The Public Finance SRI focuses on curtailment and compression of Corporate Tax Incentives. Through the 'step down' of rates or exemptions, the SRI will ensure that more revenue is able to be reverted back to the government to create more fiscal space.
'Step down' of Reinvestment Allowance (RA)
The proposals are:
- RA rate to half of its current rate, 60% → 30% in 2 stages.
- RA eligibility period from 15 YA to 10 YA.
- Restriction on Statutory Income (SI) from 70% → 50%.
Short-term and long-term impacts have been identified
Short Term Impact
| Restriction of SI |
Difference in rate |
Tax Saving Per YA (Cash Flow)
(RM mil) |
| Current Rate |
Proposed Rate |
| 70% |
50% |
20% |
380 |
Long Term Impact
| New Rate |
Differences |
Tax Savings |
| 45% for the 1st 5 YA |
15% |
1.79 |
| 30% for the next 4 YA |
30% |
2.86 |
| Total |
|
4.65 |
'Step-down' (From Full to Partial) Exemption for Shipping Income
Scenario
This policy regarding the exemption for shipping income has not been reviewed for the last 27 years. Only select companies benefit from this exemption (2008 statistics show that only 6 companies out of 176 have benefited from this incentive).
Therefore, the proposal is to reduce shipping tax exemption from 100% to 70%.
Estimated Additional Revenue
| Rate of exemption (%) |
Short Term
(RM mil) |
Long Term
(RM mil) |
| 70 |
127.8 |
1,150.2 |
| Implementer: Ministry of Finance |
Review Pioneer Status / Investment Tax Allowance
Proposals involved include:
- Review variations :
- Pioneer Status
- Investment Tax Allowance
- Review list of promoted activities and products
- Review general criteria/conditions for incentives
- Introduce sunset clause for all incentives
- 2 provisions under PIA be transferred to Income Tax Act i.e.:
- Incentives for MSC status companies under Section 4A of PIA and
- Double deduction on promotion of exports under Section 41 of PIA
These reforms are aimed to produce better incentive packages that would suit the current economic environment that is in line with Malaysia's Economic Transformation Programme.
Review Single Deduction, Further Deduction, and Double Deduction
The lab proposed to review redundant and ineffective incentives that are more than 9 years old. This will be done by reviewing the following incentives in relation to deduction:
- Incentive for RosettaNet; an international industry standard
- Premiums paid for the import of cargo insured with an insurance company incorporated in Malaysia
- Premiums paid for the export of cargo insured with an insurance company incorporated in Malaysia
- Freight charges incurred for the export of rattan and wood-based products
- Revenue expenditure incurred on approved research
- Payment for the use of services of an approved research institute/company, a R&D company or contract R&D company
2012/01/11