Malaysian Budget To Be Announced On 29 August

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

19 August 2008

The Malaysian government's 2009 budget announcement, due to be delivered by Prime Minister Datuk Seri Abdullah Ahmad Badawi in parliament on 29th August, will focus primarily on curbing the negative effects that the ongoing credit crunch and high commodity prices are having on the lower-paid, according to a senior Finance Ministry official.

Second Finance Minister Tan Sri Nor Mohamed Yakcop indicated recently that the government will seek to strengthen the social safety net and increase investment in national infrastrucutre, in particular public transport, suggesting that further tax cuts may not be on the cards.

The official also revealed that the budget would include measures which aim to boost investor confidence and sustain economic growth, but it is unclear whether the government will look to accomplish this goal through an additional cut in corporate tax or extra tax incentives for business.

As speculation increases over the budget plans, tax experts believe that the government has room for cuts in both corporate tax and personal income tax over and above those announced in the previous budget in September 2007. However, given the current economic climate the government may wish to play it safe and keep a tighter hold on the fiscal reins.

Under measures announced by Badawi in the 2007 budget, corporate tax was cut by 1% in 2008, and will be reduced by a further 1% in 2009, to 25%.

The Prime Minister also announced a generous package of tax breaks for the investment industry in an attempt to consolidate and build upon Malaysia's position as one of the leading centres for Islamic finance.

Individual taxpayers were disappointed however, as Badawi left the 28% top rate of income tax on hold for another year. It remains to be seen whether he will be more generous this year.

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