At a glance
By Fintan Ng
Malaysia’s government has unveiled its second largest ever budget, with 372.3 billion ringgit in expenditure. This year’s budget includes a series of measures emphasising support for the economy and structural reforms.
Under the theme of “Strengthening Recovery, Facilitating Reforms Towards Sustainable Socio-Economic Resilience of Keluarga Malaysia”, Budget 2023’s spending accounts for 20.5 per cent of gross domestic product (GDP), with 272.34 billion ringgit allocated for operating expenditure, 95 billion ringgit for development and 5 billion to the COVID-19 fund.
The government says that its budget strives to strike a balance in meeting needs of people in urban and rural areas in Peninsular Malaysia as well as Sabah and Sarawak as the country prepares for what could be uncertain economic conditions in the coming year.
Malaysia faces headwinds from a rise in global interest rates, geopolitical uncertainties, fallout from climate change and lingering effects from the COVID-19 lockdowns of the previous two years.
The deficit is projected to shrink to 5.5 per cent of GDP compared to 5.8 per cent in 2022.
Support for business and the community
The Malaysian Family Assistance scheme allocates 7.8 billion ringgit, which is expected to benefit 8.7 million recipients.
Malaysia’s Micro, Small and Medium Enterprises (MSMEs) have been allocated 45 billion ringgit through loans, alternative financing and guarantees to support growth.
Malaysia’s central bank, Bank Negara Malaysia, will help MSMEs increase agro-food production through 1 billion ringgit allocation and an allocation of 10 billion ringgit to help SMEs in automation, digitalisation, tourism and agriculture initiatives.
MSME will also receive a tax cut. The tax rate on their profits will be reduced to 15 per cent from 17 per cent for the first 100,000 ringgit in taxable income.
“MSMEs will benefit from the measures driving automation and digitalisation,” says Priya Terumalay, Country Head CPA Australia – Malaysia.
“The RM305 million allocation for young Malaysians to start their own small businesses is a positive move. CPA Australia’s annual Asia Pacific Small Business Survey shows that younger business owners are more likely to run businesses that are fast growing, using technology, investing in innovation and exporting.”
A focus on Malaysian women
To encourage women to return to work after taking a career break, they will be exempted from income tax for assessment years of 2023 to 2028. It’s not yet known whether the exemption will be restricted to those earning below a certain threshold.
Female entrepreneurs have also been allocated 235 million ringgit towards increasing their business capacity.
According to Terumalay, “The focus on female empowerment in this budget is commendable.
“This measure – and the Securities Commission’s program to upskill, identify and increase the number of qualified women on boards – will not only produce more female role models but also have positive economic impacts."
Tax matters
People earning between 50,000 ringgit and 100,000 ringgit will receive a 2 per cent tax cut. While those in the 250,000 ringgit to 400,000 ringgit income bracket will see a 0.5 per cent rise to 25 per cent.
To support home buyers, stamp duty exemptions will be increased to 75 per cent from 50 per cent for homes worth more than 500,000 ringgit to 1 million ringgit until 31 December 2023.
To encourage technology companies to list on the Main Market of Bursa Malaysia, their listing costs will be tax deductible.
For those listing on the ACE and LEAP markets, the existing tax deduction of up to 1.5 million ringgit for listing expenses will be extended until assessment year 2025.
Tax incentives for individual investors who invest in start-ups through equity crowdfunding will be expanded.
Manufacturers of electric vehicle (EV) charging equipment have been granted a 100 per cent income tax exemption on statutory income and a further 100 per cent investment tax allowance from assessment years 2023 to 2032.Import duty and excise taxes for imported, completely-built EVs has been extended until 31 December 2024.
The Budget also includes the review and extension of a range of tax incentives to encourage the development of a mix of industries, including pharmaceuticals and aerospace.
“Well-designed and implemented tax incentives can produce significant benefits for those industries and the nation,” says Alan Chung, CPA Australia Malaysia Division Tax Committee Chair.
Budget highlights: green financing, education, healthcare and infrastructure
Malaysia’s Green Technology Financing Scheme will be enhanced through an increase in the financing guarantee to 3 billion ringgit until 2025.
“The large investment in the Green Technology Financing Scheme should help the Malaysian government achieve its goal of supporting green tech, a key driver of future economic growth,” comments Surin Segar, CPA Australia Malaysia Division Deputy President.
With the impending launch of the Voluntary Carbon Market (VCM) Exchange by Bursa Malaysia, the plan to introduce a carbon tax is a timely one. Coupled with a carbon pricing mechanism, this will help Malaysia realise its commitments to become carbon neutral by 2050.
The budget includes 55.6 billion ringgit for education, including 1.1 billion ringgit on school repairs and maintenance, 3.8 billion ringgit for scholarships and educational loans and 6.7 billion ringgit is to implement technical and vocational education and training initiatives.
Healthcare spending of 36.14 billion ringgit includes 4.9 billion to strengthen the capacity of public healthcare services, including the procurement of medicines, reagents, vaccines and consumables along with 1.8 billion ringgit on the construction of new health clinics, hospitals and facilities.
Expenditure for the 50.8 km-long MRT3 project in 2023 is projected at 3.3 billion ringgit. The total cost of the project is estimated to be 50.2 billion ringgit.
Improving digital connectivity and 5G coverage is another focus, with 700 million ringgit to be spent improving connectivity in 47 industrial areas and 3700 schools.
5G coverage is to be expanded to cover 70 per cent of highly populated areas through an allocation of 1.3 billion ringgit.
Flood mitigation plans allocate 700 million ringgit in 2023, out of a total 15 billion ringgit allocation for a Flood Mitigation Plan until 2030, a long-term nationwide strategy to adapt to climate change.
The Voluntary Employees Provident Fund contribution limit has been increased to 100,000 ringgit per year from 60,000 ringgit.
Cybersecurity will be improved through the allocation of 73 million ringgit for enhanced monitoring, detection and reporting of threats, as well as building cyber forensic system capabilities.
The amount of 100 million ringgit will be allocated to the Domestic Investment Strategic Fund to support the development of domestic technology companies.
The Self-Employment Social Security Scheme contribution will be mandatory for all self-employed sectors from 2023.
Read CPA Australia’s submission to the Malaysian Government’s 2023 Budget
Malaysian Budget highlights: three key areas of focus
Malaysian Budget announcements you may have missed
Highlights of Malaysia's 2020 budget
Malaysia’s Budget 2022 aims for a post-COVID-19 economic boost
