KUALA LUMPUR: The National Housebuyers' Association has proposed income tax waivers to further ease the burden of ratepayers and companies badly affected by the Covid-19 pandemic.
Its honorary secretary-general Datuk Chang Kim Loong said the government should consider wholesome waivers or at the least offer 50 per cent rebates on personal and corporate income tax for the first RM100,000 of chargeable income in the next two years.
He said various initiatives announced by the government, including stamp duty waivers would only "entice buyers of high-end overhang unsold residential property, benefiting a meagre segment of society in an attempt to revive the economy".
He said the government, through Penjana (economic recovery plan) was giving tax exemptions among others, waiver of stamp duties and exemption of real property gain tax (RPGT) to revive the property sector which was seen as an important sector as many downstream sectors were dependent on this sector such as cement, sand, steel, and others.
"We chose RM100,000 because this amount was used as the threshold to receive the RM30 e-wallet in Budget 2020 and also the RM50 under the ePenjana initiative.
"Based on a chargeable income of RM100,000 and the tax rate for 2020, the 50 per cent tax reduction will translate to annual tax savings of RM5,450 or additional disposable income of RM454 per month, which will greatly add to one's monthly cash flow and result in a boost to retail spending and uplift the economy.
"However, this 50 per cent income tax reduction should not be restricted to those earning below RM100,000, but applicable to the first RM100,000, meaning anyone earning more than RM100,000 would also be able to enjoy this proposed tax reduction," he said in a statement today.
This is because, Chang said, many people who supposedly earn more than RM100,000 per year were just salaried employees who were in the 'sandwich' group (supporting elderly parents and young children) and considered themselves to still be 'middle income', and as affected by the pandemic as those in the lower income group.
"Assuming that this tax exemptions would result in a fall of up to 50 per cent in income tax collection, it would amount to loss of revenue of about 6.7 per cent which seems manageable as money would be injected back into the local economy and possibly generate more economic activities, hence would offset the drop in government revenue," he said.
Similarly, he said while companies could reduce headcounts in cost-cutting measures, they had to pay corporate income tax so long as these companies recorded a taxable profit.
"The government should consider giving tax reliefs to the small and medium size entreprises (SMEs), that were currently taxed at 17 per cent for the first RM600,000 in taxable income and the balance at RM24 per cent.
"The government could consider giving a 100 per cent tax relief on the first RM1.0 million in taxable income and the balance to be taxed at 24 per cent for the next three years.
"However, this tax relief should come with some strings attached, which is the said SME should not retrench any local employees during the tax relief period."
For large corporates, he said the government should also consider giving some tax reliefs in the form of lower tax rates for the next three years, say from the current rate of 24 per cent to 17 per cent, to allow substantial savings of about 29 per cent to these corporates.
Chang also proposed the implementation of windfall tax for the next two years on companies and sectors that had somehow 'benefited' from Covid-19, to offset the loss of revenue from granting tax exemptions.
"This Covid-19 windfall tax would be similar to the windfall tax that was imposed on CPO produces in the past when the price of CPO was very high due to the high price of crude oil. The money from the Covid-19 windfall tax could help to offset the loss of revenue from granting personal and corporate income tax exemption.
He also urged the government to push ahead with the implementation and execution of Digital Tax as more businesses have moved to online strategies to cut cost and also due to Covid-19.
"Technology giants have been known to use various innovate methods as they move their good and services worldwide in order to avoid paying tax.
"The government must ensure that all providers of online goods and services used by consumers in Malaysia pay the required taxes so that our government does not lose out on much needed revenue during these challenging times."