Country Correspondent: Esther Koisin

Article by Melisa Nadia Abd Malek

On 6 November 2020, the Finance Minister of Malaysia announced the Budget 2021 which centres around four broad themes: caring for the people, steering the economy, sustainable living and enhancing public service delivery. With RM322.5 billion (USD79 billion) expenditure, this Budget is the highest budget ever recorded in Malaysia’s history. This Budget is hoped to revive and revitalise the Malaysian economy during and post COVID-19 recovery. Highlights of the Budget are as follows:

Cash and Repayment Assistance

With the Movement Control Order (MCO) imposed throughout the country, COVID-19 has affected the livelihood of thousands of Malaysians and businesses. With the allocation of RM6.5 billion (USD1.5 Billion) to benefit 8.1 million individuals, the Government has provided a cash hand out scheme through the Bantuan Prihatin Rakyat (BPR) programme. This BPR registration was done in early January 2021. Microenterprises were also offered cash handout of RM3,000 (USD731) through the Geran Khas Prihatin (PRIHATIN Special Grant) programme. The Inland Revenue Board of Malaysia (IRBM) was entrusted with the task of receiving the applications, relaying information of these programmes, processing applications as well as approving cash payment to eligible person(s)/SMEs. In some rural areas, IRBM was also involved in handing out the BPR to the identified individuals and families. This is a departure of the normal role of IRBM as the agency responsible for the collection of taxes. 

Some other key measures for cash and repayment assistance include: 

• Targeted Loan Repayment Assistance where individuals severely affected by the pandemic (i.e. loss of income) may apply for a further repayment deferment for up to 6 months.

• An exemption from stamp duty charges on purchases of homes on several schemes to encourage ownership of homes. The endorsement on exemption is done by IRBM on the purchase of homes in eligible projects.

Tax Incentives

The most notable tax incentive given was a reduction in individual income tax by 1% for those with income between RM50,001 to RM70,000 annually. These individuals who fall within this middle-income bracket, are not eligible for the BPR. They are often viewed as the group that is least likely to benefit from any budget measures in the past. This reduction is expected to impact 1.4 million middle income taxpayers in the year 2021. 

Other tax incentives given are increase of lifestyle tax relief (which include digital newspapers and increased sports-related expenses), tax relief limit on medical care expenses for self, spouse and children for serious illnesses including an increase for full health examination. Two new tax incentives introduced were tax relief on vaccination expenses and skill improvement courses.

Generating and Retaining Jobs 

Malaysia Short Term Employment Program (MySTEP) was launched to provide 50,000 employment opportunities to Malaysians who lost their jobs during the pandemic. 35,000 jobs will be from the public sector while 15,000 is expected to come from Government Linked Companies (GLCs).

Hiring and retaining job incentives as below were also launched:

• 60% salary incentive to employers who provide employment opportunities to the disabled, long-term unemployed, laid off workers (maximum RM6,000).

• For workers with salary of more than RM1,500, the Government will pay 40% of the monthly salary for a maximum of RM4,000 for the duration of 6 months.

• A special incentive of 60% monthly wages will be provided whereby 40% will be channeled to the employer and 20% channeled as wage to the local worker replacing the foreign worker in a high reliance on foreign worker sector.

Overcoming the COVID-19 Pandemic 

The Government has increased its allocation to stem the waves of COVID-19 by:

• Supplying sufficient PPEs and hand sanitisers for frontliners.

• Establishing National Security Council and National Disaster Management Agency to review and decide courses of action to be taken in curbing COVID-19.

• Purchasing of equipment, laboratory test supplies and medicines at university training hospitals.

The government has also granted a one-off payment of RM500 in appreciation of the Ministry of Health frontliners.

Being the highest Budget ever approved by the Government, the Budget 2021 signifies the Government’s concern and seriousness to weather the impact of the COVID-19 pandemic. It is hoped that these measures will provide the people with the needed assistance and the nation’s essential preparation to revive socially and economically.  

Note:

For more information on Budget 2021, please visit http://belanjawan2021.treasury.gov.my