At RM332.1 billion, the National Budget 2022 tabled by Finance Minister Tengku Zafrul Tengku Abdul Aziz on Friday (Oct 29) is described as Malaysia’s largest-ever budget.
Themed “Keluarga Malaysia, Makmur Sejahtera (A Prosperous Malaysian Family)”, the budget aims to stimulate economic growth and improve the living conditions of the Malaysian family as the country is moving into post-pandemic economic recovery mode.
In case you missed the Budget 2022 announcement, we have compiled a few key takeaways that will hopefully provide you with valuable insights.
1. What’s In It for The Rakyat Who’s Been Hit Hard by The Pandemic?
Households are set to benefit from a new cash aid scheme – Bantuan Keluarga Malaysia (Malaysian Family Assistance). RM8.2 billion will be allocated to households under the aid scheme, benefitting more than 9.6 million recipients, said Mr Tengku Zafrul.
Households with three or more children and a monthly income of less than RM2,500 will receive a one-off payment of RM2,000. Additionally, single parents or households earning less than RM5,000 each month will receive a one-off payment of RM500. Senior citizens will also receive RM300 each.
2. Assistance to Businesses
A total of RM14.2 billion of funds is to be made available to SMEs to help them get back on their feet.
Among others, income tax instalment payments for micro, small- and medium-sized enterprises (SMEs) can be deferred for up to six months until Jun 30, 2022. Also, viable companies listed on Bursa Malaysia affected by the COVID-19 will receive an injection of additional funds through a government-owned Special Purpose Vehicle in the form of equity instruments or other related instruments.
To increase digital adoption among SMEs, funding for the SME Business Digitalization Grant will be enhanced to RM 200 million, with RM 50 million specifically reserved for Bumiputera micro-entrepreneurs in rural areas.
Businesses are also given tax deductions of up to RM300,000 to renovate their spaces, such as to improve seating arrangements or air circulation, in order to minimise the spread of COVID-19.
3. Assistance to Women and Children
Among the special assistance given to women and children in Budget 2022, the government is making it mandatory for all public listed companies to appoint at least one woman to theirs board of directors in order to recognise women’s roles in the decision-making process.
The government stated that companies who hire unemployed women, housewives and single mothers will receive government incentives. Putrajaya will pay incentives amounting to 30 % of their monthly wages for the first six months, and 40 % for the next six months.
The government is also looking to allocate an additional RM13 million to the police’s Sexual, Women and Children’s Investigations Division (D11).
In addition, RM25 million will be allocated to Yayasan Keluarga Malaysia to ensure those orphaned children whose parents succumbed to COVID-19 can continue their education.
4. Major Tax Measures Announced
The government has expanded the tax scopes of current taxes to increase tax revenue and to maintain the budget deficit at 6% of GDP.
Among the important tax measures tabled are as follow:
- Foreign-Sourced Income
From Jan 1, 2022 onwards, foreign-sourced income received in Malaysia will be taxed in Malaysia. This applies to both individuals and corporates. In case the foreign-sourced income suffers tax overseas, the Malaysian taxpayer should be able to claim tax relief through double tax agreements or unilateral tax credits.
Nonetheless, there are many complicated issues in this matter and an example would be although Malaysian dividends are not taxed, foreign dividends received in Malaysia will be subject to tax from 2022 and there could be more than one tier of taxation on the foreign dividends.
- Indirect Tax: Special Voluntary Disclosure Programme (SVDP)
As part of the government’s efforts in tax reformation, this programme encourages taxpayers to make a voluntary disclosure in reporting their income to increase tax collection for the country’s development within the period of 3 November 2018 until 30 September 2019. The programme was further updated on 7 April 2019.
5. Attract High-Quality Investments
The budget also allocated RM2.1 billion to a special strategic investment fund in response to the immediate need to revive the country’s economy and attract new high-quality, high-tech foreign direct investments and multinational companies.
It offers up to RM100 million grants for selected technology investments, such as aerospace and automation. In addition, at least RM30 billion will be allocated for renewable energy, supply chain modernisation and 5G infrastructure investments by government-linked companies.
6. Fiscal Policy and Economy
Record high fiscal spending will continue to help cushion the COVID-19 impact on the local economy and provide support to economic recovery. The fiscal deficit is seen at 6.5% this year before moderating to 6% in 2022. Overall debt is seen reaching 66% of GDP at end-2022 but statutory debt seen at 63.4%, below 65% ceiling.
Treasury secretary-general Datuk Asri Hamidon says the budget reflects the government’s effort to maintain an expansionary fiscal policy stance in order to provide adequate support for promoting a sustainable and long-term economic recovery.
Meanwhile, the local economy is expected to resume its recovery path until the end of 2021 due to the relaxation of lockdown measures and policy support with Gross Domestic Product (GDP) projected to grow between 5.5% to 6.5% in 2022, up from 3%-4% in 2021.
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