Malaysian Budget Disappoints On Corporate Tax Rate

by Mary Swire, Tax-News.com, Hong Kong

22 October 2001

It is expected that Malaysia's new tax incentive measures such as 100% capital expenditure allowances and an extended 'pioneer status' regime will attract small and medium-sized enterprises from Singapore

Commented Song Seng Wun, Regional Economist for GK Goh in Singapore, who spoke to Channel News Asia: 'In terms of investment, I think it is quite attractive and so that could be a source of magnet for companies here to look at Malaysian investments quite favourably. They have extended the pioneer status by up to 15 years and in those resource based sectors, very tremendous tax incentives - in fact no taxes.'

However, Malaysian firms expressed their disappointment after the 2002 Budget failed to include the much touted corporate tax reduction. The Bloomberg news service quoted Nor Hayati Abdul Hamid, who co-manages 200 million ringgit (US$52.6 million) at Metrowangsa Asset Managment Sdn., as saying: 'There is no corporate tax cut, (which) was what the market is looking for. It's not good news. A tax cut would've improved companies' profits.'

As a result the Kuala Lumpur Composite Index fell 5.75 (0.9 per cent) to 615.02, and in general declining stocks outpaced rising ones 401 to 173, with 198 unchanged.

Other changes in the Budget include cuts in personal income taxes by up to 2%. Top earners will see their tax rate down by 1% to 28% for residents and non-residents alike, bringing the rate into line with that for corporations. Tax on tobacco and cigarettes will be upped by 20% and fuel pump prices will be reduced by 2.5 US cents a liter.

Recommended