This year’s budget wasn’t so much about winners and losers, but the Finance Minister still pulled a few surprises out of the bag.
Everyone expected the fight to contain the pandemic and win the war against COVID-19 to be the main focus of the budget and the minister didn’t disappoint.
Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz announced that while the Malaysia’s Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Act 2020 already allows the government to allocate RM45 billion for the COVID-19 fund, it’s not enough. The government needs to ask for another RM20 billion to fight the pandemic in this budget proposal.
He also highlighted that the government expects to spend about RM3 billion on the COVID-19 vaccine when it becomes available.
Education gets the largest slice
Among the biggest winners is education. A total of RM50.4 billion will be spent by the government on schools, higher education and Technical and Vocational Education and Training (TVET).
Besides the needed funds to upgrade and repair schools, this year’s budget also provided initiatives to get laptops to lower income and disadvantaged students.
TVET programmes received a whopping RM6 billion with various initiatives targeted to give youths the opportunities to get the training they need to find jobs. Other parts of education like sports, professional courses, internship opportunities also received funding as well as transportation pass aimed to help all students get the education they need for a better future.
Meanwhile, the eBelia programme will provide a one-off RM50 credit to e-wallet accounts for youths between 18 and 20 years old.
Unemployment and financial aids
The COVID-19 pandemic has really thrown a spanner in the economy. We are seeing the highest spike in the unemployment rate at 5% in April, the highest in 30 years. One of the biggest concerns Malaysians have is the higher unemployment rate as well as the financial hardships that they are going through as a result of income loss.
The Government recognises the concern and Tengku Zafrul has proposed a number of initiatives to tackle the issue of unemployment as well as introducing the Bantuan Prihatin Rakyat (BPR) to replace Bantuan Sara Hidup (BSH).
(aged 21 and above)
|Less than RM2,500
|RM2,501 - RM4,000
|RM4,001 - RM5,000
Budget 2021 also set aside RM3.7 billion to create 500,000 employment opportunities for Malaysians through initiatives such as PenjanaKerjaya, reskilling and upskilling programmes, Short-term Employment Programme (MySTEP), Targeted Wage Subsidy Programme and social protection efforts.
Vape tax, lower income tax and EPF Account 1 withdrawals
There was much talk ahead of the budget tabling as to whether the government will introduce new taxes, but the general opinion was that the time just wasn’t right given the economic downturn.
However, the government managed to propose one new tax – an e-cigarette and vape tax. The tax which will take effect from January next year onwards, will impose excise duty at 10% rate on all types of electronic cigarette devices including vape, with their liquid cartridges also subject to tax.
The biggest loser of this Budget is likely smokers, as many restrictions are put in place for the import of cigarettes, as well as making it taxable in all duty-free islands and any free zones that have been permitted the retail sale of duty-free cigarettes.
Although the government needs more income next year, it still pushed ahead with some tax benefits, especially for the lower income. There is a 1% reduction in income tax for those earning between RM50,000 to RM70,000 with increased tax exemption for those who lose their job, as well as a range tax reliefs on education savings, medical treatments, vaccinations and health screenings.
Another announcement that got big reactions from everyone was the proposal to allow withdrawals from Account 1 of the Employees’ Provident Fund (EPF). This allows members who has lost their jobs to withdraw RM500 a month, up to RM6,000 for a year. At the same time, the government also proposed to reduce members contributions to 9% starting January 2021.
Meanwhile, there was no extension for the loan moratorium although many groups had asked for this initiative. Instead, there will be enhancement to the targeted repayment assistance for those in the Bottom40 (B40) income group and small and medium enterprises (SMEs).
In total, the budget adds up to RM322.5 billion which covers many areas from the usual expenses for defence, health, housing but this year there is extra focus on social welfare, sustainable development and investments for the future.
The finance minister ended his speech by calling on everyone to unite for the welfare of all Malaysians.
“We need to be thankful; we are still strong in all this,” Tengku Zafrul concluded with the call to “ let this Budget be the canon of our unity for the welfare of the people.”
For more information on what Budget 2021 offers, go to imoney.my