Happy Birthday Malaysia

A BIRTHDAY wish is always a must-do for any birthday. So this is
said by everyone. I always wonder why only on a birthday? Isn't a wish
a desire or hope for something to happen? I am sure Datuk Lee Chong Wei
had the earnest wish to win the Olympic gold medal and so did all
Malaysians who prayed that his wish would come true (for the benefit of
the readers, the writer had written this article before the event).
The
same wish list makes its rounds about this time of the year when the
Finance Ministry garners “wishes” for the preparation of the upcoming
Budget 2013, scheduled for announcement on Sept 28. Various
professional bodies and industry representatives have by this time
prepared and submitted their memorandum of wishes.
Being a tax
professional, we are often asked what Budget 2013 will entail. At
times, we get the shocking look when we reply that their guess is as
good as ours. Putting the professional viewpoint aside, I thought I
would also present my little wish list as a working rakyat. I will not
act like a wailing child kicking a fuss and making a scene as we often
see at Toys R Us; I need to be mindful of the current state of our
budget, reported at a deficit equal to 5.3% of the country's gross
domestic product in 2011.
A budget deficit occurs when a
government spends more money than it takes in. The chart shows the
historical data for the country's budget. With the worst dip in 2010,
it is gratifying to see improvements and the continuing commitment by
the Government to reduce the deficit.

[You must be registered and logged in to see this image.] Our future:
Childrens of a kindergarten in Cameron Highlands proudly waving the
Jalur Gemilang with enthusiasm and patriotism. - Ronnie Chin/The Star It
is not rocket science for any working rakyat to want or rather wish for
a larger disposal income. So, how do we achieve this? One of the ways
is to reduce statutory deduction for example, monthly tax deduction,
contribution to EPF and Socso or expanding the tax reliefs etc. Albeit
a simple arithmetic, is it logical and reasonably possible?
1. Lower tax rate:
Reducing EPF contributions will have its consequences when we reach
retirement, and there are already grievances that the current
contributions are inadequate to see us through our golden years. Is
reducing personal income tax rates an option? By comparison with the
regions in Asia Pacific (see table) with the exceptions of Singapore
and Hong Kong, our top level tax rate of 26% is, in fact, passable.
It
is without doubt that a lower tax rate will attract talent. If we do
not offer attractive effective tax rates and affordable costs of
living, we will lose our talent. Less than three years ago, my
favourite Penang assam laksa at Paramount Gardens used to cost
RM3.80. Today, it is RM4.30 with the same amount of noodles and kembong
fish. In relative terms, I can still get my favourite char kway teow at Albert Street Hawker Centre in Singapore at S$2.50. Can we still get any decent meals nowadays in KL for RM2.50?
For
a working rakyat, the challenges are plentiful, ranging from managing
the rising costs of living, securing an affordable roof over the head,
ensuring decent education for the children, providing healthcare for
the elders to building a nest for retirement.
If we compare what
the region offers in personal tax deductions with what we currently
have, some of the deductions do make some sense and my personal wish is
for the Finance Minister to at least give it a thought.
2. Flexibility to top up yet enjoy reductions:
I wish I will save enough to enjoy my retirement. I should therefore be
allowed to top up (in addition to the statutory contribution) when I am
still in employment and can afford to do so. Then the additional top-up
should also be entitled for further personal tax deduction. If my
employer decides to contribute to my top-up, consider granting the
similar deduction. The top-up option should also be extended to family
members' retirement accounts with similar deductions be accorded.
3. Levies deduction and elderly care-giver relief:
I wish to continue contributing to the workforce. I have the skills and
competencies but I also have the worry who will mind my children when I
am at work? I have to partially sacrifice my income for not only the
hefty agent fees but also for the foreign maid levies. The least that
will make me feel appreciated as a working mother is a deduction of the
levies paid against my gross income, similar to what I would enjoy for
the donations I made.
I am grateful to have my parents' help in
taking care of my children. Their presence is invaluable, especially to
provide the ease of mind to me as a working mother. Why not allow a
minimal elderly care-giver relief as they are as good, if not better,
than any foreign maid?
4. Reinstate deductions for interest payments:
I wish to have a decent home. The skyrocket house prices are not
helping. It is not surprising that loan interest obligations take up a
huge percentage of the monthly disposal income. In previous budgets,
interest payments used to qualify for personal tax deduction but ceases
by the year of assessment 2010. It is probably timely to have this
reinstated. A deduction even with a capped amount will help.
So, as I hum along the tune of “Wishing Upon A Star” and recollect its lyrics:
When you wish upon a star
Makes no difference who you are
Anything your heart desires
Will come to you
I know my wish for Budget 2013 may not make any difference but at least I know I had made a wish.
And not forgetting, Happy Birthday Malaysia, Happy Merdeka! At least you made your wish for independence 55 years ago!

The writer is an executive director at Deloitte Malaysia's tax practice.