Highlights of revised Budget 2023
Highlights of Budget 2023:
The revised Budget 2023 will see an allocation of RM388.1 billion, comprising RM289.1 billion operating expenditure and RM99 billion development expenditure, including RM2 billion in contingency savings.
With 12 main efforts based on three determinations — inclusive and sustainable economic drive, institutional and governance reforms to restore confidence, and social justice to moderate disparities — here are the key measures under the new supply bill.
- Education Ministry receives highest allocation of RM55.2 billion, up from RM52.6 billion in 2022.
- Health Ministry receives second-largest allocation of RM36.3 billion, up from RM32.4 billion last year. Mostly to buy medicine, reagents, vaccines and consumables, while RM3 billion will be set aside for new permanent positions and appointment of over 1,500 contract medical officers, contract dentists and contract pharmacists.
- Higher Education Ministry gets RM15.3 billion, up from RM14.5 billion in 2022.
- Home Ministry gets RM18.5 billion; RM4.1 billion to maintain and procure military assets, including littoral combat ships.
- Defence Ministry gets RM17.7 billion, including RM1 billion to enhance domestic security such as acquiring 2,100 body cameras for police, and RM450 million for new police headquarters and police quarters in Perak.
New and restructured taxes
- No Goods and Services Tax (GST) but the government will tax those with the means to pay via:
* Luxury Tax on items such as watches and fashion goods;
* excise duties on liquid nicotine used in e-cigarettes and vapes.
- The government may introduce a capital gains tax on the sale of shares in private companies in 2024.
- Income tax on those earning more than RM100,000 to RM1 million will be raised by 0.5 to two percentage points, affecting fewer than 150,000 taxpayers.
- Income tax on those earning between RM35,000 to RM100,000 will be lowered by two percentage points, resulting in additional disposable income of RM1,300 for about 2.4 million taxpayers.
- Individuals or companies donating to non-profits undertaking grassroot sports development programmes will qualify for a tax cut of up to 10% on aggregate income.
- Tax relief of up to RM3,000 for voluntary contributions to the Employees Provident Fund (EPF) account.
- Under a special voluntary disclosure programme from June 1, 2023 until May 31, 2024, the govt will provide 100% waiver on additional taxes for taxpayers who declare unreported taxes.
- Tax relief on medical treatment raised to RM10,000 from RM8,000, including relief of up to RM4,000 on treatments for conditions such as autism, Down syndrome and specific learning disabilities.
Digitalisation and automation
- RM1 billion in funds under Bank Negara Malaysia (BNM) to help micro, small and medium enterprises (SMEs) automate their processes to digitalise their businesses.
- RM100 million under the SME digitalisation scheme will be used to fund matching grants of up to RM5,000 to SMEs subscribing to apps to digitalise their businesses, such as point-of-sales systems, accounts or inventory management.
- Govt to provide RM50 million in matching grants to encourage automation of plantation sector through use of robotics and artificial intelligence.
- Govt to accelerate implementation of Jendela project as a national effort to provide internet network facilities.
- RM725 million to implement digital connectivity in 47 industrial areas and nearly 3,700 schools.
Grants and incentives to spur SME growth, drive domestic investments
- Syarikat Jaminan Pembiayaan Perniagaan to guarantee up to RM20 billion in loans from SMEs, with a government guarantee of up for 90% for companies in frontier tech, agriculture and manufacturing.
- Investment incentives will be restructured towards tiered taxes based on outcomes, such as creating high-value jobs, including local firms in the supply chain and creating new industry clusters.
- Khazanah Nasional and EPF to invest in innovative and high-growth local start-up companies with an investment value of RM1.5 billion.
- Tax deduction of up to RM1.5 million for firms that list on Bursa Malaysia's ACE and LEAP Markets until assessment year 2025; tax rebate also extended to tech companies that list on the Main Market.
- RM100 million under Digitisation Grant Scheme for SMEs and small vendors to support business automation and digitisation; separately, there is a RM1 billion facility under BNM aimed at incentivising SMEs to automate processes and digitalise operations.
- For Malaysia’s electrical & electronics (E&E) and aerospace sectors, govt plans to:
* extend tax incentives to manufacturing companies that transfer their operations to Malaysia, as well as a 15% tax rate for C-suite executives until 2024 to attract investment from companies affected by Covid-19;
* extend income tax incentives, as well as investment tax allowances to the aerospace sector until Dec 31, 2025 to encourage capacity expansion of existing companies and attract investment from new companies;
* strengthen development of Iskandar Malaysia in Johor via creation of a special financial zone and competitive remuneration package to attract international investors and skilled workers to settle in Malaysia;
* RM6 billion strategic financing by Bank Pembangunan Malaysia to promote sustainable and automation agenda.
Alleviating the people’s burden
- Govt to give Aidilfitri Special Financial Assistance of up to RM700 to all civil servants Grade 56 and below, including those on contract, and RM350 to government retirees. Payment will be made in April 2023.
- Govt to give up to 20% discount for three months on PTPTN loan repayment starting March 1.
- Govt to grant a postponement of repayment to borrowers with a monthly income of RM1,800 and below for a six-month period; application for postponement can be made from March 1.
- Govt amending Insolvency Act 1967 to enable bankruptcy cases to be discharged more quickly.
- The amendment, combined with immediate release of cases owing less than RM50,000 starting March 1, will allow 130,000 people to be released from bankruptcy status. This will benefit the Malays, who make up the majority of the 260,000 bankruptcy cases as of January, and will allow them to contribute to the national economy.
Sabah and Sarawak
- RM6.5 billion for Sabah’s development; RM5.6 billion for Sarawak. This includes developing cities bordering Kalimantan, Indonesia, such as Kalabakan, Sabah and Ba’kelalan, Sarawak with a cost of RM1 billion.
- Separately, over RM2.5 billion is provided to implement projects, mainly involving public infrastructure for the benefit of Sabah and Sarawak, road projects and street lights, as well as water and electricity supply.
- Govt to review MRT3 project cost, confident of reducing it to below RM45 billion.
- Govt to ensure Digital Nasional Bhd (DNB) is managed more transparently and inclusively to achieve full participation by telcos and provide comprehensive 5G coverage at a reasonable price. At end-2022, 5G coverage reached 50% of populated areas; targeted to reach 80% by end-2023.
- To relieve road congestion at tourist hotspots, the govt will:
* build a new road from Habu to Tanah Rata, Cameron Highlands, Pahang for RM480 million;
* upgrade Jalan Tun Hamzah up to the intersection of Semabok Lebuh AMJ Daerah Melaka Tengah at a cost of RM300 million;
* build a road and a bridge over Sungai Sepang to connect Bukit Pelandok, Port Dickson and Sungai Pelek, Sepang at a cost of RM160 million; and
* build an overtaking lane on Senai Desaru Expressway and upgrade Lebuhraya Utara Selatan from Yong Peng Utara to Senai Utara — Phase 1, Johor from four to six lanes, in phases, at a cost of RM525 million.
- Expansion and improvement of airport capacity in Penang and Subang to encourage entry of investors, businesses and tourists; to benefit economic growth at a much lower cost than building a new airport in Kulim, estimated at RM7 billion.
- RM1.2 billion to expedite repairs of 400 clinics and 380 schools that are dilapidated.
- RM1.5 billion to develop new rural roads and village link roads.
Encouraging investments & savings
- Total individual investment limit of Amanah Saham Bumiputera (ASB) and Amanah Saham Bumiputera 2 (ASB 2) will be increased to RM300,000 from RM200,000.
- Size of Amanah Saham Malaysia (ASM) fund will be increased to about RM5 billion.
- 5.1% dividend for ASB members with savings of less than RM30,000, to benefit 87% of members.
- Govt to help those aged 40-54 with EPF savings of less than RM10,000 in their Account 1 by providing an additional contribution of RM500; to benefit nearly two million EPF members with an allocation of nearly RM1 billion.
- From 2024, shariah savings assets under EPF will be fully segregated to provide competitive returns to 1.25 million members holding shariah accounts.
Agriculture and food security
- Government to promote private sector investment into large-scale agriculture by providing incentives, land, funds and technology grants.
- “Elaun Modal Dipercepatkan” and 100% income tax exemption on capital expenditure will be available, and the tax incentive application period for food production projects will be extended until end-2025, with an expanded scope to include modern agriculture projects.
- Bernas agrees to share 30% of its net profit from rice imports with rice farmers.
- Govt to give various subsidies and incentives amounting to RM1.6 billion to rice farmers. In addition, 240,000 rice farmers will receive RM200 cash per month for three months, or one season, for a total of RM228 million.
- Govt to allocate RM80 million to improve sustainability of palm oil industry and intensify the fight against anti-palm oil campaign.
Strengthening oversight and institutional reforms; fight corruption
- Govt aims to enact the Consumer Credit Act and set up consumer credit monitoring board to regulate companies providing consumer credit such as “Buy Now Pay Later” schemes this year.
- Procurement Act to be tabled to boost transparency, increase savings.
- Review compensation packages of chief executives and senior management of statutory bodies and companies to more reasonable levels.
- Amend the Whistleblowers Protection Act to better protect informants.
- New management of govt agencies such as Tabung Haji, Felda and Felcra should study possibility of closing loss-making subsidiaries not aligned with their original functions, such as travel agencies, security companies, and IT firms. Govt mulls banning companies and statutory bodies from this practice.
- All govt agencies, including the Inland Revenue Board (“Lembaga Hasil Dalam Negeri” in Malay, or LHDN in short), the MACC and the police are actively investigating corruption, including those named in the Pandora Papers. LHDN will also continue investigating “unusual wealth” to fight corruption, rather than allow it to continue to fester.
Ending hardcore poverty
- RM30 million set aside to increase activities that support Sustainable Development Goals (SDGs), including RM10 million to start community farm programmes at the parliamentary level to promote food security.
- Govt to implement “Inisiatif Pendapatan Rakyat” (IPR) through the Economy Ministry with RM750 million allocation in 2023, to empower the poor to increase their earning potential.
- Loan facility from Bank Simpanan Nasional (BSN), BNM and Tekun (National Entrepreneurial Group Economic Fund) worth RM1.7 billion to help micro entrepreneurs, women and youth.
- BSN to provide over RM1 billion with a focus on micro-entrepreneurs; Tekun to provide RM330 million, including RM10 million to help youths from poor families.
Disaster preparation, green initiatives & EVs
- Govt to re-tender six flood mitigation projects by June, potentially saving RM2 billion out of RM15 billion previously allocated for such projects.
- BNM to provide financing of up to RM2 billion to support green tech start-ups, help SMEs implement low-carbon practices.
- Khazanah to provide RM150 million to environmentally friendly project development including supporting the carbon market and reforestation.
- Green Technology Financing Scheme (GTFS) to be implemented with increased allocation of RM3 billion until 2025. Scope of funding to be widened to cover electric vehicles (EVs) with a guarantee limit of up to 60%.
- Bank Pembangunan Malaysia Bhd will offer RM1 billion Sustainable Development Scheme.
- Incentive period for Investment Tax Allowance (Gita) and Green Income Tax Exemption (Gite) schemes to be extended until Dec 31, 2025 for eligible green activities.
- Import duty exemption on EV components for local assembly extended to Dec 31, 2027; excise duty and sales tax waiver on locally-assembled completely knocked down (CKD) EVs extended to Dec 31, 2027.
- 100% statutory income tax exemption for manufacturers of EV chargers from 2023 to 2032, and a 100% allowance on investment tax for five years.
- Tax breaks for companies leasing EVs, with the lease not exceeding RM300,000.