Budget 2005 to focus on four strategies
The Star Online
Friday, September 10, 2004
Prime Minister and Finance Minister Datuk Seri Abdullah Ahmad Badawi Friday presented his maiden Budget speech to Parliament.
Dressed in a red baju Melayu, the Prime Minister said the focus of Budget 2005 will be on four strategies, namely:
First: Enhancing the effectiveness of Government financial management, efficiency of the delivery system and competitiveness;
Second: Accelerating the shift towards a higher value-added economy;
Third: Developing human capital as a catalyst of growth; and
Fourth: Ensuring the well-being of the rakyat through improving their quality of life.
Main points
Review of taxation system
Review of consumption tax (sales tax and service tax) to pave the way for introduction of Goods and Services Tax in 2007
Fund for tax refunds to be established
Excess tax payment will be offset against current year tax, or refunds for excess will be made from the fund
Zakat: to be allowed as income tax deduction up to 2.5% of income for companies
Agriculture promotion
RM300mil commercialisation seed capital for private sector and government-linked companies
adoption of modern methods through the application of technology, including biotechnology
develop Malaysia as a centre of processing, packaging and marketing of agriculture products for global markets
develop skilled manpower and transforming Univerisiti Putra Malaysia into a centre of excellence for agriculture education
RM1.5 bil allocated for agriculture projects, especially for those benefitting smallholders
Tax incentives to encourage food production extended further five years until 2010; equity requirement for investing in subsidiary is reduced from 100% to 70%
Developing Halal Products
investment tax allowance of 100% for five years
RM10mil special fund for Development and Promotion of Halal Products for studies in business planning, technology and market development, improving quality
Financial sector
allow up to five major foreign stockbrokers to operate in Malaysia
allow up to five leading global fund managers to operate in Malaysia
100% foreign ownership in futures broking companies
100% foreign ownership in venture capital companies for ICT sector
abolish limit on number of foreign dealer representatives
allow EPF to increase size of funds places in local fund management companies from current RM6bil within three years
Tax exemption on interest earned by non-resident companies from ringgit-denominated Islamic securities and debentures, excluding convertible loan stocks, and securities issued by Malaysian government
Additional RM1.75bil of Merdeka Bonds to be issued by end of 2005
Government will issue Islamic Treasury Bills, based on syariah principles
Overseas branches of local banks to establish Islamic banking counters.
Tax or duty exemption on Islamic financial products approved by Syariah Advisory Council of Bank Negara, and Islamic capital market products approved by the Syariah Advisory Council of Securities Commission
Individual income tax relief on premium payments for life insurance increased from RM5,000 to RM6,000
Real Estate Investment Trust
Exempted from tax on income distributed to unit holders; undistributed income taxed at 28%
Non-resident unit holders tax payable at 28%
Tourism
Ministry approved arts and cultural performances by local artists in Kuala Lumpur, Labuan and Putrajaya given full entertainment duty exemption. Call on states to do same.
develop health tourism
Education
Expedite approvals and accreditation for courses by private institutes of higher learning
ranking performance of private and public institutes of higher learning based on international standards
RM670mil for building new polytechnics, community colleges, industrial training institutes, MARA Skills Insititutes and National Youth Skills Institutes and RM248mil for upgrading
RM190 mil for facilities to increase skills training for secondary school leavers
Increase number of MARA sponsored students overseas from 700 to 1,000 under Skim Pelajar Cemerlang
Khazanah Nasional to sponsor 100 high achieving students for technical and professional subjects overseas
Guru Cemerlang and Pengetua Cemerlang can remain in schools with opportunities to be promoted to Special grade C and JUSA C posts respectively. 12 Special Grade C posts for guru cemerlang and 5 JUSA C posts for pengetua cemerlang to be created
RM205mil for Tuition Voucher Scheme for children from low-income group
Abolishing or Reducing Import Duties on Selected Goods
Current import duty on surgical gloves, carpet, glassware and semi-finished components for wood-based industry of between 5% and 25% abolished
Current import duty on raw materials for apparel industry and herbicides from between 10% and 35% to between 5% and 30%.
Pioneer status or Investment Tax Allowance for existing companies relocating manufacturing activities to promoted areas, including Eastern Corridor of Peninsular Malaysia, Sabah and Sarawak.
RM2.5bil development allocation for East Coast Corridor, RM3.8bil for Sabah and Sarawak.
Developing the ICT sector
Target to create additional 100,000 high value-added jobs to existing 20,000 in Multimedia Super Corridor
SMEs
soft loans and matching grants will continue
SMI Fund 2 will be increased by RM1.6bil to RM4.5bil
New Entrepreneurs' Fund 2 increased by RM550mil to RM2bil
Enhance marketing and promotion capabilities, scope of Market Development Grant expanded to include marketing and promotion, expenses for negotiations for Mutual Recognition Agreement. Maximum increased from RM60,000 to RM100,000
RM50mil fund for enhancing marketing skills
RM100mil fund for enhancing product design, packaging and labelling capabilities
Eradication of poverty
RM94.2mil for Housing Assistance Programme, Income Generating Programme, Dietary Food Supplement Programme, Mindset Change Programme and Training and Educational Programme.
RM205mil for Tuition Voucher Scheme for children from low-income group (also in education)
Orang Asli
RM77.3mil for improving standard of living for Orang Asli, including a comprehensive development plan in education, health, property ownership and infrastrucre development and mindset development
Disabled, children and elderly
Additional tax relief from RM5,000 to RM6,000; and RM2,500 to RM3,000 for disabled spouses
RM25 monthly allowance for each disabled child who participates in the COmnunity Rehabilitation Programme or who attends special schools sponsored by voluntary welfare organisations
Increase daily expenditure on food from RM3.90 to RM8 per person for children, elderly and disabled in rehabilitation and shelter institutions
Rural areas
RM130mil for rural electricity supply programme
RM174mil for construction of kampung roads
RM50mil for building and completion of rural roads
RM18.7mil for improvement of rural health
Info Desa and Internet Desa programmes will be expanded
Computers
Tax rebate for purchase of personal computers increased from RM400 to RM500
Books
Tax relief increase from RM500 to RM700 for purchase of books
RM30mil for National library to buy reading material
Housing
Additional 100,000 units of affordable homes to be implemented through Industrialised Building System
Housuing developers fully exempted from CIDB levy if IBS component usage exeeds 50%
Additional RM778mil for construction of 21,000 units of low cost houses under Project Perumahan Rakyat
Additional RM177mil in loans for construction of 3,000 units under Projek Perumaham Awam Kos Rendah
Additional RM100mil for 2,500 farmers and fishermen and the poor to finance construction of homes under Projek Perumahan Mesra Rakyat
Pilot project on integrated development in Mukim Pantai Dalam to house 1,000 households living in longhouses
Pudu Prison site to be developed as commercial and residential centre.
Tax on Cigarettes and Liquor
excise duty on cigarettes to be increased from RM58 to RM81 per 1,000 sticks; and
excise duty on liquor be increased from between 5 sen and RM23.40 to between 10 sen and RM28 per litre.