The impact of Budget 2023 on the Rakyat

The Minister of Finance Datuk Seri Anwar Ibrahim announced the Revised Budget 2023 on 24 February 2023 themed ‘Membangun Malaysia Madani’ (Developing Malaysia Madani), and the allocation of RM388.1 billion is the biggest so far to date. This article focuses on how the budget impacts the rakyat.

With an allocation of RM8billion, the Sumbangan Tunai Rahmah initiative is aimed at alleviating the burdens of the rising cost of living, especially for those in the B40 category. Households with income of less than RM2,500 can receive up to RM2,500 in cash aid and households registered with the e-Kasih system are eligible to receive an additional RM600 aid in the form of food baskets and vouchers. Nine million people stand to benefit from this initiative.

The Budget 2023 has placed much emphasis on education as the Education Ministry is given the biggest allocation at RM55.2billion. It is proposed that allocations will be provided for meals, digital learning and infrastructure, amongst others. For meals, a Supplementary Food Plan will benefit 700,000 students, while nutritious meals will be provided to 240,000 preschool students. In a move to enable digital learning, 50,000 laptops will be distributed to schools and digital connectivity projects will be undertaken for 3,700 schools. RM35million is also allocated to improve internet connectivity in higher education institutions. For infrastructure, the allocation will be spent to build seven new schools and to repair and improve school buildings, especially in Sabah and Sarawak where many schools are dilapidated.

Various incentives under the Budget 2023 are provided to help youths cope with the challenging economic times. PTPTN borrowers will receive a loan repayment discount of up to 20% for three months beginning from March. An additional six-month moratorium will be given for borrowers earning less than RM1,800 monthly. Socso initiatives to help youths include giving an RM600 monthly incentive for three months to encourage companies to provide jobs for new graduates from the technical and vocational education and training (TVET) and giving RM300 allowance for three months to gig workers to compensate for lost income as they undergo training. Recognising the importance of women, Socso will offer grants equal to 80% of the insured salary value for women returning to the workforce, especially after long maternity leave. Other initiatives to help youths include a credit through e-wallet with the amount ranging from RM200 to RM400 for 18- to 20-year-olds, and financial support to help youths start delivery service businesses using motorcycles.

To ease the burden of the rakyat, the government has proposed some tax measures. The personal income tax rate is proposed to reduce by 2% for those earning RM35,000 to RM100,000. The reduced taxes are expected to result in tax savings of RM1,300 for 2.4 million people in the M40 category. Other proposals include increased tax reliefs for medical expenses and life insurance premiums. The medical relief is expanded to include neurological conditions such as autism, down syndrome, and other learning disabilities, and is increased from RM8,000 to RM10,000. Tax relief for life insurance premiums will now cover voluntary contributions to the EPF of up to RM3,000. With the voluntary contribution, a taxpayer can enjoy up to RM7,000 tax relief.

To enhance tax collections, the special voluntary declaration programme is re-introduced with a 100% penalty waiver on unpaid taxes for those who make a declaration from June 2023 to December 2024. This will aid in the collection efforts while benefitting those who wish to take advantage of this initiative. For those earning RM100,000 to RM1million, the income tax rate will increase by up to 2 per cent and is expected to affect less than 150,000 taxpayers in the T20 category. As the increase is small, it would not unduly burden the affected taxpayers. Additionally, it is proposed to introduce a luxury goods tax and capital gains tax on disposal of unlisted shares. This will broaden the tax base for those who can afford it and is a step towards making the taxation system more progressive.

The Budget 2023 also addresses the issue of many EPF contributors from the B40 and M40 groups having insufficient savings in their accounts. Measures include a government deposit of RM500 into EPF accounts of those aged 40 to 54 years old with less than RM10,000 in their Account 1. This move will benefit 2 million members; it is aimed to help rebuild their EPF affected by the Covid-19 pandemic.

Acknowledging the importance of SMEs to the economy, the Budget 2023 includes various initiatives to support the SMEs. Loan facilities and financing guarantees of RM40billion are provided for MSMEs and small vendors and will be disbursed under agencies such as Bank Negara Malaysia, BSN and the National Entrepreneurial Group Economic Fund (Tekun). Special allocations are also made for women and youth entrepreneurs. It is hoped that the financial support will help ease the financial burdens of these enterprises and aid their businesses. Additionally, the tax rate for MSMEs will be reduced from 17% to 15% on the first taxable income of RM150,000, resulting in tax savings of up to RM3,000. To encourage digitalisation, RM100million is allocated under the Small and Medium Enterprise (SME) Grant Scheme to support business automation and digitalisation activities. Under the scheme, a grant of up to RM5,000 is given for the use of digital applications in areas such as point of sale, accounting, and inventory management.

The Budget 2023 is a step towards building a core civilised nation. It focuses on the wellbeing of the rakyat such as reducing the cost of living, improving public infrastructure and supporting the economy.

This article is written by UTAR Faculty of Business and Finance academics Chin Yoon Mei, Foo Pik Yin and Loh Chun T'ing from the Department of Commerce and Accountancy.