The 2016 Budget proposals were announced by the Prime Minister, Dato Seri Najib Razak, on 23 October 2015. Taxand Malaysia highlights the key focus areas for the year ahead.
The 2016 Budget sets the framework for the 11th Malaysia development plan, with five years to go to achieve the much anticipated ‘Vision 2020’ objective of a high income nation.
The introduction of Goods and Services Tax (GST) this year to replace the previous Sales Tax and Service Tax will boost revenue collection by RM39 billion in 2016, which is partly off-set by increased BR1M (cash assistance scheme) payments of RM5.9 billion intended to boost domestic consumption and assist lower income households. The flip side to the introduction of GST and reduced subsidies has seen an increase in the cost of living, which the 2016 Budget has addressed with a slew of measures to benefit the middle class as well as the urban and rural poor.
The corporate tax measures and GST measures announced are unlikely to have a significant impact on strengthening and growing the economy. Nonetheless, the additional incentives and extension of certain existing incentives will play a role in encouraging reinvestment. These measures should have some impact on spurring domestic reinvestment and growth. The time frames and extended time frames for these incentives is relatively short though, and the impact, if any, may only be felt in the short term.