Themed ‘Madani Budget’, the revised Budget 2023 is an upward revision from the RM372.3 billion presented in October 2022, before the 15th general elections. This budget’s allocation will go down in history as Malaysia’s biggest budget tabled yet at RM386.1 billion, with RM2 billion set aside for contingency savings. The breakdown of the overall budget stands at RM289.1 billion (74.8%) set aside for operating expenditures and RM99 billion (25.2%) for development expenditures.
Presented by Prime Minister Datuk Seri Anwar Ibrahim on the 24th of February 2023, the budget has been tabled to focus on curbing the country’s rising cost of living, strengthening the social safety net for the rakyat and reinvigorating the economy by improving the ecosystem of micro, small and medium enterprises (MSMEs). This also includes an introduction to more sustainability initiatives and incentives, as an added focus on digitalisation and automation for some industries and infrastructure.
Before highlighting the features of the budget, here are some projections for the Malaysian economy in 2023:
- National debt will reach RM1.2 trillion, more than 60% of the GDP
- Revenue collection is expected to be around RM291.5 billion in 2023
- The national GDP is expected to be around 4.5%
- Inflation is expected to remain at 3.3%, as it was in 2022.
With that, the medium-term goal is to restore the fiscal health of the Malaysian economy, with a fiscal deficit of 3.2% of the GDP by 2025.
Tax restructures, reductions and increases
- Income tax on those earning between RM35,000 to RM100,000 will get a tax decrease of 2% (affecting approximately 2.4 million taxpayers)
- Income tax on those earning between RM100,000 to RM1 million will get a tax increase of 0.5% to 2% (affecting fewer than 150,000 taxpayers
- No Goods and Services Tax (GST)
- Luxury tax to be introduced on luxury consumer items such as watches and high fashion goods
- Excise duties to be implemented on liquid nicotine used in vapes and e-cigarettes
The Special Voluntary Disclosure Programme (SVDP) was also re-introduced, as the government would waive 100% on additional taxes for those declaring unreported taxes. The programme was first introduced by the Pakatan Harapan government in 2018. “This unity government has taken a smart move to reintroduce SVDP as a means of collecting additional tax revenue,” says Soh Lian Seng, head of tax at KPMG Malaysia in a press release. A total of RM7.88 billion in taxes was collected then, and this was when it was given at a 15-30% penalty. As this programme will provide a full penalty waiver, the take-up rate should far exceed the first programme. “We can expect this SVDP to collect more than RM10 billion,” he adds, noting a disclaimer that this is conditional on the full mechanism of the programme that is yet to be revealed.
Effects on capital markets investments
While capital gains tax was not introduced in this revised budget 2023, it strongly alluded that it may be implemented in the coming years, as it is currently under review. This proposed tax on the disposal of non-listed shares may attract more listings on the local bourse, said MIDF (Malaysian Industrial Development Finance Berhad). On top of that, the issuance of dual-class shares has also been allowed to encourage the listing of local high-growth technology companies.
With that, the Securities Commission Malaysia (SC) has also been tasked to facilitate more marketplaces for secondary trading of private market instruments to increase liquidity and enable better price discovery.
Other key measures for the capital market include:
- An allocation of RM40 million to the Malaysia Co-Investment Fund (MYCIF) as an additional fund for equity crowdfunding.
- The extension of tax deduction of up to RM1.5 million on listing expenses on the ACE and LEAP markets until 2025; this is also extended to cover the cost of listing technology-based companies on the Main Market of Bursa.
- A tax deduction on the cost of issuing SRI-linked sukuk that has been approved/permitted/deposited with the SC for five years.
Motivators for saving
While the Amanah Saham Malaysia (ASM) fund size will be increased to approximately RM5 billion, total individual investment limits of Amanah Saham Bumiputera (ASB) and ASB2 will be increased to RM300,000 (from RM200,000).
ASB members with savings less than RM30,000 will get a 5.1% dividend pay out. This is calculated to benefit 87% of members.
As for EPF savings for those aged between 40 to 54 years (pre-retirement age) with less than RM10,000 in their Account 1, will be given an additional contribution of RM500.
Other allocations and incentives
The rest of the Revised Budget 2023 has been directed to give grants and incentives to spur SME growth, as well as through allocations for digitalisation and automation. Another focus would be towards addressing hardcore poverty and alleviating the burden of the rakyat‘s financial stability and plight.
Industries such as agriculture, electrical & electronics (E&E) and aerospace sectors are given tax incentives and investment allocations. On the sustainability front, green initiatives and financing schemes are also introduced to work in tandem with businesses and SMEs.
Finally, governance needs are addressed with institutional reforms to address corruption, as well as budget allocations towards infrastructure maintenance and natural disasters and crisis preparation.
For here more information on the MADANI Budget 2023, and here is the Budget Summary 2023 from the Ministry of Finance (in BM).
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