Deloitte TaxMax – The 45th seriesForum TalkpointSim Kwang Gek

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2019 2020

GDP growth 4.7% 4.8%

Fiscal deficit (% of GDP) 3.4% 3.2%

Operating expenditure RM262.3b RM 241.0b

Development expenditure RM53.7b RM 56.0b

Projected crude oil per barrel USD70 USD62

Projected tax collection• Direct tax• Indirect tax

RM135.6bRM41.4b

RM142.6bRM47.2b

The 2020 Federal Government Budget

1. Consists of revenue and borrowings2. Excludes contingency reserves

INCOME TAX45.1%

OTHER DIRECT TAX

2.9%

INDIRECT TAX15.9%

NON-TAX REVENUE

18.4%

BORROWINGS17.7%

WHERE IT COMES FROM

EMOLUMENTS27.8%

DEBT SERVICE CHARGES

11.8%

SUPPLIES AND SERVICES

13.0%

RETIREMENT CHARGES

9.1%

GRANTS AND TRANSFERS TO STATE GOVERNMENTS

2.6%

SUBSIDIES AND SOCIAL ASSISTANCE

8.2%

OTHERS8.7%

ECONOMIC10.4%

SOCIAL5.1%

SECURITY2.2%

GENERAL ADMINISTRATION

1.1%

WHERE IT GOES

Source: Ministry of Finance, Malaysia International Monetary Fund

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Making Malaysia the preferred destination for investment

RM1 billion of customised packaged investment incentives for 5 years –

targeting Fortune 500 companies and global unicorns

National Committee on Investment (NCI) jointly chaired

by MOF and MITI

To expedite approval of investment, MITI to focus on

post-approval investment monitoring and realisation –

RM10 million

Electrical and Electronics Sector

• Income tax exemption up to 10 years to E&E companies investing in selected knowledge based services

• Special Investment Tax Allowance of 50% on qualifying capital expenditure incurred within 5 years

Comprehensive review and revamp of the existing incentive framework

Special channel established under InvestKL to attract Chinese

investments

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24

17

20

25

30

20

2425

18.520

22

25

Malaysia(Note 1)

Singapore Thailand Indonesia Philippines Vietnam(Note 2)

Laos(Note 3)

Myanmar Brunei(Note 4)

Cambodia(Note 5)

India(Note 6)

China

0

5

10

15

20

25

30

35

Tax Rate (%)

Corporate income tax rates (comparative analysis with selected countries)

Note 1: SMEs is taxed at 17% on first RM 500,000.

Note 2: Oil and gas and natural resources companies is tax at 32%-50%, depending on project.

Note 3: Tobacco products companies is taxed at 26%.

Note 4: Oil and gas companies is taxed at 55%.

Note 5: Oil and gas companies is taxed at 30%.

Note 6: Effective from 1 April 2019, the above tax rate is for domestic companies that forego claiming specified tax exemptions or incentives.

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• Digital Social Responsibility (DSR) – Tax deduction

• RM10m – MDEC to train micro-digital entrepreneurs and technologist to leverage on e-Marketplaces and social media platforms

• One-time RM30 digital stimulus to qualified Malaysians who own an identity-verified e-wallet account with selected service providers

• National Digital Skills Register

• 5G Ecosystem Development Grant (RM50m)

• Contestable Matching Grant Fund (RM25m)

• Creating digital content –e-Games, animation and digital arts (RM20m to MDEC)

• Implementation of pilot dronetech test bed initiative

• New digital talent development strategy framework

• 50% matching grant up to RM5,000 per company for SMEs to adopt digitalisation (e.g. e-POS, ERP and electronic payroll system)

• RM550m for Smart Automation Matching Grants

• One-stop Digital Enhancement Centres

• RM21.6b in National Fiberisation and Connectivity Plan

• Improve connectivity in remote area especially Sabah and Sarawak

• RM250m to leverage on various technologies, including via satellite broadband

• RM210m in new digital infrastructure

Focus on Digital Economy

Building Digital

Applications

Building Digital

Infrastructure

Building Digital Companies

Building Digital Malaysians

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Percentage of Tax Revenue over GDP

11.513.6 14.1

17.5 17.6

26.9

30.6

34.2

0

5

10

15

20

25

30

35

40

Indonesia Malaysia Singapore Philippines Thailand Korea Japan OECD Average

Tota

l ta

x r

evenue, %

of

GD

P

Source: Organisation for Economic Co-operation and Development - 2017

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Expanding tax base and reduce tax gaps

• 30% on annual chargeable income < RM2 million

• 2,000 individuals

• RM100 million collection

Taxing the rich

• 21% of GDP

• Approx. RM300 billion

Taxing the shadow economy

• Applicable to all businesses and individuals aged 18 years and above

• Effective 2021

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