2011 as shown in figure 1.

Figure 1- Operating and development outgo from twelvemonth 2007-2011

While there are some surprises from the authorities on development outgo which are decreases on their disbursement by RM 5 billion in the latest budget. By and large the budget for twelvemonth 2011 outgos have increased compared with twelvemonth 2010. This is alining with the Malaysia authorities purpose of heightening quality of life of the rakyat. The Malaysia authorities have started to alter their policy of roll uping gross from direct revenue enhancements to indirect revenue enhancements started from twelvemonth 2008. The principle buttocks is where they want Malaysia remain competitory in this parts by supplying a more attractive revenue enhancement rate compared to their neighbor. The authorities is seeking to take down its income revenue enhancement rates every twelvemonth to do it competitory with their neighbors. For illustration, from 28 % in YA 2002 to 25 % in YA 2009 for companies whereas for personal income revenue enhancement the maximal revenue enhancement rate is merely 26 % . Figure 2 below illustrate that the income revenue enhancement rates at corporate and single degree for Malaysia with its neighbors.

State

Personal Taxes Rate

Corporate Tax Rate

Cambodia

20 %

20 %

Malaya

26 %

25 %

Philippines

32 %

30 %

Siam

37 %

30 %

Singapore

20 %

17 %

Vietnam

35 %

25 %

Figure 2- Tax Rate in SEA

Corporate Tax

The standard corporate revenue enhancement rate in Malaysia for the twelvemonth of appraisal 2011 is still staying at 25 % , while for occupant little and moderate-sized companies if the companies capitalised at RM 2.5 million or less and non portion of a group holding a company transcending the above capitalization threshold will taxed at 20 % on the first RM500, 000 with the balance taxed at the 25 % corporate revenue enhancement rate. For non-resident companies the revenue enhancement rate for royalties ; lease of movable belongingss and proficient or direction services fees for the revenue enhancement rate in the twelvemonth appraisal 2011 is 10 % . The involvement revenue enhancement rate is 15 % , the dividends for individual grade and franked revenue enhancement rate is exempt and 25 % in the twelvemonth appraisal 2011 ; the concern revenue enhancement rate is 25 % and the income other than the above is 10 % revenue enhancement rate. For the proficient or direction services fees merely will be revenue enhancement when the services rendered in Malaysia are apt to revenue enhancement. Besides that, the receiver is resident in a state which has a dual revenue enhancement pact with Malaysia ; the revenue enhancement rates for specific beginnings of income may be reduced. The involvement paid to a non-resident by a bank or a finance company in Malaysia or on sanctioned loans is exempt from revenue enhancement. An sanctioned loan is a loan granted to or guaranteed by the Malaysia authorities.

Figure 2 illustrated that Malaysia revenue enhancement rate at corporate degree can see as moderate compared to our neighbor ( Singapore ) which merely charge Corporations at a revenue enhancement rate of 17 % . This can be one of the major factors where Singapore is one of the preferred finishs for foreign investors. Malaysia authorities has already planned to do a great discovery since they started to cut down the corporate revenue enhancement rate for every twelvemonth. This will do our state more attractive in term of taxonomy chance where investors view it as a great chance to put in Malaysia. In order to stay competitory at the South East Asia part we should besides familiarise with other state as good. In Cambodia, the corporate revenue enhancement rate is by and large levied at a rate of 20 % on the nonexempt income. Particular rates may be applied to certain activities. Oil or nature gas production activities and the development of natural resources including lumber, golf and cherished rocks are taxed at a rate of 30 % . Income derived from Qualified Investment Project ( QIP ) approved by the Development Council of Cambodia ( DCC ) and entitled to 5 old ages transitional period are taxed at the rate of 9 % or at the rate of 0 % during the revenue enhancement freedom period as determined by CDC. Qualified insurance companies are taxed at the rate of 5 per centum. Dividends received from occupant companies are non capable to income revenue enhancement.

Singapore is the lone state in this part which revenue enhancements their corporations below the 20 % revenue enhancement rate where corporations at this island will be taxed at a rate every bit low as 17 % , with a partial freedom of 75 % on the firs SGD 10,000 and 50 % on the following SGD 290,000 of the company ‘s income. Full revenue enhancement freedom can be granted on the regular income of a modification company up to SGD 100,000, for any of its first 3 back-to-back old ages of appraisal. A 50 % partial revenue enhancement freedom applies to the following SGD 200,000 of regular income. A concessionary revenue enhancement rate of 10 % or lower applies to qualified entities.

While for Thailand the corporate income revenue enhancement is levied at a rate of 30 % . It may be reduces to 20 % or 25 % for certain Thai companies listed on the Stock Exchange of Thailand prior to 31 December 2009. Dividends distribution to foreign companies is capable to a 10 % keep backing revenue enhancement. Small and medium sized endeavors ( SME ) with less than THB5 million paid-up capital may use to a decreased corporate income revenue enhancement between 0 % and 25 % on the following nonexempt net incomes non transcending THB3 million. Some inducements are granted to companies promoted by the board of investing ( BOI ) , assets direction companies ( AMCs ) , and venture capital companies puting in SMEs capable to certain conditions. The corporate income revenue enhancement rate for a regional operating central office is reduced to 10 % on measure uping ROH service income, royalties and involvement and 0 % on dividends received from associated endeavors. A rate of 3 % applies to gross income of companies engaged in international transit. Companies within crude oil grants are taxed at a rate of 50 % revenue enhancement rate over the net nonexempt net incomes.

Corporations at Vietnam is presently capable to a revenue enhancement rate at 25 % and it is applies to resident companies owned by foreign stockholders licensed from 1 January 2004, and Vietnamese endeavors. However, decreased revenue enhancement rates may be applied for qualified undertakings. Corporate income revenue enhancement rates up to 50 % is apply to entities carry oning prospecting, geographic expedition and development of crude oil and gas and other rare and cherished natural resources.

Personal Tax

The revenue enhancement rate for the occupant ‘s person ‘s position which is determined by the continuance of persons stay in the state under Section 7 of the Income Tax Act 1967. For illustration, an person who stay in Malaysia for at least 182 yearss in a calendar twelvemonth is regarded as a revenue enhancement occupant. The income revenue enhancement rate for Malaysia persons is progressive up to 26 % with consequence from the twelvemonth of appraisal 2010. The occupant ‘s person is taxed on his or her indictable income after subtracting personal alleviation. Then if who do non run into abode demands are taxed at a level rate of 26 % . But for a qualities individual who is knowledge worker shacking in the Iskandar Development Region is taxed at the rate of 15 % on income from an employment with a designated company engaged in a qualified activity in that specified part. The employment must hold commenced on or after 24 October 2009 but non subsequently than 31 December 2015.

The discounts for occupants persons is if the indictable income is less than RM35,000 discount grated is deducted from revenue enhancement charged and any extra is non refundable. The sum of discount where hubby and married woman are individually assessed for each person is RM400 and if the hubby and married woman are individually assessed the sum available to each as an person is RM400. The discount for Zakat, Fitrah or other Islamic spiritual dues paid is the existent sum expended

Petroleum Income Tax

A individual transporting on crude oil upstream operations is capable to a Petroleum Income Tax of 38 % . With consequence from the twelvemonth of appraisal 2010, the appraisal system on income derived from upstream crude oil companies under the Petroleum Income Tax Act 1967 is changed to the current twelvemonth appraisal system and self appraisal system. Income revenue enhancement for the twelvemonth of appraisal 2010 based on income received in 2009 shall be allowed to be paid by installments for five old ages. In add-on, A individual who signed Petroleum Agreement with PETRONAS or Malaysia, it sing as Thailand Authority and transport out the crude oil operation. The “ Person ” includes a company, a partnership or other organic structure of individual and corporate sole. “ Petroleum operations ” means seeking for, winning or obtaining of crude oil in Malaysia ( by boring, excavation and extracting ) , all operations incidental thereto and sale or disposal of crude oil so won or obtained, transit within Malaysia of crude oil so won or obtained to any point of sale or export but excludes transit outside Malaysia ; refinement or liquefying ; covering with merchandises so refined or liquefied ; service affecting the supply and used of rigs, derricks, ocean oilers and flatboats.

Figure 3- Gross for Malaya from twelvemonth 2007-2011.

Withholding Tax

Apart from the corporate revenue enhancement and personal revenue enhancement, keep backing revenue enhancement besides contributes portion of the gross to the Malaysia in a direct manner. Withholding revenue enhancement is applicable in Malaysia if a non-resident payee derives or is deemed to deduce from Malaysia involvement, royalty, rent for usage of movable belongings, contract payments for undertakings carried out in Malaysia, proficient fees and other similar types of fees. The gross takes the position that even non-technical service fees would be capable to keep backing revenue enhancement. However, if these proficient and non-technical services are performed outside Malaysia, payments for them would non be capable to keep backing revenue enhancement. Under a new legal proviso that came into force on January 1 2009, keep backing revenue enhancement may be applicable to assorted income under Section 4 ( degree Fahrenheit ) of the ITA, non being additions or net incomes falling under Section 4 ( a ) to ( vitamin E ) of the ITA. For the intents of the ITA, a company is revenue enhancement occupant in Malaysia if it is managed and controlled from Malaysia, intending that a company is deemed to be revenue enhancement occupant in Malaysia if the board of managers holds at least one board meeting a twelvemonth in Malaysia.

Withholding revenue enhancement will non be applicable for income received in regard of the services and rendered or performed outside Malaysia. Effective from 30 August 2008 until 31 December 2012, keep backing revenue enhancement freedom is given to non-residents experts on income received by supplying proficient preparation services such as Post alumnus classs in Information and Communication Technology ( ICT ) , electronics and life scientific disciplines and station basic classs in nursing and allied wellness attention and Aircraft care technology classs.

Effective from 1 January 2009 to cut down the cost of proficient services provided by non-residents, reimbursements or expense associating to hotel adjustment in Malaysia will non be included in the calculation of gross proficient fees for the intent of keep backing revenue enhancement. Last, in regard of keep backing revenue enhancement non paid, a punishment of 10 % is imposed merely on the sum of unpaid revenue enhancement and non on the entire payment made to a non-resident.

Real Property Gain Tax

Under the new budget 2011, the Real Property Gain Tax is still remain as the same as twelvemonth appraisal 2010 where any addition from the disposal of existent belongings shall be taxed at a fixed rate of 5 % and be collected through a withholding mechanism, whereby the buyer withholds 2 % of the purchase value and wages to the Inland Revenue Board. In comparing, there is no such revenue enhancement applicable on the disposals of indictable plus from 1 April 2007 to 31 December 2009. By the manner, a Real Property Company ( RPC ) is a controlled company keeping existent belongings or portions in another RPC as a major plus. Every individual whether or non resident in Malaysia is indictable to RPGT in regard of nay additions accruing on the disposal of existent belongings or RPC portions in Malaysia. The freedoms are still applicable such as freedom up to RM10, 000 or 10 % of the additions or whichever is higher is given to persons. Furthermore, freedom under the Real Property Gain Tax Act 1976 includes the gifts between parent and kid, hubby and married woman, grandparent and grandchild and the disposal of a residential belongings one time in a life-time for an person who is a citizen or lasting occupant of Malaysia.

Goods and Servicess Tax

As the Malaysia authorities intend to alter their policy of roll uping gross from direct revenue enhancements to indirect revenue enhancements. The initial passage phase was to implement the Goods and Services Tax ( GST ) and the Bill was tabled on 16 December 2009 in the Dewan Rakyat for the first reading. This was a much anticipated bull as GST was announced manner back in Budget 2005 but was deferred to indefinitely in early 2006. However, the Second Finance Minister YBhg Dato Seri Ahmad Husni Hanadzlah late comment that it was improbable the GST would be introduced in the 2nd half of 2011, as had been widely expected when the Bill was foremost tabled. In fact, as can be seen from

State in ASEAN

Date of execution

Dutch east indies

1 January 1984

Philippines

1 January 1988

Siam

1 January 1992

Singapore

1 April 1994

Cambodia

1 January 1999

Vietnam

1 January 1999

Lao people’s democratic republic

1 January 2009

Figure 4- List of states in ASEAN and their GST execution day of the months

GST or Value Added Tax ( VAT ) as it is known in other states is non new from the international position. This signifier of indirect ingestion revenue enhancement has been implemented in other states since the 1950 ‘s. In fact, Malaysia is one of the last few states in the ASEAN part along with Myanmar and Brunei has yet to present a GST. GST in Malaysia is expected to be set at 4 % , which would do it the lowest single-rate government in the universe and would compare favorably in the wider Asia-Pacific part with states such as China ( top rate of 17 % -goods merely ) , New Zealand ( 12.5 % ) , Philippine ( 12 % ) , Australia and Indonesia ( 10 % ) , Thailand ( increase to 10 % in 2010 ) and Singapore ( 7 % ) .

Now Malaysia is in the passage phase of implementing the GST which when effectual, the GST in Malaysia will replace the bing gross revenues and service revenue enhancement. GST is the solution where it can prolong the authorities gross where GST is a broad-based ingestion revenue enhancement levied on the import of goods every bit good as most domestic supplies of goods and services. This will work out the concern of the authorities from where they can back up with their increasing outgo while their direct revenue enhancements is cut downing. The GST is the reply to the inquiry likely lays inevitable squeezing on beginnings of authorities gross in future and the demand to both expand and turn the beginnings. Obviously, the Malaysia authorities is be aftering for the twenty-four hours when oil grosss which is a important beginning of authorities gross go less dependable of important. The authorities likely besides recognises that the state can no longer trust excessively much on the direct revenue enhancement when the bulk of single autumn under the non-taxable position. In add-on, in recent old ages, the Malaysia authorities have reduced their corporate revenue enhancement as an inducement to increase foreign direct investing into Malaysia. In response to new foreign investing coming into the part, being directed to more corporate revenue enhancement friendly states. Therefore, a little load on taxpayers across the board might assist countervail this loss in revenue enhancement gross in the interim, before positive impact of the investing is felt.

By manner of comparing, in the first twelvemonth of GST in Australia ( 2000 ) , net GST aggregations amounted to about A $ 24billion and this increased in the 2nd twelvemonth by about 15 % to a small over A $ 27billion. In 2007, entire aggregations had increased to A $ 39.5billion, doing up about 16 % of the entire revenue enhancement return for that twelvemonth. So over clip, the authorities can realistically look frontward to increase gross from this beginning, to be used in cardinal national undertakings such as investing and substructure with the benefits fluxing down to the state as a whole.

When the authorities start to implement the GST in future, devouring goods are expected to increase across the wide and this will merely be the beginning as the authorities has to increase the rate to increase the gross. This can be proven by where Singapore GST was introduced in 1994 at 3 % , but subsequently increased to 4 % in 2003 and 5 % in 2004. It was late increased to 7 % with consequence 1 July 2007. However by contrast, Australia introduced a 10 % GST in 2000 and the rate has ne’er been increased ; and in Canada, the revenue enhancement has really been reduced twice, from 7 % upon debut ( 1991 ) to 6 % ( 2006 ) and so 5 % from 2008 onwards. There will besides some impacts of execution of GST on the personal revenue enhancement degrees with conform to the authorities policy where the rakyat benefit will be taken attention of. Other states have to changing grades, used the debut of the revenue enhancement to cut down personal income revenue enhancement rates to be consistent with the end of traveling off from direct revenue enhancement towards ingestion revenue enhancements like GST.

Presently, the New Zealand authorities is sing increasing the applicable GST rate from 12.5 % to 15 % to co-occur with any decrease n the corporate revenue enhancement rate. The authorities considers that personal income revenue enhancement decreases should be portion of the overall revenue enhancement alterations to guarantee that, for the consumer, the impact is “ revenue enhancement impersonal ” . Anecdotal grounds suggests that while consumers are mostly opposed to an addition in GST in isolation, the addition would earn important support were it to be introduced in concurrence with a corresponding decrease in personal income revenue enhancement.

As clip passed, the consumers disbursement additions with their turning criterion of life, in combination with increased imposts audit effectivity and concern conformity from corporations across the state, Malaysia authorities can anticipate increasing gross from the gross.

Gross saless Tax

Since the execution of GST was once more deferred to a ulterior day of the month, Malaysia authorities will lodge to its original manner of roll uping the indirect revenue enhancements by based on the gross revenues revenue enhancement and service revenue enhancement. Gross saless revenue enhancement is charged and levied on all nonexempt goods under the Section 6 of Gross saless Tax Act of 1972 which is manufactured in Malaysia ; or acquired under the proviso of Section 9 by nonexempt individual and sold, used or disposed of by him otherwise than by sale or disposal, to a accredited maker authorized by the Director General to get such goods without payment of revenue enhancement ; or imported into Malaysia by any individual for place ingestion. Harmonizing to the Section 2 of manufactured in Malaysia which is in relation to goods other than crude oil, the transition by manual or mechanical agencies of organic or inorganic stuff into a new merchandise by altering the size, form or nature of such stuffs and includes the assembly of parts into pieces of machinery or other merchandises does non include the installing of machinery or equipment for the intent of building. In relation to crude oil, refinement or combination and includes the add-on of any foreign substance. Labuan, Langkawi, Tioman and free zones do non fall in gross revenues revenue enhancement.

The rating of goods for gross revenues revenue enhancement intents is based on the World Trade Organization ( WTO ) rules of usage rating. In the instance of imported goods, gross revenues revenue enhancement is collected from the importer at the clip the goods are released from imposts control. In regard of batch of goods whose excise responsibility is say 10 % , so the value for gross revenues revenue enhancement intents would be the imported value and the gross revenues revenue enhancement that would hold been collectible, if non for the freedom. Companies with a gross revenues turnover of less than RM100, 000 and companies with Accredited Manufacturing Warehouse ( LMW ) position are exempted from this licensing demand. However, companies with a gross revenues turnover of less than RM100, 000 have to use for a certification of freedom from licencing. Licensed makers are taxed on their end product while makers that are non licensed or exempted from licencing demand to pay revenue enhancement on their inputs. To alleviate small-scale makers from paying gross revenues revenue enhancement upfront on their inputs, they can choose to be licensed under the Gross saless Tax Act 1972 in order to buy tax-exempt inputs. With this, small-scale makers can choose to pay gross revenues revenue enhancement merely on their finished merchandises.

Gross saless revenue enhancement is by and large at 10 % . However, natural stuffs and machinery for usage in the industry of nonexempt goods are eligible for freedom from the revenue enhancement, while inputs for selected non-taxable merchandises are besides exempted. Gross saless revenue enhancement is by and large an ad valorem revenue enhancement. Specific rates of gross revenues revenue enhancement are presently merely imposed on certain categories of crude oil. The ad valorem rates are fruits, certain grocery, lumber and edifice stuffs at 5 % ; coffin nails and baccy at 5 % ; spirits and alcoholic drinks at 5 % ; all other goods except crude oil topic to specific rates and good non specifically exempted at 10 % . Certain non-essential groceries and edifice stuffs are taxed at 5 % , general goods at 10 % , spirits at 20 % and coffin nails at 25 % . Certain primary trade goods, basic groceries, basic edifice stuffs, certain agricultural implements and heavy machinery for usage in the building industry are exempted. Certain touristry and athleticss goods, books, newspapers and reading stuffs are besides exempted. All exports are exempted from gross revenues revenue enhancement. Late payment punishment is 10 % on such unpaid gross revenues revenue enhancement. A farther 10 % will be imposed if the gross revenues revenue enhancement due and collectible remains unpaid for more than 30 yearss after the day of the month of infliction of the 10 % punishment. An extra punishment of 10 % will be imposed for every wining 30 yearss period or portion thereof until a upper limit of 50 % is reached.

Service Tax

The authorities is altering their policy of raising their gross from direct revenue enhancements to indirect revenue enhancements where the base is wider as shown in service revenue enhancement. In fact the authorities had delayed the execution of GST. So in the nutshell, where can the authorities gets their gross since it had already committed to cut down its income rate over the past few old ages with the position that the GST suppose to be implemented wef sometime in May 2011 but once more deferred. So they had no pick but to increase the service revenue enhancement from 5 % in 2010 to 6 % in 2011 so to do up the loss in gross from decreased income revenue enhancement rate. Service revenue enhancement is a ingestion revenue enhancement levied and charged on any nonexempt service provided by any nonexempt individual. It applies to certain prescribed goods and services in Malaysia including nutrient, drinks and baccy ; proviso of suites for lodging and premises for meetings, conventions, and cultural and manner shows ; wellness services, and proviso of adjustment and nutrient by private infirmaries.

The revenue enhancement besides applies to professional and consultancy services provided by comptrollers, advocators and canvassers, applied scientists, designer, surveyors ( including values, assessors and existent estate agents ) , publicizing bureaus, consultancy houses, direction service supplier, insurance companies, motor vehicle service and fix centres, telecommunication services companies, security and guard services bureaus, recreational nines, estate agents, parking infinite services operators and courier service houses.

However, professional services provided by a company to companies within the same group will be exempted from the current service revenue enhancement of 5 % . Courier services provided from a point within Malaysia to a finish outside Malaysia will besides be exempted from the service revenue enhancement of 5 % . By the manner, under the budget 2011, the 5 % ad valorem rate of service revenue enhancement is proposed to be increased to 6 % effectual from 1 January 2011. Furthermore, effectual from 1 January 2010, this revenue enhancement is levied on all nonexempt services, except for the proviso and issue of charge or recognition cards, the services revenue enhancement is including the RM50 per twelvemonth on the chief card and RM25 per twelvemonth on the auxiliary card.

The services revenue enhancement is indictable on the day of the month of the issue of the card and every 12 month thenceforth or portion thereof after the issue of the card or on the day of the month of the reclamation of the card and every 12 months thenceforth or portion thereof after the reclamation of the card. By and large, the infliction of service revenue enhancement is capable to a specific threshold based on an one-year turnover runing from RM150, 000 to RM500, 000 such as auto lease bureaus licensed under the Commercial Vehicles Licensing Board Act 1987 holding an one-year gross revenues turnover of RM150,000 and supra, employment bureaus holding an one-year gross revenues turnover of RM150,000 and above, companies supplying direction services, including undertaking direction and coordination services, holding an one-year gross revenues turnover of RM150,000 and supra and the hotel holding more than 25 suites and eating house within such hotel. In add-on, the Service revenue enhancement will be collected on the day of the month the card is issued, on the completion of twelvemonth or on the day of the month of reclamation. Last, in regard of services revenue enhancement non paid, a punishment of 10 % is imposed merely on the sum of unpaid revenue enhancement.

Decision

The budget ‘s chief focal point has been on the mega undertakings to be undertaken as portion of the Government ‘s ETP programme. There were few revenue enhancement steps but rather extended budget allotments for assorted sectors of the economic system. But this twelvemonth ‘s headlines have been dominated by words such as “ in-between income trap ” , “ high income society ” and “ eroding of international fight ” . Recent concerns include the apparition of the “ bubbly belongings market ” , “ lifting cost of life ” , “ backdown of authorities subsidies ” and “ debut of GST ” . Obviously, the Malaysia authorities is besieged by these and other issues as we strive to travel up to another degree in the universe economic system. As the authorities has gain experience from old twelvemonth budget, they manage to indentify our national defects and strived to research alternate solutions.

From the position of the rakyat, raising disposable income would intend a decrease of mean revenue enhancement liability. In terminal of the receiving, the authorities would necessitate to increase revenue enhancements to equilibrate their budget. The couple must run into because revenue enhancement aggregation is a nothing amount game. There is no free tiffin in economic sciences. Tax rates can non travel down if the authorities intends to roll up more revenue enhancements. The authorities may diversify its beginnings of revenue enhancement for illustration by taxing ingestion via GST but the net consequence is that the entire revenue enhancement on the population will stay the same unless the income and wealth of the population addition. In this regard, the authorities has justly pointed out that it has to follow a scheme of raising national income degrees because by making so, the rakyat will non merely bask a higher criterion of life, indirectly the authorities will run into its revenue enhancement mark every bit good. The reconciliation of the budget via addition in the service revenue enhancement as the execution of GST has been postponed or other revenue enhancements would be a good move to stabilise revenue enhancement aggregation for the hereafter but it may non cut down the revenue enhancement load of the mean taxpayer.

This twelvemonth budget was interesting as the authorities has announce that the execution of GST would be deferred to enable the authorities to prosecute inclusively all sections of the people on the infliction of the GST. Surprisingly, this twelvemonth budget the allotment for the outgo was increased comparison to old twelvemonth and it is the highest amongst the budgets from the old ages before. Since, the authorities has increase enormously in their disbursement for twelvemonth 2011. Economist and other politicians are funny on how the authorities traveling to run into up the outgo with the current policy for cut downing of the direct revenue enhancements. If the Malaysia authorities has been cut downing the direct revenue enhancements rate from twelvemonth 2008, so they have to increase on certain revenue enhancements to prolong the gross so that it could run into the outgo.

In last twelvemonth 2010 budget, the authorities has imposed RPGT on any capital addition from the disposal of plus. Although RPGT is non a new things in Malaysia, but Malaysia authorities has waived for a period of clip until it was re-implemented wef of 2010 to counterbalance back the sum of revenue enhancements they have given up from the direct revenue enhancements. Although for this twelvemonth budget, the direct revenue enhancements rate are remain the same as last twelvemonth but one of the high spot for this twelvemonth budget is there will be an addition of 1 % for service revenue enhancement while gross revenues revenue enhancement will stay at 10 % . The addition for service revenue enhancement is non a surprise since the authorities has postponed the execution for GST, therefore it leave the authorities a small pick to roll up extra revenue enhancements from other public in order to fit with their outgo. There is ever a tradeoff between roll uping revenue enhancements by ways of direct revenue enhancement or ingestion revenue enhancements. In other ways, it can be explained in economic position where the chance cost for the authorities to increase in the ingestion revenue enhancements in concurrence with a corresponding decrease in personal income revenue enhancements.

This explained on how the Malaysia authorities is able to prolong their gross with their of all time increase outgo. Service revenue enhancement is a broad-based ingestion revenue enhancement levied or charged on any nonexempt services provided by nonexempt individual. In fact, the measure from the authorities to increase in the service revenue enhancement is merely a short term solution for their high disbursement. Therefore, in order for the state to stay sustainable GST is a better solution and Malaysia could look frontward positively to some expected benefits from the debut of a GST. These guarantee the state for being less dependant on its traditional beginnings of non-taxation authorities gross. These will besides enable the authorities to be after for increased economic growing underpinned by a more wide based, efficient and consistent beginning of revenue enhancement gross, with the GST constituent of that gross increasing over clip ; and with the overall impact on the consumer comparatively negligible both upon its origin, and in future. We are looking frontward for the execution of GST in Malaysia in the new hereafter by the authorities one time they have finalized everything and the short-run and long-run impact can merely be justified once they are implemented.

Appendix

Corporate Tax Rate

State

Corporate Tax Rate

Cambodia

20 %

Malaya

25 %

Philippines

30 %

Singapore

17 %

Siam

30 %

Vietnam

25 %

Adopted from: KPMG ‘s Corporate and Indirect Tax Survey 2010

Indirect Tax Rate

State

Indirect Tax Rate

Cambodia

10 %

Malaya

10 %

Philippines

12 %

Singapore

7 %

Siam

7 %

Vietnam

10 %

Adopted from: KPMG ‘s Corporate and Indirect Tax Survey 2010

Direct Tax Rate

State

Direct Taxes Rate

Cambodia

20 %

Malaya

26 %

Philippines

32 %

Siam

37 %

Singapore

20 %

Vietnam

35 %

Adopted from: KPMG ‘s Corporate and Indirect Tax Survey 2010

Federal Government Revenue

2007

2008

2009

2010

2011

Direct Taxes

Corporate

32,149

37,741

30,199

33,248

36,210

Individual

11,661

14,966

15,590

18,775

19,867

Petroleum

20,453

24,191

27,231

18,286

21,786

Cooperatives and others

1,395

1,577

1,897

1,715

1,855

Income Taxes

65,658

78,745

74,917

72.024

79,718

Others

3,738

3,663

3,458

4,132

4,265

Direct Taxes

69,396

82,138

78,375

76,156

83,983

Indirect Taxes

Export Duties

Petroleum

2,271

2,703

1,104

1,991

2,136

Others

51

76

48

50

59

Entire Export Duties

2,322

2,779

1,152

2,041

2,195

Import Duties

2,424

2,635

2,114

2,099

2,108

Excise

8,991

10,683

10,068

11,835

12,026

Gross saless Tax

6,642

8,374

8,603

8,241

8,411

Service Tax

3,013

3,345

3,344

3,965

4,125

Others

2,380

2,944

2,847

2,754

2,652

Indirect Taxes

25,772

30,760

28,129

30,936

31,518

Non-tax Gross

44,717

48,896

52,135

55,039

50,324

Entire Gross

139,885

159,793

158,639

162,131

165,825

Adopted from: Ministry of Finance

Malaysia Federal Government Development Outgo

2007

2008

2009

2010

2011

Security

Defense mechanism

4,102

4,120

2,663

2,728

3,506

Internal Security

1,601

1,659

1,294

1,186

867

Entire

5,702

5,779

3,956

3,914

4,373

Social Servicess

Education and Training

6,271

7,892

10,840

11,702

10,363

Health

1,496

1,652

2,575

3,594

2,212

Housing

2,947

1,780

1,420

1,181

903

Others

2,178

2,394

2,547

4,720

2,062

Entire

12,893

13,717

17,381

21,197

15,539

Economic Servicess

Agribusiness and Rural Development

3,842

4,184

5,508

3,136

836

Public Utilities

2,358

2,795

2,899

3,926

5,731

Trade and Industry

4,904

4,581

5,592

4,711

9,621

Conveyance

8,500

9,212

8,531

7,904

9,644

Communicationss

105

334

618

790

838

Others

407

247

3,279

6,656

1,644

Entire

20,116

21,353

26,428

27,123

28,315

General Administration

1,853

1,998

1,749

1,809

955

Entire

40,564

42,847

49,515

54,042

49,182

Adopted from: Ministry of Finance

Malaysia Federal Government Operating Outgo

2007

2008

2009

2010

2011

Security

Defense mechanism

9,547

10,597

11,311

9,701

10,531

Internal Security

6,586

7,913

8,271

8,400

9,200

Entire

16,134

18,510

19,583

18,102

19,731

Social Servicess

Education and Training

30,443

36,528

39,318

38,151

39,940

Health

9,772

11,594

12,193

12,225

13,249

Housing

931

980

1,222

1,171

1,225

Others

4,802

5,480

5,505

5,980

5,635

Entire

45,947

54,582

58,237

57,526

60,048

Economic Servicess

Agribusiness and Rural Development

2,177

5,027

4,336

3,457

3,389

Public Utilities

235

91

401

136

136

Trade and Industry

2,521

3,623

2,290

6,521

6,915

Conveyance

4,925

4,976

4,535

4,352

6,636

Communicationss

60

64

56

73

Others

82

47

52

54

57

Entire

9,940

13,825

11,680

14,575

17,206

General Administration

11,534

12,450

27,123

15,936

15,368

Others

39,530

54,132

40,443

46,020

50,452

Entire

123,084

153,499

157,067

152,158

162,805

Adopted from: Ministry of Finance

Federal Budget from 2007 to 2010