Raising tax on higher-income group a bold move

The government's announcement in Budget 2016 to tax more on the higher-income group is a bold move, said Ernst & Young Malaysia Partner and Tax Leader, Yeo Eng Ping.

She said this was rather a bold move considering it came immediately after the decrease in personal income tax rates in last year's budget together with the introduction of the Goods and Services Tax (GST).

"Not surprisingly, high-income earners have been called to pay more tax. We have observed similar developments in other countries such as Singapore and Japan," she said in a statement.

Prime Minister Datuk Seri Najib Razak, when tabling the 2016 Budget yesterday, announced that taxable income band for resident individuals of between RM600,000 and RM1 million be increased from 25 percent to 26 percent, from year of assessment 2016.

The tax rate will be increased from 25 percent to 28 percent for the income bracket above RM1 million.

Yeo said the budget also paid attention to the middle- and low-income groups, through initiatives such as the enhancement of various personal reliefs, the expansion of GST zero-rated list to include more essential food items, controlled medicines and "over the counter" medication, as well as specific measures to raise the income and wealth of the "Bottom 40" (B40) households.

For corporates, she said Budget 2016 did not try to introduce a plethora of incentives.

"Instead, there are a few select measures in specific areas or sectors, such as innovation and commercialisation of research and development (to stimulate private sector investments and reinvestments), tourism (which ties in nicely with the cheap ringgit), food production and manufacturing," she said.

She also said the budget underlined consistent measures to ensure the country continued to develop its infrastructure and promote connectivity to support economic expansion.

"The corporate sector has been lobbying for an extension of the reinvestment allowance (RA) incentive, and hence, the special RA incentive is a much welcomed proposal," she added.