Prime Minister Najib Razak announced Budget 2016 themed “Prospering the Rakyat” with the purpose of concerning and bringing prosperity to Malaysians. Before tabling the Budget 2016 in parliament, the public participated in the annual ritual budget survey hosted by our Prime Minister Datuk Seri Najib Tun Razak’s official website. The FIVE highest concerned aspects are cost of living, housing and urban living, education, economic development and employment. Let’s take a deeper look at Budget 2016 and discover whether the “Rakyat” voices have been heard.
Here are the Budget 2016’s key announcements:
1. GST Exempted Medicine
Announcing zero-rating for all types of controlled medicines for non-communicable diseases to benefit the lower income group.
2. Personal Tax
The table below describes the changes of personal tax:
Income tax rates for Malaysians in other income bands are maintained except for those who are earning annual net chargeable income of more than RM600,000. The government expects to receive an additional RM400 million ringgit in tax revenue from the rich. The government claimed that taxing the rich more might aid to reduce income inequality and spend more in the country’s developments. This act might seem to derive from Robin Hood, a man who robs the rich and gives to the poor.
3. Income Tax Relief
4. The Bantuan Rakyat 1Malaysia (BR1M)
BR1M’s existence will continue to benefit 4.7 million households and 2.7 million single individuals across the nation.
The table below shows the increased aid of BR1M:
5. Student Aid
The government decided to continue aiding RM100 to households earning RM3,000 and below for student expenditures. Furthermore, college and university students are qualified to receive RM250 worth 1Malaysia Book Vouchers to purchase necessary reference books and stationery. However, the redemption will only be allowed at designated bookshops, as often cases of misusing and re-selling of the book vouchers are reported all over the nation. The distribution of vouchers might seem to be a generous act from our government. However, the vouchers are part of government's tax revenue and transfer back to us to offset the high living costs. So use the vouchers wisely!
6. Affordable Housing
Budget 2015 provided an affordable housing to the lower income group to help them to get their first house. With the new budget, more measures are still continuously proposed. Under Perumahan Rakyat 1Malaysia (PR1MA), Rumah Mesra Rakyat, Perumahan Penjawat Awam 1Malaysia (PPA1M) and Program Perumahan Rakyat, a total of 317,000 units affordable homes have been planned.
First House Deposit Financing
RM200 million allocated for helping the first house buyers for their down payment.
20% Stamp Duty Exemption:
Shariah-compliant loan instruments to finance home purchases, encouraging Shariah financing and to reduce cost of home ownership.
RM40 million is allocated for the rehabilitation of abandoned public housing projects.
Stamp duty exemption for rescuing contractors and the original buyers of the abandoned houses.
RM60 million is allocated for the construction of housing for the Orang Asli community.
7. Minimum wage
The government has increased the minimum wage of employees in both Peninsular Malaysia and East Malaysia. It includes all sectors, except domestic service and house maids. More Malaysians are encouraged to take up jobs they previously shunned and this could help to reduce Malaysia’s dependence on foreign workers.
The table below describes the changes of the minimum wages:
Overall, Budget 2016 is a good move at helping Malaysia towards a high-income nation by 2020, which is in line with the six strategies proposed in the Eleventh Malaysia Plan. It gradually cuts the budget deficit and ensures infrastructure development and sustainable economic growth. Besides, the budget also places priority on addressing the increasing living costs for the rakyat, especially the low and middle-income groups. Thus, like most things in life, Budget 2016 might not satisfy everyone especially people who earn annual net chargeable income of more than RM600,000 and taxed at a ridiculous high rate.
The challenge lies in Malaysians’ ability to control spending behavior and making necessary expenditures decisions. Living costs are climbing towards the summit, but salaries are not.
Building your own financial portfolio seems to be the better plan rather than relying on BR1M. Learn more about Personal Finance topics from Loanstreet’s Learning Centre!