THE nation’s annual budget has often placed its emphasis on the Bottom 40% group, allocating resources to various financial or non-financial support initiatives. The rise in the cost of living, however, does not discriminate.
The middle 40% (M40) group, particularly those who are taxpayers residing in urban areas, has also borne the brunt of soaring living costs.
Accordingly, the Finance Ministry had recently announced that Budget 2024, which will be tabled on Oct 13, would focus on empowering the M40 to alleviate their burden.
Anticipation is high that this year’s budget will introduce more tax benefits to boost the disposal income of taxpayers.
From the perspective of most taxpayers, any form of tax cuts, additional tax reliefs and rebates would be welcomed.
The adoption of a more targeted measure would also be beneficial, especially one that takes into account the general expenses borne by the M40 group.
Within an M40 household, aside from expenses related to food, the largest financial commitments typically revolve around housing loans or rent, children’s education and family healthcare, which may also encompass the needs of parents and in-laws.
In this context, here is the list of some tax breaks that can be considered in the budget proposals, designed to be beneficial for the M40 group with a specific emphasis on the expenses that are commonly incurred:
> Housing loan interest – In March, the Local Government Development Ministry disclosed that the cost of homes was increasing at double the rate of income (4.1% versus 2.1% respectively).
The government can offer assistance to encourage individual ownership of residential properties. This includes the reintroduction of tax relief for housing loan interest with less restrictions, as the past conditions on claiming the housing loan interest relief up to RM10,000 per year for three years are rather stringent. Since housing loans often span many years, one potential avenue worth considering is providing relief on the interest payable for the taxpayers’ residential home regardless of the purchase date.
> Tax relief for children – The cost of raising a child today poses a significant financial commitment for parents, and the expense continues to rise each year. It may be prudent for the government to increase the limit of child relief from RM2,000 to RM4,000 per child.
Similarly, as the cost of education continues to soar, child relief for parents who have children pursuing higher education can be increased from RM8,000 to RM16,000 for each child.
Additionally, increasing the limit from RM2,500 to RM5,000 under the lifestyle tax relief category would be welcomed by the M40. In today’s digital age, households with school-going children will incur expenses on personal computers, tablets or smartphones.
Smartphones, in particular, have become integral to our way of life, serving as essential tools for conducting online transactions, including e-wallets and online banking.
It was disappointing that this boon, which was applicable from 2020 to 2022, was not extended in the revised Budget 2023 proposals. However, there remains an opportunity for the government to reconsider and extend this relief in the Budget 2024 proposals.
> Healthcare matters –Currently, taxpayers can claim relief of up to RM8,000 on medical treatment, special needs or carer expenses incurred for their parents.
It should be noted that this relief is restricted to the expenses related to the taxpayer’s own parents and does not extend to cover parents-in-law.
Taking into account the cost of healthcare services and the multifaceted financial responsibilities faced by some taxpayers, including the support of dependent parents, parents-in-law, and possibly grandparents, there is a compelling case for the government to introduce dependent elderly relief.
This would alleviate some of the burden of taxpayers who are responsible for providing for the entire family, including dependent elderly relatives, thus promoting a caring society – in line with one of the Madani core values, Ihsan (being compassionate).
It would be laudable if the government were to consider reinstating the parents’ relief of RM1,500 each, as previously provided in the past.
Consideration should also be given that this relief is not confined to the parents of the taxpayer only but is also extended to parents-in-law and grandparents.
> Tax rebates – Apart from the standard relief for spouses and children, other claimable reliefs are contingent upon the expenses incurred by the taxpayers, which must be substantiated by receipts.
So as to empower the M40 group and as an effective means to increase their disposal income, another avenue that can be considered is the extension of tax rebates – in addition to tax reliefs.
Simply put, tax relief is the deduction (substantiated with supporting documents) from total income to derive chargeable income, whereas a tax rebate is a deduction from the actual tax payable.
Presently, a tax rebate of RM400 is given to B40s whose chargeable income is less than RM35,000.
The government can consider granting tax rebates of RM1,000 to taxpayers within the M40 group – those whose chargeable income is in the range of RM35,000 to RM100,000.
This measure also offers the added advantage of being administratively more straightforward for taxpayers, as no supporting document is required to substantiate the claim.
Essentially, the eligibility for this tax rebate would be entirely dependent on the chargeable income of the taxpayers.
Comprising the largest tax-paying base, the M40 group has been propping up the national economy and it’s time that they get to enjoy incentives and benefits that will alleviate their burdens arising from escalating cost of living.
There is hopeful anticipation that the Budget 2024 allocations will cushion the “forgotten” M40 group more than in previous years, thereby demonstrating the government’s promise of improving the quality of life for all Malaysians and not just the select few.
Long Yen Ping is partner (global mobility services) of KPMG Malaysia. The views expressed here are the writer’s own.
