(i) There were several changes in income tax rates and policies concerning individuals and sole proprietor businesses that were proposed in the Budget 2014. The three significant changes in tax policies are listed below.
Review of Individual Income Tax
In consideration of the implementation of the Goods and Services Tax (GST) which takes effect on 1stApril 2015, the government had proposed several changes to reduce individual income tax rates with effect from Year of Assessment (YA) 2015. The proposed changes are:
I. Income tax rates for resident individuals is to be reduced by 1% to 3%
II. Income tax rates for non-resident individuals is to be reduced by 1% from 26% to 25%
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Contributions to approved institutions
ii. Tax reliefs.
Chargeable income can be further reduced through rebates such as:
i. RM400 for a taxpayer with chargeable income up to RM35,000 and RM400 for the spouse
ii. The amount equivalent to zakat paid by Muslim taxpayers.
In the proposed new budget, a special relief of RM2, 000 will be given to resident tax payers earning up to RM8, 000 a month with an aggregate income up to RM96, 000 a year which will be effective for YA 2013. This measure is taken to increase the disposable income and to alleviate the middle income group’s burden of tax liabilities and increasing cost of living due to the implementation of GST. As the middle income group forms the largest taxpayer-based in the country, the proposed measure highlights that the middle income group is not neglected by the government.
Review of Real Property Gain Tax (RPGT)
Based on the Real Property Gain Tax Act 1976, RPGT is charged on gains arising from the disposal of real property, which is defined as any land situated in Malaysia and any interest, option or other right in or over such land.
In accordance with Budget 2014, the government has proposed a significant hike in RPGT to 15%-30% from the previous rates of 10%-15%. The reason behind the hike was to curb speculations and even prevent a possible property bubble as the limited supply of real property especially in urban areas has provided opportunities for speculative activities, which resulted in houses with grossly inflated prices that are beyond the reach of many Malaysians. Thus, hiking up RPGT will enable the Rakyat to purchase affordable new houses. Furthermore, increasing RPGT would arrest undue price hikes which were usual before the implementation of Goods and Services Tax scheduled for April 2015.
With effect from 1 January 2014, the revised RPGT rates will be as follow:
The following table states the revised RPGT rates with effect from 1 Jan 2014:
Date of Disposal | Rates of RPGT (%) |
| Individuals (Citizens & Permanent Residents) | Individuals (Non-Citizens) |
| With effect from 01.01.2013 | With effect from 01.01.2014 | With effect from 01.01.2013 | With effect from 01.01.2014 |
Within 2 years after date of acquisition | 15 | 30 | 15 | 30 |
In the 3rd Year after date of acquisition | 10 | 30 | 10 | 30 |
In the 4th year after date of acquisition | 10 | 20 | 10 | 30 |
In the 5th year after date of acquisition | 10 | 15 | 10 | 30 |
in the 6th year after date of acquisition or thereafter | Nil | Nil | Nil | 5 |
Adam Smith’s theory of taxation is based on his first theorem of welfare economics which states that “an unfettered market will automatically, as if by an “invisible hand” allocate a nation’s resources in the most efficient manner possible. Therefore Smith supports the notion that taxation should be levied only to support a limited government and should satisfy four maxims: equity, transparency,...