Budget 2008 – FMM: Personal income tax should’ve been cut too

FMM: Personal income tax should’ve been cut too

KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) welcomes the reduction in corporate tax to 25% in 2009 but feels there should have been a concurrent cut in personal income tax.

President Tan Sri Yong Poh Kon said a lower personal income tax could help increase domestic consumption, especially in view of the weaker external market.

“Currently, the personal income tax rate at 27% is higher than corporate tax, and the tax bands are too tight.

“Tax payers hit the higher and maximum tax bands very fast and this is a disincentive to knowledge workers,” he told a press conference yesterday.

The Government will also implement a single-tier tax system, under which profits are taxed only at the company level and dividends received are exempt from tax.

Yong said the system would simplify the distribution of dividends.

He also lauded the move to simplify the issuance of work permits and visas for skilled workers as well as new Immigration Department procedures to speed up approval, as this would help bring knowledge workers to this country.

FMM also welcomed efforts to allow small and medium-scale enterprises (SMEs) to make income tax payments not later than seven months after the accounts were closed. This would help relieve the cash flow constraints of SMEs at the initial stage of their operations.

“The budget is giving added impetus to the SMEs to step up efforts to achieve world-class standard in terms of pricing, quality and capacity by setting a deadline for them to apply for the Industrial Linkage Programme and Pioneer Status of Investment Tax Allowance by 2010.

“This push is necessary in view of the rapid pace of globalisation and keen competition,” Yong said.

Manufactured exports are estimated to grow only 2.1% in 2007, a drop from 10.1% growth in 2006, due to intense competition in the global market.

Yong said it was urgent to improve manufacturing efficiency, especially in terms of curbing the rising costs of doing business.

“A significant concern at this moment for the manufacturing sector is the availability of natural gas at stable prices to enhance their cost competitiveness,’ he added.

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