Budget 2020: Did Everybody Get Something?
“A vision of Shared Prosperity continues the tradition of Vision 2020, infused with ideas, idealism, innovation, institutional reforms and integrity to forge a new Malaysia.
A New Malaysia that offers as the birth right of all Malaysians, adequate medical care; a good education; useful and remunerative job; decent home; freedom from unfair competition and monopolies; human dignity filled with rights and respect; and a society devoted to religious tolerance and racial harmony, where our children grow up free from fear but full of promise and opportunity.”
That’s how our Finance Minister YB Lim Guan Eng ended his Budget 2020 speech a few hours ago.
Evidently, the Pakatan Harapan government’s biggest challenge was to deliver a balanced and all-inclusive budget to be on par with the much talked about Shared Prosperity Vision 2030.
Hopes were paramount for a budget that will deliver quick and sustainable differences to upgrade the quality of lives of all Malaysians.
With an allocation of RM297.02 bil, Budget 2020 comes with some never-before-done measures to reduce the disparity between races and regions in Malaysia.
For a start, this is the first time since 1969 that the allocation for special grants to Sabah and Sarawak has been revised. The government will double the special grants to Sabah and Sarawak to RM53.4mil and RM32mil respectively.
In an interview with iMoney, Yap Ming Hui, Whitman Independent Advisors founder and managing director said that Budget 2020 is definitely a people-friendly and balanced budget.
“Measures such as fuel subsidy, reduced toll rate, reassurance that there would be no reintroduction of GST, increment of the minimum wage, hiring incentives for local employees and digitising incentives for companies will all help to reduce the living cost of Malaysians.”
Meanwhile, Lim Phing Phing Director at PwC International Assignment Services Sdn Bhd said, “Whilst there is no major shift in economic policies, the budget proposals clearly reflect the government’s continued commitment to promote job creation, strengthen the M40 and B40 group and grow the economy.”
She also explained that the individual tax reliefs and deductions introduced are aimed at enhancing equality and inclusivity as well as inculcating a socially responsible society.
“The increase in the highest marginal income tax rate to 30% for resident individuals will impact a very small proportion of the rakyat and the move is widely seen as an attempt to narrow the income inequality gap between the T20 and B40 groups.”
So, experts are positive about Budget 2020! So, who are the biggest winners and losers of this budget?
The Biggest Winners
It is clear that the government is all set to uplift women’s participation in the workforce. Women returning to work will be exempted from tax for four more years until 2023.
They will also get RM500 a month for 2 years as an incentive, while their employers will receive RM300 incentive per month.
As part of the Malaysians@Work initiative which aims to provide job opportunities to 350,000 Malaysians over the next 5 years, Women@Work initiative will create 33,000 job opportunities in the coming year for women between aged 30 and 50 who have been out of work for a year or more.
In an effort to boost women entrepreneurs, SME Bank will introduce two new funds where the Government will provide an annual interest subsidy of 2% to reduce borrowing costs and a RM200 million fund offering loans of up to RM1 million per SME.
Other allocations include RM10 mil to promote women in sports and an extension to maternity leave from 60 to 90 days.
Addressing the growing number of unemployed youths in the country, the government has introduced Graduates@Work initiative.
The initiative aims to help graduates who have been unemployed for over 12 months. Graduates with job offers will get a monthly incentive of RM500 for two years and employers hiring them will receive a monthly incentive of RM300 for the same time period.
Unemployed graduates will also receive wage incentives of RM500 per month.
Sabahans & Sarawakians
Special emphasis has been given to schools in Sabah and Sarawak where an allocation of RM783 mil will be directed to all schools in need of refurbishment in 2020.
Malaysian Communications and Multimedia Commission will be given RM250mil to provide broadband access through satellite technology to enhance connectivity in the interior of Malaysia, especially Sabah and Sarawak.
For those living in major cities where living costs are higher, the minimum wage will be increased from RM1,100 to RM1,200.
Additionally, those aged above 40 who are earning less than RM2,000 a month and are single will get RM300 Bantuan Sara Hidup aid. Disabled individuals will also be eligible for the BSH aid.
What’s more, the MySalam protection plan will be expanded to cover 45 critical illnesses and polio compared with the current 36 critical illnesses. This is on par with some of the private insurance schemes available in Malaysia. Coverage will now include those aged 18 to 65, instead of the current 55.
Patients suffering from a critical illness will receive RM8,000 cash through MySalam as well as RM50 per day for a maximum of 14 days for patients in Government hospitals. BSH recipients between 18 and 55 years old will be covered automatically under this scheme.
BSH recipients will also be entitled to fuel subsidy of RM30 per month for car owners and RM12 per month for motorcyclists. Other eligible recipients will receive Kad95 to enjoy 30 sen/litre limited to 100 litres/month for cars and 40 litres/month for motorcycles.
Before the end of this year, Budget 2020 will allocate Special Financial Aid of RM500 for civil servants of Grade 56 and below.
The Cost of Living Allowance (COLA) will also be increased by RM50 per month for civil servants in 2020.
Local companies are being given special attention to drive the economy of the country through Budget 2020. Special investment incentives packages worth up to RM1bil a year would be given for five years to local companies that penetrate the world market.
Apart from that, the Malaysia Digital Economy Corporation will receive an allocation of RM20 million to develop more local talent. SMEs will also be encouraged to adopt more digital solutions for their businesses with matching grants.
Talking about tax measures for SMEs, the current tax rate of 17% on the first RM500,000 chargeable income will be increased to RM600,000. SMEs will be able to save RM7,000 through this threshold modification.
The biggest losers
Streaming service subscribers
The Digital Service Tax which will be implemented on January 1, 2020 might lead to an increased subscription rate depending on the service providers. It covers streaming services like Netflix and Spotify, digital advertising such as Google and Facebook, as well as digital software and games distribution companies such as Steam.
Those earning above RM2mil annually will see increased tax at 30% from the current 28%. This move is expected to affect around 2,000 top income earners in Malaysia.
In an effort to curb illegal gambling in Malaysia, the government has increased the minimum mandatory penalty to RM100,000 for illegal gamblers, along with a minimum mandatory jail sentence of 6 months. A minimum mandatory penalty of RM1mil & a 12-month minimum mandatory jail sentence will be imposed on illegal operators.
Other special measures
- Toll at Second Penang bridge will be reduced from RM8.50 to RM7.
- 18% discount on toll collections for all PLUS Highways in 2020.
- 30% reduction in toll rates during non-peak hours.
- Individuals who own not more than two cars or motorcycles will get targeted fuel subsidy for one vehicle*
*Car with 1,600cc & below or
-Any car above 1,600cc must be more than 10 years old,
-Motorcycle must be 150cc & below,
-Motorcycles above 150cc must be over 7 years old
- Up to RM6,000 tax exemption for expenses on serious medical treatment and extended to cover fertility treatments.
- RM2,000 tax exemption for parents who send children to kindergartens and childcare centres.
- For the purposes of calculating real property gains tax (RPGT) on disposal, the acquisition price will be based on values on 1 January 2013 (for properties acquired before 1 January 2013).
Overall, Budget 2020 has ended on a positive note as highlighted by Prime Minister Tun Dr. Mahathir Mohamad, “As we heard earlier, additional allocations have been given to almost all parties. This shows that the country’s fiscal position is still strong.”