Tax and cheap

I was at the MICCI taxation committee meeting today and all the members were discussing about our proposals on the 2008 National Budget when someone talks about the tax regime in Malaysia as compared with our neighbour known as Sillypore Singapore. Well, some of you may not be paying taxes for now but I think you will find some of the things I have to say useful to a certain extend.

A little background information for those who are not aware, the National Budget is the time when our Pak Lah appear on TV talking about how much money the gomen will spend on this and that and this and that in the following year. It’s also a time when he will probably announce stuff like reduction in road tax or passport renewal fees. If you are a smoker or a drinker, it’s a time when you will find out that your ciggies and alcohol will be more expensive, because taxes on these 2 items always increase. And before that happens (usually in September), all the professional bodies are asked to submit the respective proposed amendments to tax laws or equivalent.

So it was during the discussion on our proposals when the notion about individual taxation here in Malaysia vs Singapore cropped out. So how much taxes are we paying as compared to our neighbour, who we always make fun of? Check out the following tables (please click to enlarge):

A quick glance and you will know that the highest rate for Sg is much lower compared to us. Further, you will only be taxed at the highest rate in Sg if you earn above SG$320,000 while in Malaysia, RM250,000 is the top band. Maybe some of us will want to be taxed at such high rate, because that means we are earning so much money. But I think if you are that rich, you won't be spending time reading blogs.

Therefore, we poor souls have to look at the lower ends. In our beloved country, earning RM2,500 a year and you will be subject to tax already (based on the schedule). However, there is an individual rebate of RM350 if you annual chargeable income is RM35,000 and below. In layman terms, it simply means if your chargeable income is RM35,000 and below in a year, your tax will be reduced by RM350.

I am sure many is asking what is chargeable income. On normal circumstances, chargeable income means “all” your income minus your individual relief of RM8,000 and minus all your other deductions like EPF, medical insurance, parents medical, life insurance, purchase of books, etc. It is your net income. By the way, your money earned from your Adsense and PPP, chances are you may have to report it. Those of you who happily and proudly declaring all your income in your blog… one day those fellas from the gomen see your blog and realised you never reported them… then… good luck!

Back to our taxes… with the rebate of RM350, effectively, we are only paying tax if our chargeable income is RM20,000 and above. From this aspect, we are on par with Sg, as they only start to pay tax when their chargeable income is above SD$20,000. But, look at the schedule… if our chargeable income is at RM35,000, our tax rate is already 7%, while in Sg, it’s only at 5.5% at a chargeable income of SG$40,000. If I continue, I might just confuse some of you so I leave it to your intelligence to analyse the 2 schedules.

One thing to ponder, our maximum deduction available for EPF contribution is RM6,000, and life insurance is included in it. This means if we more than RM6,000 of EPF is deducted from our salary in a year, and we have life insurance, we still only be able to claim RM6,000. Sucks right? Well, tell ya’ what… in Sg… understand that full deduction on their CBF (equivalent to our EPF) is allowed. This means… lower chargeable income for them… higher chargeable income for us.

Now, most of you will know that slaves workers in Malaysia are paid lower as compared to our equivalent Singapore counterparts. This simply means we are underpaid and over-taxed. It’s as simple as that.

Right, I hear some of you saying, Sg has got GST. First, I’ve blogged before, GST may also happen in Malaysia. Secondly, taking GST consideration… how much are Singaporeans paying for their goods and services. Let’s take the so ever famous you-and-I-must-have-one-if-not-you-and-I-are-not-cool… and i-Pod. Many of my friends travel to Sg just to get one… they said it’s cheap, even after conversion. This simply means, if i-Pod is sold at RM1,000 in Malaysia, it’s being sold for less than SG$440 in Sg.

What does this mean? A person earning RM here and a kiasu-ian earning SD$ there… with a dollar to dollar comparison… it means we are not only underpaid and over-taxed… we are also paying almost double for our goods.

You know we always we are one of the cheapest country around?... Particularly our petrol. Well, you know what is truly cheap?.... us.

P/S: I got the “how much your blog is worth” thing up at my sidebar… wow… really worth so much? Yay!! I am rich!