KUALA LUMPUR: The Malaysian Institute of Taxation (MIT) hopes the government will review personal income tax rates as well as increase the amount of relief accorded to individuals for insurance and EPF contributions in Budget 2009, which will be presented in parliament next week.
Its president Dr Veerinderjeet Singh said yesterday the government should widen the income tax brackets for individuals. Comparing Malaysia’s income tax structure with that of Singapore, he said our neighbours get to keep a larger portion of their income when they earn more because of the wider income band.
“If you look at Singapore, they not only have a lower personal income tax rate, but you move more slowly from one tax bracket to another,” Veerinderjeet said. “So even though I earn extra income today and make an extra S$50,000, it may not push me to the next income bracket. In Malaysia, chances are, it’ll move you to the next bracket.”
In Malaysia, there are 10 tax brackets for individuals earning between RM2,500 and RM250,000 a month. In Singapore, there are seven brackets for individuals earning between S$20,000 and S$320,000.
“We have suggested contributions to insurance and EPF be increased,” Veerinderjeet said. “The maximum contribution (for tax exemption) is now RM6,000 and we think that should be increased as it has been too low .”
Veerinderjeet said MIT believed the individual’s highest tax rate should be aligned with the corporate tax rate, which currently sits at 25%. However, he said this move may unintentionally benefit high-income earners rather than low- to middle-income earners.
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