DO… NOT… REACT

It smells like the dark side is trying to execute Order 513(v2) to counter Project 916 (or could it be Project 920 now?). And will the cinema be showing “The Return of the Weed Operation”?

Yes, it’s getting hot in here, so take off all your clothes, not your fist; or any other thing for that matter.

This is not the time to show that you have had enough. This is not the time to show that you are not afraid. This is not the time to be emotional and all.

This is a time to use your intellect, which you all claim to have as compared to the rest. This is a time to see what is beyond. So please use your brain. Exercise discernment and don’t do anything stupid.

Just continue with our daily lives while keeping an eye on the show. After all, it’s quite a blockbuster. Whatever it is, just don’t react unwisely.

P/S: Besides Taxy Driver, are there any tax professionals out there reading A.Z.A.I.G.? I plan to start a tax blog. Just ranting, nothing too technical. Drop me a mail if you are interested.

My glimpse on the budget

Disclaimer:
This is going to be a rather technical write-up and not the regular sounds-funny-make-you-laugh kind of entry. If you are a Malaysian, it will directly or indirectly impact you so, read on if you care to know. Otherwise, you may choose to go… oh, I am not an expert, these are just my thoughts.

What was announced during the Budget Speech 2 weeks ago is not the complete picture of what is to be implemented. Behind the speech, there is a piece of document called the Finance Bill, one which documents all the changes to the law. 90% (or more) of the changes are tax related. It goes to show that Malaysia still heavily relies on tax initiatives to drive the economy, although it is quickly becoming a thing of the past from the global view.

As an ordinary rakyat, our attention is mainly focused on the changes and incentives given to us as individuals, such the reduction of tax rate, tax exemptions of meal and transport allowances and others.

But we must not be oblivious and forget about changes in law that affects the corporate world. Make no mistake, without these modern slavery masters, we will not be getting our salary or allowances, rendering all the reduction in tax rates and tax exemption on allowances absolutely futile. If they get a raw deal and are screwed, so are we.

One amendment made to the tax law is the tightening of this particular tax incentive known as “Reinvestment Allowance” (“RA”), the most common tax incentive enjoy by companies in the manufacturing industry. I am not going to go into the details as it will probably bore you but in short, a manufacturing company can effectively reduces its tax liability by as much as 70% under this incentive.

Putting that into numbers, it simply means a company with tax to pay of RM10m can reduce it to as low as RM3m under this incentive. This incentive is attractive and is rather easy to claim. I would say it is one which is keeping the already depleting number of factories in Malaysia.

Nevertheless, the govt, via the latest budget changes has now placed multiple restrictions into this incentive; making it extremely difficult for manufacturing businesses to claim it. The reason for the tightening of the rules was “to avoid abuse”.

Based on my experience, I do not deny that there are some over-aggresive companies out there in terms of claiming this. However, this can be dealt with via proper enforcement of rules, more proper tax audits for instance. You do not punish the entire industry and risk affecting the economy while at it.

This certainly will not bode well with highly manufacturing driven states such as Penang and Selangor. What happened to making this country business friendly? And is it a co-incident that Penang and Selangor are Pakatan states?

Another measure introduced is this concept called “thin capitalisation”. It basically restricts tax deduction on interest in companies which have small amount of capital. In a nutshell, it simply means that if a company is funded mainly by loans from related companies, it will have to pay more taxes.

In the last year or so, I have personally witnessed foreign investments coming in under my watch as Malaysia does not have thin capitalisation rules. No doubt, thin capitalisation is not foreign to countries such as Australia, UK, America, Canada and Japan. But then again, they are Australia, UK, America, Canada and Japan, while we are… Malaysia. Economically, I think the country is not ready for this new measure.

Just to make matters worse, in true Malaysian fashion, our law-makers intend to govern the entire thin-cap rules with just 2 new sub-section (not even one whole section by itself) in the Income Tax Act, 1967. I was told that thin-cap rules in Australia stretch to about 40 pages.

This has caused a lot of anxiety for a lot of businesses and the industry which will be impacted most is the industry which forms the bread and butter for a lot of nation… the banking industry. I am talking the about the industry which is pushing the economy of America to a near collapse as you read this.

Although it will not cause the economy to fall by just introducing this rules, but it has certainly created a lot of complications in doing businesses in Malaysia. On one hand, the govt may be trying to promote more fixed capital injection in Malaysia. On the other, it might just drive a lot of foreign investors away. As long as the economy is not solid, I think we are just not ready for this rule.

The other new proposal which I think is not very business-friendly is the introduction of withholding tax on “other income” to non-resident. It is very technical to go into the details and you will certainly fall asleep if I am to dwell into it. In short, Malaysia’s treaty partners will not be very happy about this rule.

In addition, it also creates a lot of confusion among Malaysian taxpayers (both individuals and companies) as it is rather difficult to interpret “other income” under this rule. And if this rule is not adhered to, it’s the Malaysian tax payers which will be penalised.

It’s not all gloomy, there are some new tax goodies given to companies. But I feel these goodies only benefit a small portion in the corporate world. Like what I have mentioned in my earlier post, if you want to encourage more tourists to buy more “nasi lemak”, do you give incentives to the tourists, or the “nasi lemak” seller?

In an effort to apparently encourage more foreigners to get listed in Malaysia, tax exemption will be given on corporate advisory fees rendered to foreigners. It means income of the local company providing corporate advisory to foreigners will be tax exempt. And apparently, this will encourage more foreigners to be listed in Malaysia.

Just to digress a little, can someone tell what ECM Libra does?

People always say we only know how to condemn, only know how to criticise. Instead of doing that, we should provide solutions and genuine ideas to improve things. I cannot agree with that more.

But there is one big problem. Do you think they will listen when we sincerely present our ideas to them? Genuine brilliant ideas to improve things, when put forward, tend to end up just like this blog-post… be read, perhaps attract some comments… and be forgotten.

No apology... no worry...

The name is Ahmad Ismail, and he carries with him the title Datuk. Many Malaysians, and it does not only conform to Chinese and Indians, are pissed with him. And the thing he did? … … he openly labelled the Chinese and Indians as “penumpang”. By the way, did he also ask us to “balik tong-san”?

He has refused to apologise for what he said. He said… “Why should I apologise? I didn’t do anything wrong. Those who do wrong should apologise but I haven’t don’t anything”

Ya’ know, I think all us Chinese and Indians should just let this fella go… for now. Why do we need to get so hyped up about something we all know will never see the justice in this country? And by the way, he does have a point when he said he didn’t do anything wrong. Since when calling Chinese and Indians “pendatangs” is an offence in this country?

I know, it’s something that can be rather difficult to stomach. But think about it… did what he say cause your “char kuey teow” to be less tasty? Did what he say cause your wallet to be a little lighter? Did what he say give you sleepless nights? Did it severely affect your life?

Perhaps it did raise your blood pressure a bit but I am sure the pressure is all normal now. If it’s not, it might that “char kuey teow” you had, too much cholesterol. And it still tasted very good by the way, right?

So, let’s focus on the bigger picture, on things yet to come. Let us not be upset but channel our energy on more important things like the Auditors General report which (again) showed unworldly wastages. Let us focus on how to deal with inflation, which the reduction of petrol price didn’t really help at all.

Let us not also forget what Zulkifli Nordin, what that PKR (yes… PKR) MP did at the Bar Council forum.

But above all, let us just wait and see how Project 916 unfolds and do not react in any manner which might jeopardise it.

Guess the 6th

It has been a while since I last posted a riddle and for some strange reason, I have been getting some guess-the-answer-and-open-the-file-and-fill-in-your-name kind of forwarded mails.

These mails basically has an excel spreadsheet which has been password protected. There will be a riddle attached to it and the answer to the riddle is the password to the attached spreadsheet. Once you managed to break the code, you can then open the spreadsheet and fill in your name and you can also see those who managed to break the code before you.

I have gotten a few and I am just going to let you all in on a simple one, just to stimulate our very slow brain on a Friday.

1
2
6
42
1,806
?

What’s the 6th number?

Happy guessing and have a wonderful weekend… It’s Matta Fair!

Selfishness aplenty

In a seminar organised by the Malaysian Institute of Taxation yesterday, the Director General of Inland Revenue, basically the biggest boss in the income tax department said that the goodies given by the govt are effective immediately, so utilise it. She was referring to the various tax exemption given to employees in relation to meal allowance, travelling allowance, hand-phone allowance and some other stuff.

Yes, some of the allowances that you used to be getting are now tax free, you don’t need to pay tax for it. But not everyone is fortunate enough to get all these as some companies are pretty stingy and squeeze their modern slaves to the fullest thus, they will try to reduce the allowances payment.

The income tax department boss echoed what our PM said last Friday, that all these exemptions are to encourage employees to give more of such allowances to the employees in the light of the current rising of inflation and rough times.

But what do you think all these modern slave masters will do? Do you think they will have the poor modern slaves’ welfare close to heart and begin increase the modern slaves’ allowances?

What the top management is interested in is … “So now, how much lesser tax am I going to pay?”… “Please make sure the allowance paid to me is now excluded from my EA Form”

Without a change in attitude and mentality, goodies given out to the rakyat, together with all the other proposals made… will fail.

P/S: If you are a boss, what are you doing to improve the welfare of your staff?

A caring budget... for who?

“Any goodies for me?”

Almost all my colleagues posed me that question last Friday and I am sure that was the first thing that came to mind for most of you as soon as you mentioned about the National Budget 2009 tabled in parliament last Friday.

The answer is yes… terms and conditions apply.

First, if you are rich, you get to taste a little bit of sweets as the highest rate for individual income tax reduced from 28% to 27%. For you to enjoy this, you should be earning about RM280,000 and above in a year. Are you one of them?

There is also a drop of marginal tax rate of 13% to 12%. This is for those who earns between RM35,000 to RM50,000 a year. If you’re lucky to fall within the RM35,000 chargeable income, you get an additional RM50 rebate. This RM50 together with the 1% decrease should give you additional money of circa RM500 a year to spend. Are you one of them?

Frankly speaking, those are the 2 prominent goodies for individuals. So unless you’re earning above RM280,000 a year or between RM35,000 and RM50,000 a year, there isn’t much. The rest are just crap not very relevant.

Of course, a lot of us are pretty excited about tens of billions of ringgit allocated to improve the public transport system. That’s a lot of money allocated… but won’t you wonder how much will actually… I mean actually be used… as in actually… aiyah, you know what I mean.

Now, allow me to just divert your attention to goodies given to companies. I know… I know… they don’t concern you but just read for information sake… can or not?

There are a lot of goodies given to bus companies. Toll reduction… road tax reduction… not bad really. But I wonder, who is the owner of bus operators in town?

Let me ask you a question… if you want to encourage tourists to buy nasi lemak, do you exempt the nasi lemak seller from paying tax or exempt the tourists from paying tax (say service tax)? In a move to apparently encourage foreign companies to list in Bursa, the company that provides advisory services to the foreigner will get tax exemption. It didn’t really make sense to me until one of my friend asked me… “who owns one of the biggest corporate advisory firm in town?” I dunno lah… which one ah?

There is one I like best, and I am sure most if not all of you are also drooling over the proposal. I am talking about the 100% exemption on import duty and 50% exemption on excise duty on hybrid cars. Will take make the Honda Civic Hybrid sells like hot bread? I am definitely going to get one. But then I am also wondering, who will be getting the AP for it… hmmm….

Last but not least, do you know how much money will be spent to develop Sabah and Sarawak? Billions and billions ringgit! Makes me wonder why…

I am thankful

This entry has been long outstanding…
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I am thankful to God because…

I have perfect eyesight despite abusing my eyes with hours in front of the tv and computer screen.

My hearing has now become so sensitive that I am having tinnitus without any organic cause.

I still have good functioning kidneys despite having abnormal urinalysis and clinically diagnosed with nephropathy. Thank God for a very favourable result in the latest urinalysis.

I still have normal blood pressure despite my not very healthy diet and clinically diagnosed with nephropathy.

I have a healthy nose and throat after multiple scans despite having chronic throat irritation and occasional bloody phlegm.

I still have a perfectly functional right arm despite developing chronic tennis elbow after over-using it during badminton.

I still have a clear and healthy esophagus despite years of bad acid reflux.

… that I am still alive despite all that. Not only alive… but alive and well. It’s a miracle that I am still alive.

When I look at some people around me, I know I am definitely blessed and well sustained.

Thank you God.

“I will not die but live, and will proclaim what the Lord has done”
Psalms 118:17

P/S: Anything that you are thankful for today?