Glove makers income tax RM2.8b this yr, RM4.7b next yr
KUALA LUMPUR: Glove manufacturers’ corporate income tax is projected to be RM2.8bil in 2020 and RM4.7bil in 2021, according to Maybank Investment Bank Research following a dialogue with the Finance Minister.
The research house said on Monday the government decided no windfall tax will be imposed on glove manufacturers to avoid potential “opportunity costs/losses” such as glove manufacturing companies investing overseas instead of in Malaysia, and sending wrong signal to existing and potential investors in other industries.
The RM400mil contributions by glove manufacturers as announced in Budget 2021 are voluntary and are on top of the glove manufacturers’ record corporate income taxes.
These were among the key points during a post-Budget 2021 dialogue with Datuk Seri Tengku Zafrul Tengku Abdul Aziz last Friday, Maybank Research said.
Zafrul said there is also no plan to re-instate automatic blanket loan moratorium as the government adopts a balanced approach between helping those in need and ensuring healthy credit culture so that financial institutions remain on strong footing and resilient.
On the Covid-19 vaccine, Budget 2021 allocated RM3bil to acquire vaccines through Malaysia’s participation in WHO’s COVAX programme and negotiations with the pharmaceutical companies undertaking the Stage 3 clinical trials of vaccines, with the aim to obtain the vaccines in 1Q 2021.
Over the medium term, the government is committed to lower budget deficit to 4% of GDP by 2023. Key strategy will be on revenue enhancing given the limited scope to cut spending e.g. 95% of operating expenditure are “locked-in” obligations i.e. emoluments, debt service charges, retirement charges.
The Ministry of Finance has set up a committee to study various revenue enhancing measures including the possibility of re-introducing Goods & Services Tax (GST); analysing weaknesses in tax regime and impact of new taxation on the economy; studying options for new taxes such as carbon tax and digital tax; rationalizing tax incentives; improving tax administration and enhance tax audit (e.g. implementing tax identification numbers; enhancing data analytics).
Timing is also important -especially on any new taxes so as not to disrupt economic recovery process as 2021 is a transition year from crisis to recovery.
Meanwhile, Parliament will vote on Budget 2021 this Thursday. If it is not approved, only certain part of the budget can be spent i.e. “charged expenditure” which is essentially pensions and debt servicing which is only 20% of the overall budget.
The remaining 80% -- including operations of public services like healthcare, education, law & order -- must be approved by the Parliament.
The use of Section 102(a) of the Federal Constitution to pass a partial budget is allowed when there is insufficient time to approve a budget before the start of the new financial year.
This happened in 1999 when Parliament was dissolved as general election was called after the tabling of Budget 2000, and there was a special Parliament session before the end of 1999 after the general election to approve a partial budget for year 2000.
However, there is no precedent to approve a partial budget after the rejection of a budget.
Therefore, in the event of the Budget 2021 is not passed by the Parliament, a revised or new Budget 2021 needs be tabled and approved before end of this year to avoid delay into next year.