A lot of you may agree that gambling is morally incorrect – Especially when we’re living in an Islamic culture that prohibits us from gambling – Legally, at least. If we take a look around us, many of our friends are caught in this habit; some caught lady luck, most lose a big portion of their life savings because of this. In any way, you cannot deny that excessive gambling would shake one’s financials greatly – Whether it’s his savings volume, cash flow or debts owed.

In short, if you’re in Malaysia, it’s unlawful for you to:

1. Gamble online in any fashion;
2. Use your credit card, privately labeled debit card or any other foreign cards to gamble online;
3. Use any of your Malaysian bank account to make transactions to online gambling sites;

In April 2009, The Association of Banks, Malaysia (ABM) disclosed that 0.2% of credit card transactions made from January – February 2009, just FOUR (4) months, are online gambling transactions. While The Malay Mail believes that online gambling may hit up to RM100 billion in 2009, there are no published proof of records by banks or ABM – Reason given, competitiveness.

The Malay Mail also commented that Ahmad Sofian, Federal Criminal Investigation Department principal assistant director SAC declined to comment when “asked if banks had lodged reports with regard to illegal transactions by their clients”. Of course, in the financial and business point of view, who will?

Bank Negara Malaysia (BNM) explicitly states that credit card issuers (banks/financial institutions) who offer credit cards to consumers should run due diligence on merchants to check if there are any unlawful activities going on. Should that be considered as consumer protection?

Will online gambling be a problem in Malaysia?

When you take a look at notions passed by other countries, such as the US – “In 2006, the Congress passed the Unlawful Internet Gaming Enforcement Act, which made it illegal for financial institutions to transfer funds between punters and online-gambling sites”. It’s already illegal for Americans then to gamble online – And gambling businesses went elsewhere.

Yet, the volume of online gambling hasn’t changed much after lawful implementations – Even four years after that. Today, a huge number of gamblers gamble online because they have the access to it; because they can; because they want to. Transactions in billions of dollars passed annually – And would a country’s economy be spruced by legalizing gambling?

Fun gambling financial fact: US$335 billion is recorded to be transacted in the legalized gambling arena globally.

In our Malaysian culture, we’re taught from young that gambling is not something you should look into – Or even bother trying. Yet, thousands of us Malaysians are still into it. The only legalized gambling arena in Malaysia, Genting Highlands, would be the place not to go – And it’s only for its theme parks and cooling wind.

Still, with the presence of the Internet and private proxies that route Internet connections elsewhere out of Malaysia, online gambling thrives among youths to senior Malaysian citizens.

The desire to stop people from gambling online could be taking away human’s second nature – After drugs, cigarettes, prostitution and drinks. But could regulated gambling proved workable in Malaysia?

Regulated Gambling in Malaysia?

In Britain, online gambling is legal – But taxed and highly regulated by the government. When we look closely into financial transactions by countries of whom governments ban gambling, a user needs to place trust on its ‘intermediary’ or ‘bookie’ to make transactions – Whether it’s performed through a foreign bank account with a branch situated in Malaysia through wire-transfer or TT.

These makes online gamblers worried to the point of trust, only. According to a website, Mr. Rais Yatim figures it’ll be better for Malaysia to legalize gambling than to ban gambling – Regardless of whether it’s done online or in slot machines, in order to curb gambling in Malaysia. The article also suggests that controlled gambling (regulated) will be a good option for the Malaysian government in order to reduce gambling.

In your opinion, would this be a good move for Malaysia?

Making-Money-Out-of-Regulated-Gambling.gov.my

Question remains – Would the government cash in additional profits from regulated gambling, thanks to law-passing gambling activities in a controlled environment, as suggested by the article stated above? Because regulated gambling means controlled gambling and when controlled gambling comes into play, taxes and dividend cuts can be diverted to the government, how is this in any way not profitable?

Let’s fathom the days of Genting’s casino until present, look at some of its income figures (if you know how to look, you can get an approximate value here) and if you’re a business/finance person, you’ll be able to figure it out.

Usually, nobody would tell you what’s financially in-store for them when a project closes. But when you read between the lines, the facts and hints are often shouting at your face.

Even by playing SimCity 3000, you can see that passing the notion on gambling makes your finances grow and residents not happy.

In our previous post titled “What is GST?“, (Goods & Services Tax) Accounting KL Management Services spoke about the implementation of GST and its definition. In this edition, we’re discussing on the pros and cons of the Malaysian government implementing GST in Malaysia.

There were many responses when the Malaysian government first announced the Financial Budget for Malaysia, year 2010 (read Malaysia’s Budget 2010 highlights), both good and bad. But when they were undecided about GST, it sparked more conversation on whether it’ll benefit the Rakyat, or further threaten poorer communities in Malaysia.

What goods GST covers

As proposed by our dear government, GST covers all types of goods & services sold to Malaysian & non-Malaysian residents (therefore consumers) except for a common commodities such as rice, flour & sugar.

This goes to mean: Whenever you walk into your favorite hypermarket with the family to get some groceries in the future, you will be charged additional ~% (the proposed additional 4%) on top of your bill except for certain controlled items.

Further, Malaysia’s main revenue shouldn’t just live off petroleum. In other words, we shouldn’t put all eggs in one basket because petroleum revenues have risks of its own, seeing that it’s a natural resource.

What reason did they give? More funds for development and expenses.
How much would they probably get? RM1 billion (RM1,000,000,000) per annum in estimated rounded-up revenue.

Will it hurt the poor & middle class?

To a certain extent, it will somehow affect pockets of middle and lower income group Malaysians.

The arguments:

1. Recent price hike in petrol, prices of commodities have increased drastically. And now another one called GST?
2. Income tax brackets for high earners aren’t as ‘expensive’ as middle-to-low income groups. Check Malaysia’s Income Tax Rates 2009 »
3. The Malaysian government has saved approximately RM2 billion (RM2,000,000,000) by lowering fuel subsidies – What’s the take on GST now for lower income groups?
4. GST is tax on SPENDING. Basically, everything from parking fees to purchasing mattress. Even with GST-exempted items, this would still hit lower income groups in Malaysia.
5. Private sectors aren’t paying much to Malaysians – Other more developed countries such as Singapore could take this hit because wages & salaries are much higher.
6. Other countries such as Britain, India, Hong Kong, Japan and Singapore has GST – Doesn’t mean GST has to be implemented in Malaysia. Their economic status and way of gaining revenue varies from Malaysia. (GST is also called VAT – Value Added Tax in other countries)
7. Inflation may happen. Prime Minister Mr. Najib has guaranteed no inflation – But with the introduction of GST, the chain of ‘passing the cost’ will end up usually at the hands of consumers.
8. Corruption isn’t a rare thing in Malaysia – So businesses has already included ‘corruption prices’ in goods & services. How does that not reflect additional costs to consumers?
9. Out of inflation pressures, higher prices for goods & services are sought.

Prime Minister Mr. Najib has promised Malaysians that they will be tabling a public discussion on GST (called the GST Bill) on December. There are also several upsides that could be seen – But until Mr. Najib tables the meeting on GST Bill, we shouldn’t be skeptical of anything yet.

Other side of the GST story

GST has been said to promise a few things:

1. Implementation will not be abrupt. It will be a slow & steady tax preparation so that individuals and small businesses will not be adversely affected.
2. It will replace the 10+5% services and goods tax. This means taxes are lower now – Consumers need not pay more for one area, but it’s divided into many other source of ‘tax’ payments.
3. GST rates are promised at 4%, out of the normal 10% or 5% charged in restaurants.
4. Implementation will not occur until middle to late 2011 or 2012. Planning time is essential to not put ‘inflation pressure’ on small businesses.
5. Government’s coffers will increase. This will enable further development and budget control to the country, other than relying just on petroleum or income tax revenues.
6. Tax when consumed, not when earned is much better. It allows better control. Spending influences will be “Careful” and “More controlled” when purchasing on higher prices are made rather than “taxable incomes” generated from work.
7. It’s a broad-based tax system. Some items may be slightly more expensive & cheaper. It’s not a overall standardized taxation method.

Your opinion on GST

Of course, there are many pros and cons of the new GST system – And the implementers should look more intricately into all income groups, balance their sheets and understand what are the effects first. While we can only propose so much, there’s only so much we can do.

Here are some of the ‘preparation techniques’ the tablers of the GST Bill can adopt:

1. Be intricate with details: Tax is a complicated subject, like a science of its own. If you make the subject complicated, it may lead to more misunderstandings and later, more arguments.
2. Introduce ‘layman terms’ for further understanding. Giving examples always help. Examples on implementations always help. Tell a story to the public – And make it make sense to them.
3. Use other form of publicity media: Tabling the GST Bill on national newspapers and mass media isn’t going to cut it. Find other means such as introduction campaigns Malaysia-wide.
4. Engage community understanding: Allow certain private and public (individual or company) figures to table talks and debates on GST Malaysia-wide. This encourages engagement and allows more problems & solutions to be seen.

The Malaysian government or finance department has a long time more (approximately 15 – 20 months) to table talks around Malaysia with regards to GST.

What is GST? Definition of Goods & Services Tax

GST is a consumption tax charged on a wide range of domestic & international products, goods and services. It’s a broad-based tax imposed on every level of a product, from raw materials all the way to finished goods. It affects all layers of business and consumers – And whether you realize it or not, you’re being taxed for almost every thing.

Goods & Services Tax (GST)

Malaysia’s budget 2010 reports that the Goods and Services Tax (GST) is currently at the final stage of completing the study on the implementation, where analysts are measuring the social impact of its presence in Malaysia.

The Malaysian government said that it could be possible for them to implement this in the near future. Looking at Malaysia in a broader scale, GST will not only affect big businesses, but small and medium enterprises (SME) as well. Although there were nimbles of past information saying that a food outlet can only charge GST if it’s annual turnover is above RM3 million (3,000,000 Ringgit Malaysia), the GST compliance requirements and thresholds has not been officially announced.

If we were to take into account GST’s implementation into goods and services, we have to assume that will happen to all stages of the supply chain – Which means from the purchase of raw materials or start-up goods all the way to end-user (consumer ready) products available for sale. Ultimately in a product, GST charged to every level are passed on to the next person and ultimately, the consumer.

Budget 2010 – Updated!

Last update: 11th November 2009 – By BERNAMA & BTIMES.

The Economy

• Malaysia economy to grow 2-3 per cent in 2010
• Mining to grow 1.1 per cent, manufacturing sector 1.7 per cent, agriculture 2.5 per cent, construction 3.2 per cent and service 3.6 per cent.
• Private consumption expand 2.9 per cent while private investment 3.4 per cent
• Per capita income to increase by 2.5 per cent to RM24,661
• Federal Government revenue in 2010 to decline by 8.4 per cent to RM148.8 billion.
• Budget deficit at 5.6 per cent of GDP compared with 7.4 per cent in 2009.

In Finance

1. “The stock market will be further liberalised to enhance its efficiency as well as attract domestic and foreign investment. For this purpose, the government will undertake the following measures: First, liberalise the commission sharing arrangements between stockbrokers and remisiers in 2 stages to encrouage retail participation in the stock market. The first stage, which takes effect immediately, allows flexible brokerage sharing at a minimum rate of 40 percent for remisiers. The commission sharing will be fully liberalised in the second stage, effective 1 January 2011.
2. “Allow 100 per cent foreign equity participation in corporate finance and financial planning companies compared with the present requirement of at least 30 per cent local shareholding.
3. “Islamic banking assets account for 18.8 per cent of Malaysia’s total banking assets while takaful industry assets contribute 7.7 per cent of total insurance and takaful industry assets. To ensure rapid development of financial services, particulalrly in Islamic finance, the government proposes that the existing tax incentives be extended to 2015.

In Community, Halal, Training and Agriculture

1. Government to allocate RM899 million to intensify tourism industry.
2. 1Malaysia Development Bhd (1MDB) will establish a corporate social responsibility fund totalling RM100 million as a start to finance community activities
3. Formulate Halal Act in collaboration with State Islamic Religious Councils.
4. To corporatise the Halal Industry Development Corporation as an agency under MITI
5. Intensify Halal Certification by the Islamic Development Department of Malaysia (JAKIM) by collaborating with international institutions to obtain standards certification such as HACCP ad GMP.
6. To provide RM24 million to develop halal products anti-smuggling system at three entry points and three main ports.
7. Allocate RM82 million to modernise aquaculture industry and conduct entrepreneurship training scheme for aquaculture breeders with focus on production of fish fry and ornamental fish.
8. Effective Jan 1 2010, government agrees to allow agencies to retain 50 per cent of rentals received while the remaining 50 per cent will be remitted to the government as revenue.

For Education

Bai’ah, or more commonly known as the “New Deal” (linguistically, bai’ah signifies bartering or exchanging commodities, making a covenant, a compact, an agreement or the like), will be introduced for appreciating the contribution and performance of principals and head teachers in high performance schools. 20 schools have been identified, and the Malaysian government plans to appraise at least 100 or more in 2010.

In higher studies, the National Higher Education Fund Corporation loans are able to be converted into scholarships beginning 2010, if student performances graduate with first class honours.

Early childcare & education in Malaysia: RM100mil allocation, Permata programme as a recognition of the importance of early childcare and education in Malaysia, by Datin Seri Rosmah Mansor. (Children’s age for PERMATA programme: < 5 years old)

Effort to increase children count in pre-schools: Training, tax relief and government loans to those who’re setting up kindergartens. (Under RM30 billion budget allocation – No exact sum quantified, through the implementation of the national key result areas (NKRA).

For Property & Development Projects

Updated: 11th November 2009

• Government provides RM41 million to improve income and quality of life of the Orang Asli Community by implementing various projects.
• Government allocates RM2.3 billion to build and upgrade infrastructures in rural areas.
• RM14.8 billion is allocated to manage, build and upgrade hospitals and clinics.
• Allocate RM137 million to upgrade and improve drainage and irrigation infrastructures in paddy fields involving 180,000 farmers.
• TNB to spend RM5 billion to implement electricity generation, transmission and distribution projects in 2010.
• To provide RM70 million to build the Paya Peda Dam Project in Terengganu to increase water supply capacity to paddy irrigation scheme in Besut.
• Public-private collaborations to include an integrated immigration, customs and quarantine complex in Bukit Kayu Hitam, construction of six UiTM campuses and the development of MATRADE centre

Budget 2010 allocations totalled RM191.5 billion, of which RM138.3 billion is for operating expenditure and RM53.2 billion for development expenditure.

RM200 million (RM200, 000, 000) will be allocated to refurbish and revive low & medium cost housing projects. 41 development projects have been identified. This is a one-time funding allocation.

For Rural Development Projects

RM2.3 billion (RM2, 300, 000, 000) will be allocated to various rural development projects, distribution for tender projects under the Rural and Regional Development Ministry starting 2010.

Budget 2010 on Fiscal Updates

1. The Government will issue 1Malaysia Sukuk totalling RM3 billion.
2. “The government needs to ensure that the Malaysian tax system is equitable and able to generate revenue for development purposes. In line with this, the government proposes that a tax of five per cent be imposed on gains from the disposal of real property from 1 January 2010. (RPGT)
3. “The government is currently at the final stage of completing the study on the implementation of goods and services tax (GST), particularly to identify the social impact of GST on the people. The purpose of this study is to ensure that if GST needs to be implemented to stabilised Government finance, it will not burden the population. “If the government implements GST, it will replace the current sales tax and service tax as well as exemption will be granted to the low income group. The GST rate to be imposed will be lower than the current sales tax and service tax rates.
4. Government to enhance tax incentives for healthcare service providers who offer services to foreign health tourists with income tax exemptions of 100 per cent on the value of increased exports from 50 per cent previously.

In equity markets, the Malaysian government has decided to reduce the budget deficit from 7.4% this year (2009) to 5.4% next year (2010). This fiscal consolidation may see improvement of stock volumes, as it promotes value for money, high-return investments for investors.

Budget 2010 on Real Property Gains Tax (RPGT)

On Real Property Gains Tax (RPGT) for companies, the Malaysian government issued a capping limit of 5%, where RPGT is imposed on gains from real property disposal irrespective of holding periods and owner categories. Schedule 5 of Real Property Gains Tax 1976 shouldn’t be applicable anymore. This move is effective 1st January 2010.

The Real Property Gains Tax is reported to be the tax base of the nation – In other words, revenue.

RPGT for individuals and non-corporate entities will also stand at 5%, where level of exemption increases from RM5,000 to RM10,000 or 10% of chargeable gains (whichever is higher), disposal of residential property once in a lifetime and exemptions to gifts between parent to child, husband to wife, grandparent to grandchild (family).

In 2009, year of disposal vs. date of acquisition was at 30% for the 2nd year, 20% for the third year (for non-citizens, non permanent residents, still 30% for 3rd year), 15% for the 4th year (still 30% for non-citizens), 5% on the 5th year (30% for non-citizens) and for the 6th year thereafter, 5% for companies and none for individuals and non-corporate entities, 5% for non-citizens.

So in this case if you’re selling a house 5 years after you’ve bought it, the Budget 2010 will reap 5% off even 6 years or thereafter – In 2009 and before, there is no tax imposed on this. Another new rule you will see is the acquirer will remit considerable amount to the Inland Revenue Board (IRB) 60 days from the date of disposal (layman version: Sale).

For Cigarettes

On cigarettes excise duty in Malaysia, an increment of 1% is seen, going  up to 5.6%. Excise duties on beer remained unchanged.

For Individuals Tax

1. The Government proposes existing personal tax relief of RM6,000 for EPF contributions and life insurance premiums be raised to RM7,000.
2. The Government proposes the maximum income tax rate to be further reduced to 26 per cent from 27 per cent effective from the 2010 year of assessment.
3. Individual tax relief on broadband subscription fee up to RM500 a year from 2010 to 2012.
4. Individual taxpayers to be given tax relief on broadband subscription fee up to RM500 a year from 2010 to 2012
5. Government to launch a scheme in January 2010 that enables EPF contributors to utilise current and future savings in Account 2 to promote house ownership.
6. The Government will establish the 1Malaysia Retirement Scheme to be administrated by EPF.
7. Employees EPF contributions will be raised again to 11 per cent on a voluntary basis with immediate effect. However, from Jan 1, 2011 employees’ EPF contribution will revert to 11 per cent.
8. Civil servants are eligible to apply for computer loans once in every three years and up to a maximum of RM5,000 from the government once in every five years

Individual tax is to be seen reduced to 26%. Personal tax relief for budget 2010 will be increased by RM1,000. In 2009, it’s RM8,000 and in 2010, it’ll be RM9,000.

Individuals earning less than RM24,000/annum (RM2,000/mo) will be free of income tax.

On life insurance premiums & EPF contribution for budget 2010, existing personal tax relief of RM6,000 will be increased to RM7,000 from January next year for people with annuity schemes.

For Malaysian individual tax, which is seen at <RM2,500 (first time) at 0% chargeable tax, RM2,501 – RM5,000 to be at 1% (also next RM2,500) and RM5,001 – RM10,000 (and next RM5,000) to be at 3% in 2009, dropping 1% in 2009 from 2008; in the categories of RM35,001 – RM50,000/p.a. and amount exceeding RM250,000/p.a.

Iskandar Development region knowledge workers at a number of sectors who work and reside in Iskandar Johore will be subjected to a flat 15% on chargeable income. These sectors include education services, biotechnology, green technology, healthcare, financial advisory and consultancy services, creative industry, logistic services and tourism.

For Petroleum Tax

1. The Government will implement fuel subsidy management system in early 2010.

In petroleum tax, the Malaysian government plans to speed up tax collection by requiring petroleum companies to pay taxes in the same financial year. This move may see a number of good and bad governing factors, but the good one being fast tax collection. In previous years tax collections are often forwarded to the next financial year.

For Tax & Finance

The Accounting Digest wrote about “Recommended Budget 2010 for Tax“, giving pointers on Withholding Tax System, Taxation Fees, Tax Losses and Group Relief.

Among some of the listed recommendations (CIMB , PWC, etc.) for corporate tax codes and another financials include:

1. Tax incentives for ‘installers’ or ‘bringers’ of green technology.
2. Reduce import duty on environment-friendly vehicles such as hybrid cars.
3. Introduce potential subsidy for biodiesel programmes.
4. Tax credit for R&D that supports fundamental and applied research.
5. Allow companies to take 30-40% tax credit in expenditure on research and experimentation, global standards setting, branding and workforce training.
6. Reduce holding costs for property developers of unsold bumiputra property units six months after the project launch.
7. Real estate investment trust – Reduction in withholding tax.
8. Bumiputra discount ONLY FOR housing properties below RM250,000.

Budget 2010 – The RM470 billion

In March 28th, 2009, our dear Prime Minister Mr. Najib announced an extra RM200 billion allocation under Budget 2010, as he expects revenue generated in return to double up to RM470 billion in the period of 2 years. These four packages totaling at RM470 billion is seen to ’sustain’ Malaysia from the economic turmoil from middle towards the end of 2008, all the way up to-date.

The Statistics Department of Malaysia reports highly interesting statistics on the GDP, however. As much as its growth rates has sharply plummeted starting 2008, figures weren’t looking so good in 2009 either.

In Quarter 2 of 2008, the GDP growth rates were at 6.6%, Quarter 3 at 4.8% and a sudden drop of 0.1% to -6.2% in Quarter 1 of 2009. In between Quarter 4 of 2008 – Quarter 1 of 2009, these are when public and private sectors are well aware of the mass media’s attention towards economic downturns that are affecting a number of MNC companies worldwide.

‘National’ bailouts of AIG, Fannie Mae and Freddie Mac, fall of Lehman Brothers and so forth. Although drastically improved, Quarter 2 of 2009 sees an improvement of 2.3%, which brings it to -3.9% in Quarter 3.

GDP current prices were at RM155 billion at Quarter 1 of 2009 and RM161 billion at Quarter 2. GDP constant 2000 prices were at RM121 billion at Quarter 1 of 2009 and RM126 billion at Quarter 2 of 2009. In 2008, GDP current prices were at RM738 billion and 2000 constant prices at RM528 billion.

According to the Malaysian Insider, Mr. Najib also allocated RM27.9 billion in the form of subsidies including for petrol, diesel, cooking gas, wheat, bread, sugar, flour, rice, text books, scholarships, education, health, welfare and highway toll.

Can Budget 2010 achieve balance?

The Malaysian government’s aim to reduce operational expenses (as heard from approx. December 2008 until today) has seen to not have much effect at insiders’ points of view. Unproductive, underperformance or largely inflated operational expenses which can sometimes be masked behind ‘additional personal expenses’ probably wouldn’t give much effect on growth values.

Budget 2010 is expected to have a lower fiscal deficit – 5.5% in estimate, according to Reuters. Financial analysts figured a high fiscal deficit estimated at 7.6% according to The Star.

The Asian Development Bank had revised its forecast for Malaysian economic growth this year to -3.1% from an original -0.2%. “The expenditure ceiling under the Ninth Malaysia Plan (2006-2010) is RM230bil and a total of RM174.2bil, or 75.8% of total allocation, has been utilised.

“This means that a balance of RM55.8bil will be allocated for the 2010 budget, a rise of 1.3% from an estimated RM55bil in 2009 (assuming a 3% spending shortfall from the budget allocation of RM56.7bil) – The Star.

Mega projects such as Interstate Water Transfer Scheme (IWTS) amounting to RM1.3 billion, the Medini integrated development in Iskandar Malaysia infrastructural works at RM766 million, Sepang LCCT, LRT extensions for Klang Valley and Bakun Undersea Cable Project are less than 20% of the planned projects – Which could mean more spendings yet to be unsure.

While Malaysian government anchors 1Malaysia and looks to address the needs of Malaysians first, it has been said that the agricultural industry will receive more focus on their part – The rest of it such as healthcare, broadband infrastructure, telecommunications, rural developments and education has been spoken much in the past years – Malaysians still have major concerns that are yet to be addressed.

Public transportation, being another major problem as citizens are not maximizing the usage of public transportation in certain areas, there are some areas to where mass people transporting is a concern. A good example would be light rail transit systems, where fiscal deficits are often the major problem. Others include overcrowded and under-developed infrastructure (in which the government is looking at another mega project of LRT extensions, said to cover areas close to Sunway Pyramid).

Budget 2010 – Before announcement

First published on September 1st, 2009.

The ‘Malaysian‘ Budget for Year 2010 seemed promising for some companies out there, but to what extent can you expect out of the budget to help your business grow faster?

It has been said in the main media that our Prime Minister, Mr. Najib has planned out a “Shrinkage of Budget Deficit” plan. Just to satisfy the technical people reading this – The Malaysian government intends to reduce expenses to falling offset revenues. Of course, you can read that anywhere. While the purpose of “The Accounting Digest” is to provide “between-the-line” explanations pertaining the finance and accounting industries, stories of what the Malaysian government is planning to do can vary.

Malaysia’s Budget 2010

Injecting billions of Ringgit as stimulus packages often come with one main responsibility every receiver and giver has to handle – Discipline. It’s quite impossible to expect small companies to positively response to economic downturns, albeit the fact that their management practices have good cash reserves, financed well or practices excellent financial management.

The RM67 billion stimulus plan is measured to encumber businesses from fallouts, at the same time allow small timers to grow competitively. Yet again:

Malaysia has unveiled RM67 billion (US$19 billion) of stimulus measures to counter a global recession that policy makers predict may cause the Southeast Asian economy to shrink as much as 5 per cent in 2009.

The additional spending will swell this year’s budget shortfall to 7.6 per cent of gross domestic product, the biggest in 22 years, the government said in March.

That prompted Fitch Ratings to lower Malaysia’s long-term local-currency credit rating to A, the fifth-lowest investment grade, from A+, on June 9. It was Fitch’s first rating cut for the nation’s debt since the Asian financial crisis in 1998. -Business Times.

Yet again, the Malaysian government has said to put focus in education & health infrastructures, public social frameworks, agricultural and export growth for the country. These are excellent to start with – But how long have we been putting focus on these basic needs?

Tax Measures to call for in 2010

Looking at everyday news and getting updates from the mass media can be informational and entertaining – But it comes down to evaluating your businesses from the very foundation of it. Since many financial analysts, experts and economists would charge you a bomb for just advices alone, The Accounting Digest will point out some highlights in tax functions to help you evaluate and understand better:

Filing tax returns is no joke. Don’t expect the tax framework to benefit you. Instead, make it work for your business in particular.

• Withholding tax system – Income tax from employees paid directly to the Tax department. For small companies, a financial restructuring plan can be done, but multiply that by 20 – 100 employees. Ask us how you can perform proper financial restructuring on withholding tax on your company.
• Taxation Fees – Corporate tax return fees, bookkeeping (in some cases) fees, company secretarial fees, etc. Since tax filing is complicated and varies between businesses, your local tax professional can now provide you a list of what to declare, what can be declared and to what extent.
• Tax losses and group relief - (In taxation) When total expenses are more than income, you can incur a loss for taxation purposes. For certain industries, tax losses are at 70%. If you’re unsure about how to go about this, be sure to ask your local tax professional.

Economic Balance in Malaysia after Recession

With Bank Negara Malaysia (herein referred to as “BNM”) declaring in the month of September that its Monetary and Financial Developments in August 2009 the Malaysian economy faces stable interest rates, demand for financing in the housing industry is sustained and the capital market moderated, it seems positive that Malaysia may be looking at a very positive economic outlook coming 2010.

There were previous speculations about the domino effect this Great Recession has on Malaysia will last about 2-3 years; albeit its heavy political activities and shrewd financial stability mentality that was placed on Malaysians by various mass and alternative media.

Locally speaking, Malaysia is seen to be performing quite well in this recession – BNM’s net non-performing loans ratio remains at 2.1% as of August 2009, as many other banks stood at an approximate figure of 3.65%. Deutsche Bank however, was forecasted to a high of 15% non-performing loans ratio (herein referred to as “NPL”) for the next 12 months starting October 2009.

The Average Base Lending Rates (BLR) in Malaysia stands at 5.53% on July, decreasing to a low of 5.51% at the end of August.

For more almost a decade now, citizens of the world mainly financiers and political leaders have always craved for economic stability, sustainability and predictability: Even depicted in the G20 summit. But what is the shape of the economy after this recent economic turmoil, and how would we reshape it?

GDP Growth Rates in Malaysia - Quarter 1 2007 to Quarter 2 2009

Economy Focus: Malaysia

The GDP chart above (by Dept. of Statistics Malaysia) shows a very sharp decline at the expected bottom-out -6.2% in Quarter 1 of 2009. Over the period of time, output for exports have declined, oil price was down to a low of US$48/barrel and the producer price index showed decline compared from January – August 2008 and 2009.

Some of the other exciting figures are also unemployment rates, commodity prices, global stockmarket prices, foreign currency exchange value and manufacturing output of vital Malaysian exports. Interestingly, the balance of payments figures are depicted as below.

Balance of Payments - Malaysia for 2007 - Q1 2009

According to the Malaysian Department of Statistics,

The current account recorded a surplus of RM28.8 billion (equivalent to 17.8% of GDP) in the second quarter of 2009, down from RM31.4 billion from the preceding quarter (-RM2.7 billion or -8.5%). The decrease was as a result of lower surplus on goods of RM33.1 billion from RM37.0 billion in the earlier quarter (-RM3.8 billion or -10.4%), and services of RM1.0 billion (Q1 2009: RM2.5 billion). Meanwhile, other components in current account showed an improved performance as follows:

• a lower net payments on income account of RM1.5 billion (Q1 2009: -RM3.9 billion); and
• a lower leakage on current transfers of RM3.9 billion (Q1 2009: -RM4.2 billion)

Malaysia vs. Other economies

Household debts are still worryingly high in United States, and healthcare is often a concern. It has been said ‘worryingly’ for many times that Americans are spending too much, wanting a lot of amenities but are not paying enough for it. Consumer spending has dropped, but cost of capital and consumer prices index has increased. This negatively effects the economy as prices will be higher and consumers do not spend as much – Leaving local monetary circulation volatility at a much lower rate.

In Malaysia, banks were having strong capitalization and stable NPL, sustained fund raising volatility in the capital market, gross financing to the private sector was moderated and M3 (broad money) grew at a faster annual rate at 7.6%.

Update: Check out our new post for a more detailed version of Budget 2010 in Malaysia.

The ‘Malaysian‘ Budget for Year 2010 seemed promising for some companies out there, but to what extent can you expect out of the budget to help your business grow faster?

It has been said in the main media that our Prime Minister, Mr. Najib has planned out a “Shrinkage of Budget Deficit” plan. Just to satisfy the technical people reading this – The Malaysian government intends to reduce expenses to falling offset revenues. Of course, you can read that anywhere. While the purpose of “The Accounting Digest” is to provide “between-the-line” explanations pertaining the finance and accounting industries, stories of what the Malaysian government is planning to do can vary.

Malaysia’s Budget 2010

Injecting billions of Ringgit as stimulus packages often come with one main responsibility every receiver and giver has to handle – Discipline. It’s quite impossible to expect small companies to positively response to economic downturns, albeit the fact that their management practices have good cash reserves, financed well or practices excellent financial management.

The RM67 billion stimulus plan is measured to encumber businesses from fallouts, at the same time allow small timers to grow competitively. Yet again:

Malaysia has unveiled RM67 billion (US$19 billion) of stimulus measures to counter a global recession that policy makers predict may cause the Southeast Asian economy to shrink as much as 5 per cent in 2009.

The additional spending will swell this year’s budget shortfall to 7.6 per cent of gross domestic product, the biggest in 22 years, the government said in March.

That prompted Fitch Ratings to lower Malaysia’s long-term local-currency credit rating to A, the fifth-lowest investment grade, from A+, on June 9. It was Fitch’s first rating cut for the nation’s debt since the Asian financial crisis in 1998. -Business Times.

Yet again, the Malaysian government has said to put focus in education & health infrastructures, public social frameworks, agricultural and export growth for the country. These are excellent to start with – But how long have we been putting focus on these basic needs?

Tax Measures to call for in 2010

Looking at everyday news and getting updates from the mass media can be informational and entertaining – But it comes down to evaluating your businesses from the very foundation of it. Since many financial analysts, experts and economists would charge you a bomb for just advices alone, The Accounting Digest will point out some highlights in tax functions to help you evaluate and understand better:

Filing tax returns is no joke. Don’t expect the tax framework to benefit you. Instead, make it work for your business in particular.

• Withholding tax system – Income tax from employees paid directly to the Tax department. For small companies, a financial restructuring plan can be done, but multiply that by 20 – 100 employees. Ask us how you can perform proper financial restructuring on withholding tax on your company.
• Taxation Fees – Corporate tax return fees, bookkeeping (in some cases) fees, company secretarial fees, etc. Since tax filing is complicated and varies between businesses, your local tax professional can now provide you a list of what to declare, what can be declared and to what extent.
• Tax losses and group relief - (In taxation) When total expenses are more than income, you can incur a loss for taxation purposes. For certain industries, tax losses are at 70%. If you’re unsure about how to go about this, be sure to ask your local tax professional.

Need to read more? We have more on Budget 2010. Click here to read updated (26th October 2009) version of Budget 2010 for Malaysia.