That 2% monster!

It seemed harmless at first sight; the proposal to “broaden the tax base… that tax at a fixed rate of 5% be imposed on gains from the disposal of real property” with a collection mechamism whereby the tax is collected through a withholding mechanism whereby the purchaser withholds 2% of the purchase value and pays to the Inland Revenue Board.

One month thereafter and one month before implementation date, here are some potential migraines to consider…

1. All purchasers of real property or real property company (RPC) shares will be required to withhold 2% of the purchase price and remit the same to the IRB when the purchaser is unsure whether the disposer is subject to RPGT on the gain, or whether the disposer has got a gain from the sale, or whether the disposer is gonna or not gonna file their RPGT returns.
2. Reread point (1). See any problems yet? RPC shares are shares in companies with at least 75% of their tangible assets being comprised of real property or RPC shares… now, do you see the problem?
3. Reread point (1). See another problem? Where the purchaser is unsure, just withhold and remit to IRB. Imagine this scenario… investment dealers, banks, insurance companies, brokerage firms, any freakin’ person deciding to purchase an entire business aka balance sheet etc will now have to be wary of the lock, stock and barrel they’re purchasing or the thousands of shares traded in case there are RPC shares there and whether they may need to withhold 2% of that purchase price and remit to the IRB.
4. Worse still, what about properties forclosed by banks for bad loans and mortgages? How would the “withholding” work? Has the bank “purchased” the property? How would the bank then have to get back the money they are trying to recover through an auction of the property on the basis that there was probably no gain to be taxed and that it should not even be taxed under RPGT in the first place?

And I’m sure there will be more. Those are just some I am able to pluck out so far.

Signs of a U-Turn up ahead…

And the announcement didn’t come from the Finance Ministry. Curiouser and curiouser…

The Manglish Finance Bill

I just had to add this. The freakin’ Finance Bill is bilingual. Here’s an extract of what is virtually the kind of language hopping you get to see in every page of the Bill…

4.  Akta Cukai Pendapatan 1967, yang disebut “Akta ibu” dalam Bab ini, dipinda dalam seksyen 2 dengan memasukkan selepas subseksyen (8) subseksyen yang berikut:

“(9)  Any reference in subsection 107C(4A), paragraph 2A of Schedule 1 and paragraph 19A of Schedule 3 to a company which has a paid-up capital in respect of ordinary shares of two million five hundred thousand ringgit and less tat the beginning of the basis period for a year of assessment shall exclude a company which is established for the issuance of asset-backed securities in a securitization transaction approved by the Securities Commission.”

Must be a 1Malaysia thing… the Education Ministry promotes language changes every decade or so, so should everyone else.

Painless Budget?

That’s what the Finance Minister called it. But was it painless? Let me count the ways…

1. Service tax on credit cards (yearly) – …. wait for it… payable upon issuance of the card! Imagine this scenario: You get an envelope in your mailbox and the letter says a bank has sent you a free for life credit card. But then, oh by the way, they’ve charged your card with RM50 because its a tax. Scenario 2: You work for a bank. You are issued a card by the bank because… well… you work for the bank. Your bank wants to ease the pain by bearing that tax for you. But then, it becomes a taxable perquisite to you and you get taxed on the freakin’ tax borne by your freakin’ employer just because the freakin’ government decided a piece of plastic has a RM50 tax! Every year!
2. RPGT – First, the Budget speech said it’s 5% on gains, to be implemented by the purchaser withholding 2% of purchase price. Then, the freakin’ Finance Bill came out and virtually said, “It’s the scaled rate that RPGT used to be at, only worse… the lowest tax ain’t 0% anymore, its 5%!” Which was why one of the Big 4 firms then said that the tax is a “knock out punch”. But then, FM2 aka Husni announced in the news that, “It’s not the scaled rate! It’s 5% flat!” So, now we have a limbo of a tax because someone got the drafting of the freakin’ law wrong. Oh yeah… one other thing… when the purchaser is in doubt on whether the seller is getting capital or revenue gain, withhold first. Let the seller go convince the government about the nature of their gain, if any.
3. Reduction in top scale individual tax from 27% to 26% – Amazingly, the speech refers to our top scale rate as the middle income group. I don’t know about you, but I feel insulted.
4. Personal relief on EPF contribution and life insurance to be increased from RM6,000 to RM7,000 – … gotta wait for this one also… BUT that RM1,000 is only applicable to premiums on deferred annuity schemes entered into after 1 January 2010. Okay, I haven’t a clue what that is… which means I have to go find out. Which makes it so “painless” a Budget for me.

No doubt there are some good news in this year’s Budget for some. I’ll get back to you on that later. Busy answering badgering calls from the credit card department.

The old man is right…

After yearly fiascos like this, I think the old man has a point.

The Opposition’s Budget

I won’t bother to analyse this point by point due to the following reasons:-

1. You can read it for yourself… it’s in plain English.
2. It’s 106 pages long (imagine the number of glasses of water the poor Finance Minister has to gulp down, not to mention while standing in Parliament and reading for a couple of hours at least!)
3. Most of it is just dissing what the current government has done.
4. It’s very “opposition”… and by that I mean if DAP (as opposed to PR, because if PAS had a part in preparing this budget, you’d… cough! Islamic incentives… cough!… know) were to helm the federal government today, their Budget will never (should never) sound like that (because they’d then be dissing their own federal government and giving more autonomy to state governments).
5. Some of their proposals feel very leftist… especially the bit about “sharing risk”, where it sounded more like,”if SMEs fail, we’ll work out a way to save them with the banks”. I’m all for giving power back to the people/ more opportunities for the smaller players kinda leftish government… but saving failing businesses is pushing it a bit too far, I think. Just a tad uncomfortable for the pro-competition-better-for-the-consumer side in me.
6. Some of the proposals are pretty radical (one, at least, is recycled from last year), so operationally, I don’t think our current institutions, like the Inland Revenue, are equipped to administer the changes proposed, let alone understand what they mean. Even if they can, I suspect the cost of changing the operational procedures and awareness campaigns will just wipe out the funds allocated to the objectives before they could even start… (I have that much confidence in our tax authorities. Sue me.)
7. I didn’t have the time to read beyond page 57.
8. I really do have work to do.
9. Even if I don’t, there’s other more interesting news to read today courtesy of a rather interesting weekend politically.
10. I’m in my lazy patch. Now, go read it for yourself!

Fire fighting

That’s why I’ve been absent from the blogging world. In laymen’s terms, my ‘client’ got hit with tonnes of queries and adjustments by IRB, so, I’ve been busy like shit.

Today, there’s this piece of news telling us there’s a website that monitors the use of the funds of the stimulus packages. In laymen’s terms, how our taxpayer’s money gets spent will be disclosed in this website.

I don’t know about you, but I can’t access that website. In laymen’s terms, it doesn’t exist.

Question 1: Where’s the money coming from?

I have a whole list of Budget bashing points, I didn’t even know where to begin. So, I thought I’d keep this post simple.

What’s a Budget? Okay, for the layman like you and I, our own personal budget is merely an account for the expected income and expenditure we’ll have for a specified period. For example, given that my pay cheque ain’t coming in till the end of the month, how do I make what measly balance I have from my previous pay cheque last till then.

I’ve scrutinized the mini Budget speech at least three times already. Therein, we have a list of what the Ministry intends to spend money on, which will be the content of many other posts to come in my mini Budget bashing series, I’m sure. But, I only found one paragraph hinting at where the money the Government (the capital “G” was how they spelt it, I merely copied) plans to spend, would come from. Here…

17.  The Government is confident that the deficit can be financed from domestic sources, given the ample liquidity in the domestic financial system. In addition, the Federal Government debt ratio is still at a prudent level. The financing of the deficit will not crowd out the private sector in sourcing funds, particularly from the bond market, which has expanded rapidly and is currently the second largest in the East Asia region.

No, I don’t understand that paragraph either.

At least he reset the bar…

The title of this post was supposed to be “I am impressed”. But then, it occured to me that in other countries, comprehensive information and details pertaining to Budgets are made public within 24 hours of the announcements anyway. So, for it to happen in Malaysia is merely meeting the expectations of a properly run Ministry of Finance, wouldn’t you say so?

Granted, one draft law is out – the one pertaining to the deferment of the banks having to tax their mortgage interest income when it refers to late payments by retrenched individuals (and I suspect any new laws for banks will come out at speed of light as long as the man’s in power and his brother runs a financial group).

The amazing part for this Malaysian tax practitioner (because I have never experienced this level of speed in getting information from the authorities… NEVER…) is that a whole “Garis Panduan Bajet Mini 2009″ has been issued! I got it two days after the Mini Budget announcement and granted that its seriously mini in size and scope, but for the IRB to have the details from the MOF and and to have produced 28 pages of details on a guideline dated 10 March, 2009, I am still recovering from the culture shock this morning.

That and the fact that the whole guideline’s in Malay. Not exactly my linguistic forte for speed reading, know what I mean?

There’s nothing for you and me…

… unless you lost your job. If you did, you save at most RM1,080 in tax ringgits. If you didn’t work at least a year in the job before you got canned, you save nothing. My guess is, those people who lost their factory jobs aren’t even in a taxable bracket, so, the tax exemption means shit.

… unless you buy a house between yesterday and the next couple of years. If you do, you save at most RM2,700 in tax ringgits. That is, if your interest on your mortgage added up to RM10,000 per year.

… unless you plan to switch your older than 10 year old car for either a Proton or a Perodua. If you do, you get RM5,000 discount of your Proton or Perodua. My guess is, you’d have gotten RM5,000 worth of discounts anyway because the market in that department is soft as the bumpers they latch onto those tin cans.

… unless you’re gonna go back to school and take up an MBA or a PhD. Even then, you’d have to pass the “meritocracy” test to get the grants. I personally think they should conduct a “meritocracy” test on the universities they want us to get those paper qualifications from…. its probably waaaaay lower in the international rankings than pond scum.

… but if you can get your hands on those syariah-compliant Savings Bonds, lock in your deposits for 3 years and get a higher return than what those stingy banks are willing to pay for interest.

… unless you’re a Bangladeshi worker who’s just bought a plane ticket to Malaysia to finally exercise your work visa. If you are, you’re screwed.

So, how does the above stimulate the Malaysian individuals to spend and revive the economy? I think you already know the answer to that.