A new Budget 2023 has been tabled, and it is proving itself to be even bigger than the last announcement! During a live broadcast on 24 February 2023, Prime Minister and Finance Minister Anwar bin Ibrahim presented Budget 2023 in Parliament.
Dubbed the MADANI budget, the main focus is an emphasis on driving an inclusive and sustainable economy, inspiring confidence with institutional and governance reforms, and facilitating social justice by reducing inequality.
In yet another historic move, the total budget was announced to be at RM388.1 billion. This staggering amount far eclipses the 2022 budget amount of RM332.1 billion. It even surpasses the previous Budget 2023 announcement in October 2022 which was at RM372.3 billion.
New taxes
One of the biggest highlights that came out of Budget 2023 was the introduction of new taxes on selected goods.
A new luxury tax that targets high end products usually only bought by the ultra rich has been proposed. In theory, this will not affect the average Malaysian; but will help increase govt revenue from high value purchase. What exactly the tax covers was not specified, but the Finance Minister mentioned luxury watches and high-end fashion as examples.
Additionally, there will be new taxes placed on capital gains. More specifically, this tax will apply to unlisted share disposable by companies starting in 2024. This tax will be introduced at a low rate.
A new excise duty is being planned to be imposed on e-cigarettes and vape liquids/gels that include nicotine. As it stands, these products are illegal in Malaysia. However, it has not stopped an explosion of vaping culture. As such, the government now believes that it is better to regulate and tax the products, seeing that they have been unable to prevent Malaysians from getting their nicotine fix.
With that in mind, half of the income from the excise duty tax will be diverted back to the Ministry of Health, in support of the Generational Endgame (GEG) initiative to improve the quality of healthcare services.
Getting businesses back on track
Just like the previous budget announcement, 2023 will be the year where Malaysia focuses on helping businesses recover from the pandemic whilst also placing even greater emphasis on getting SMEs back on their feet. Businesses will be happy to know that the corporate income tax on the first RM150,000 revenue will be reduced of 17% to 15%.
A huge emphasis has also been placed on helping small hawkers and vendors. Up to RM50 million has been allocated to building and upgrading 3000 small hawker stalls and kiosks throughout the country. Additionally, up to RM176 million has also been set aside for upgrading premises and business facilities under agencies such as MARA, DBKL, Perbadanan Usahawan Nasional Berhad (PUNB), and Perbadanan Pembangunan Bandar (UDA).
MSMEs and small business owners can breathe a sigh of relief as the government intends to allocate up to RM40 billion in loan facilities and financing guarantees for SME entrepreneurs. They also intend to provide RM1.7 billion in loan facilities for MSMEs and small vendors under agencies such as Bank Negara Malaysia, BSN and TEKUN.
Of that RM1.7 billion total:
- RM300 million will be reserved for women and youth micro businesses. A major step for inclusiveness and equality.
- RM1 billion will be provided by BSN to focus on developing MSMEs and hawkers.
- RM330 million will be provided by TEKUN, including RM10 million that will be allocated towards assisting low income youth businesses.
- The government also announced that it will cover driving test fees for class B2 motorcycle, taxi, bus and e-hailing.
Bank Negara Malaysia was also revealed to be offering up to RM10 billion in loan funds to support business development.
Finally, up to RM20 billion in SME loans are being made available for the high-tech, agriculture, and manufacturing sectors, guaranteed by Syarikat Jaminan Pembiayaan Perniagaan (SJPP). The government also guarantees up to 90%. These guarantees will also extend to non-banking financial institutions to benefit small vendors.
Personal income tax adjustments
The personal income tax rate for the brackets between RM35,000 and RM100,000 will be reduced by 2%, benefitting a large percentage of Malaysians who are taxpayers. This is a substantial amount as there are three income brackets within this range that will see the reduction.
On the other hand, the income tax brackets above RM100,000 annually will be increased by 0.5 to 2%. Which brackets will see the biggest increase has not been revealed, but it is expected that the highest earners will see the biggest tax increase.
On a brighter note, the tax relief limit for medical expenses has been increased. This brings the total limit up to RM10,000, up from RM8,000. In addition to this, the scope of these medical expenses has been widened to cover neurodevelopmental disorders as well. These include things such as autism, down syndrome, and certain learning disorders.
It was also announced that there would be an expansion to the scope of tax relief for insurance premiums, life, or takaful to cover EPF contributions. This expansion will increase the tax relief limit to RM3,000.
Empowering women in the workforce
The government seeks to make huge progress with women empowerment within the workforce this year. To encourage women to continue pursuing their career dreams after maternity leave, SOSCO will be issuing grants of up to 80% of total insured salary.
Additionally, the government will also be encouraging more nurseries/preschool to help working mothers care for their children. Tax incentives are being offered to companies that provide nurseries at their offices. There will also be an easing of registration and legalisation of unregistered nurseries to help facilitate the process.
PTPTN relief
This year, those who take on PTPTN loans can also expect a huge helping hand. For one, it was announced that PTPTN loan applicants will be receiving a hefty 20% discount on repayments for three months starting from 1 March 2023. Not only that, individuals who are earning RM1,800 per month or less can also expect up to six months of deferment on payments to help ease their financial situation.
If there is anything we can say about the new budget announcement, it is that the government is in full support of helping businesses and SMEs thrive in the current uncertain economic climate. The sheer amount of financial assistance is a testament to their dedication towards ensuring the survival and prosperity of our small businesses and the future of the next generation.
