Possible tax measures to strengthen fiscal …

Possible tax measures to strengthen fiscal position

Budget 2023 established the foundational principles of Madani, emphasizing sustainability, prosperity, innovation, trust, and compassion. Budget 2024 continued this focus, highlighting good governance, economic reforms, and improved living standards. Budget 2025, themed Ekonomi Madani: Negara Makmur, Rakyat Sejahtera, aims to build upon these principles while addressing the need for fiscal sustainability. The implementation of e-invoicing in Budget 2024 has significantly impacted revenue collection by bringing shadow economy transactions into the formal economy. In Budget 2025, further tightening of provisions in the Income Tax Act 1967 and increased tax compliance procedures are expected to enhance the effectiveness of e-invoicing and encourage its adoption. The government s consideration of widening the tax base in Budget 2025 includes the potential expansion of Capital Gains Tax (CGT) and Service Tax. However, careful analysis is required to avoid adverse effects on the Malaysian stock market and investment climate. Environmental tax is another feasible option to widen the tax base. Implementing taxes on carbon emissions and plastic waste could generate revenue while promoting sustainable practices. The additional tax revenue could be recycled to provide incentives for green practices. Streamlining incentives under the Promotion of Investments Act 1986 (PIA) and Income Tax Act 1967 is necessary to simplify the incentives offered and focus on high-value-added activities. A shift from tax incentives to tax rebates or credits may be more attractive to taxpayers in compliance with the global minimum tax effective from Jan 1, 2025. Malaysia could capitalize on the growing trend of remote working and reassessment of service functions by promoting itself as a preferred location for a global services hub. Offering lower corporate and individual tax rates for value-added global services could attract skilled manpower and increase tax revenue over time. In conclusion, Budget 2025

Source: thestar.com.my
Published on 2024-09-18

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