KUALA LUMPUR: The base for individual tax payers in Malaysia is small, hence the need for the Goods and Services Tax (GST) which covers a wider base, said Deputy Finance Minister Datuk Othman Aziz.
He told the Dewan Rakyat that number of individual income taxpayers in Malaysia is still small with just 2.27 million people.
As such, the government implemented the GST which taxes those who can afford to spend, he said.
Othman said the number of companies paying taxes was also lesser than the 1.2 million companies registered with the Companies Commission of Malaysia (SSM).
"Just like the individual taxpayers, the numbers are really low.
"As it is, only 168,244 companies are paying taxes," he said deliberating on the Income Tax Bill (Amendment) 2017.
In spite of that, only those who earn RM3,100 or above will have to pay income tax starting from next year.
The deputy minister said the government had reduced the two-percent monthly tax deduction (PCB) rate on employees.
Presently, employees who earn more than RM 2,851 and above each month, their employer will deduct an amount of income tax from the monthly salary.
The amount will then be paid to the Inland Revenue Board on behalf of the employees.
"The two percent reduction from five percent shows the government’ intention to ease the people's burden.
During the 2018 Budget presentation last month, Prime Minister Datuk Seri Najib Razak announced that taxpayers with income of between RM20,001 and RM70,000 per annum would get a two percentage point relief in personal income tax.
As a result, 261,000 middle-income earners will cease to be taxpayers next year, allowing them to better sustain their daily lives by increasing the disposable income between RM300 and RM1,000.
It is estimated that additional disposable income of RM1.5 billion can be spent by the rakyat. -- Reporting by FERNANDO FONG, VEENA BABULAL and ARFA YUNUS.