Saturday, October 24, 2009

Malaysia Budget 2010 Not Favor To Middle Income Group

Datuk Seri Najib Tun Razak announced the Malaysia Budget 2010 on 23 October 2009 which falls on my birthday. What a coincident! The budget 2010 was aimed at making Malaysia a high-income economy and ensuring holistic and sustainable development.

Just to highlight a few measures especially in the tax relief and charges of RM50 for credit cardholders. I think the measures are ‘unfavorable’ to middle income group. Why I say so…

I believed that the above measures would not have any impact to reduce my financial burden. What I want to stress in that a few points on the tax relief.

• Income tax reduction from 27% to 26% for income above RM100,000

In order to entitle the 1% reduction of the tax relief, your income must reach RM116,500 per year which means that your monthly income should be RM9,708 and not RM100,000.  The remark above RM100,000 is not right?  Where do I get the RM116,500? If your annual income is RM100,000, after the deduction of RM7,000 (EPF contribution and life insurance premium), RM9,000 (personal relief), RM500 (tax relief on broadband subscription) and assumed that other things are remained unchanged. Your income will be reduced from RM100,000 to RM83,500. If the RM83,500 is your taxable income. Hello brother! you are not entitled for the minus 1% tax reduction.

What I can tell you that you must earn at least RM116,500 per annum or more if you have children and other deduction as well. So, if you get RM116,500 per annum, your monthly income should be around RM9,708. So, we go to the nearest thousand, you should earn RM10,000 per month in order for you to get enjoy the income tax reduction from 27% to 26%.

How many workers population in Malaysia is getting RM10,000 per month. Based on the expert as per said in the local newspaper, the move to increase the personal tax relief would allow families with a household income of about RM24,000 a year to be free from income tax. So, if you earn RM2,000 per month, you will be tax free citizen. Taking consideration of the personal relief, EPF relief and broadband relief, if you earn around RM40,500 or RM3,375 per month, you can scream loud ‘Hooreeeey’.

But, my concern is how the individual or families with income between RM40,500 and RM116,500 a year who are seen unfavorable with the measures of minus 1% of tax reduction. How many of these workers population under these rages of incomes? I think a lot because if you are earning more than RM10,000 per month, your rank in the organization should be in the rage of management level. Based on the organization structure which often resembles a pyramid, with the top level (management) are fewer as compare to lower level (employee).

My opinion strongly believes that this measure is only helping the high income group instead of middle income group. This is not fair.

• A service tax of RM50 to credit card holder and RM25 to supplementary cardholder

Another burden to the middle income group is Government tries to curb the usage of credit cards and to promote prudent spending. A service tax is imposed to the credit card holders.

Currently I have 5 credit cards with average outstanding amount of RM2,000 per card for the first 3 cards and the remaining two with no utilization. It means that every month I need to pay the minimum due at least RM100 per card. So, every month I need to put a side RM300 to pay my credit cards. This do not include other monthly commitment such as if you purchase any goods under the 0% interest schemes.

Next year effective 1 January 2010, a service tax of RM50 per year will be imposed on each principal credit card and RM25 per year for any supplementary card issued or earned by Malaysia citizen. In my case, I need to pay RM250 to government. If I got two supplementary cards, the total I need to pay to Government is RM300 per year.

Why? This the things I really want to know why Government imposes this kind of service tax to credit card holders. Government should understand that for middle income group, the usage of credit cards is a must and some of them use credit card for roll-over purposes. The monthly incomes are still cannot cope with the monthly expenses, that is why the credit card comes handy for emergency and in the time of insufficient funds.

Who should be affected from the service tax of RM50? I think that the middle income group will suffer for the measure. They need to put a side from my yearly income to pay Government. In my case, I need to allocate RM300 and RM300 is a lot for me.

If Government really wants to promote prudent spending, why not put high restriction in applying the credit cards. Minimum income of RM100,000 per year that will entitle you to earn credit cards. Government need to know the impact of their measures, a lot of people will stop using credit cards and land themselves in making financial aids from the “ALONG”. Then what will happen next, more people will get ‘chain’ on their necks to the wall or got their homes tainted with red pain or their immediate family members will received a ‘love’ threats or so on. Is this government wants??

Government should know that some usages in credit cards are helpful to boost the economy circles from consumers to businesses. Put an example, recently I bought some household furniture from one retailer and they have this 0% interest schemes. When I bought the furniture, the retailers made money, the staff of the retailer earned salary, the lorry driver got wages from the transporting the furniture from the retailer premises to my home, the manufacturer of the furniture made money, the designer of the furniture made money and the whole chain of entities who involves in the furniture will be able to share some pieces of the cakes.

Last but not least, my opinion of the Budget 2010 on 23 October 2009 was not the best birthday present and I totally disagreed with some of the measures which I seen is not helping the middle income group. The only people who enjoy the two “unfavorable” measures are the rich and high income group. All of them are driving the high class cars such as Mercedes Benz, BMW, Lexus, and you can name it all. How about people who driving Proton, Myvi and other automobiles such as motorcycles and buses? This is not the ways in the 1Malaysia concept that hinges on “People First, Performance Now” motto. I hope DSN should look into this and please help us especially from the middle income group.

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