28th February 2023 - 3 min read
Treasury secretary-general Datuk Johan Mahmood Merican has come forward to explain why the government’s recent proposal to increase income tax rates only involved selected income brackets of the T20 group – specifically those with annual earnings of up to RM1 million – and not those who earn beyond the amount. This is as those who are earning more than RM1 million per year are already paying a “sufficiently high” tax rate of 28% and 30%, he said.
During the post-budget debate hosted by the Malaysian Economic Association, Datuk Johan also reminded that Malaysia employs a progressive income tax system instead of a flat rate system. This essentially means that any changes made to the tax rate of a specific income bracket (such as an increase or a reduction) will also impact all the subsequent brackets.
“By adjusting the tax rates up to RM1 million, all taxpayers earning more than that will also end up paying a higher tax rate,” said Datuk Johan, adding that the government decided to implement the tax rate hike starting from the income level of RM100,001 because it means only about 150,000 individuals in Malaysia will be experiencing a tax increase.
“Even though when you look at it, it looks like the tax rate increases from RM100,000 above, really, you need to achieve about RM230,000 taxable income after reducing from all the reliefs before you start paying the higher taxes. So we’re talking about people who earn RM20,000 a month. It’s only about 1% of our labour force, so we’re not even talking about T20, we’re talking about T1. Are we saying that even 1% is too many people to pay more taxes?” Datuk Johan further stressed.
Additionally, Datuk Johan emphasised that this proposed arrangement reflects Prime Minister Datuk Seri Anwar Ibrahim’s view, where the government should not be held singularly responsible for helping those in need. Instead, those who are more fortunate and better off financially should also pitch in to contribute to the poor.
During the re-tabling of Budget 2023 last Friday, Datuk Seri Anwar had proposed some changes to Malaysia’s existing income tax rates, which include reducing the tax rate for the M40 group (annual income from RM35,000 to RM100,000) by 2%. Additionally, the tax rates for selected income brackets under the T20 group (annual income from RM100,001 to RM1 million) will be increased by 0.5% to 2%. Finally, the tax rates for individuals earning between RM1,000,001 to RM2 million, and more than RM2 million per year will remain unchanged at 28% and 30%, respectively.
(Source: Malay Mail)
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