Highlights of Budget 2005

Main points 

 

Review of taxation system 

  • Review of consumption tax (sales tax and service tax) to pave the way for introduction of Goods and Services Tax in 2007 

     

  • Fund for tax refunds to be established 

     

  • Excess tax payment will be offset against current year tax, or refunds for excess will be made from the fund 

     

  • Zakat: to be allowed as income tax deduction up to 2.5% of income for companies 

    Agriculture promotion  

     

  • RM300mil commercialisation seed capital for private sector and government-linked companies  

     

  • adoption of modern methods through the application of technology, including biotechnology 

     

  • develop Malaysia as a centre of processing, packaging and marketing of agriculture products for global markets 

     

  • develop skilled manpower and transforming Univerisiti Putra Malaysia into a centre of excellence for agriculture education 

     

  • RM1.5 bil allocated for agriculture projects, especially for those benefitting smallholders 

     

  • Tax incentives to encourage food production extended further five years until 2010; equity requirement for investing in subsidiary is reduced from 100% to 70% 

    Developing Halal Products  

     

  • investment tax allowance of 100% for five years 

     

  • RM10mil special fund for Development and Promotion of Halal Products for studies in business planning, technology and market development, improving quality 

    Financial sector 

     

  • allow up to five major foreign stockbrokers to operate in Malaysia 

     

  • allow up to five leading global fund managers to operate in Malaysia 

     

  • 100% foreign ownership in futures broking companies 

     

  • 100% foreign ownership in venture capital companies for ICT sector 

     

  • abolish limit on number of foreign dealer representatives 

     

  • allow EPF to increase size of funds places in local fund management companies from current RM6bil within three years 

     

  • Tax exemption on interest earned by non-resident companies from ringgit-denominated Islamic securities and debentures, excluding convertible loan stocks, and securities issued by Malaysian government 

     

  • Additional RM1.75bil of Merdeka Bonds to be issued by end of 2005  

     

  • Government will issue Islamic Treasury Bills, based on syariah principles 

     

  • Overseas branches of local banks to establish Islamic banking counters. 

     

  • Tax or duty exemption on Islamic financial products approved by Syariah Advisory Council of Bank Negara, and Islamic capital market products approved by the Syariah Advisory Council of Securities Commission 

     

  • Individual income tax relief on premium payments for life insurance increased from RM5,000 to RM6,000 

    Real Estate Investment Trust 

     

  • Exempted from tax on income distributed to unit holders; undistributed income taxed at 28% 

     

  • Non-resident unit holders tax payable at 28% 

    Tourism  

     

  • Ministry approved arts and cultural performances by local artists in Kuala Lumpur, Labuan and Putrajaya given full entertainment duty exemption. Call on states to do same. 

     

  • develop health tourism 

    Education 

     

  • Expedite approvals and accreditation for courses by private institutes of higher learning 

     

  • ranking performance of private and public institutes of higher learning based on international standards 

     

  • RM670mil for building new polytechnics, community colleges, industrial training institutes, MARA Skills Institutes and National Youth Skills Institutes and RM248mil for upgrading 

     

  • RM190mil for facilities to increase skills training for secondary school leavers  

     

  • Increase number of MARA sponsored students overseas from 700 to 1,000 under Skim Pelajar Cemerlang 

     

  • Khazanah Nasional to sponsor 100 high achieving students for technical and professional subjects overseas 

     

  • Guru Cemerlang and Pengetua Cemerlang can remain in schools with opportunities to be promoted to Special grade C and JUSA C posts respectively. 12 Special Grade C posts for guru cemerlang and 5 JUSA C posts for pengetua cemerlang to be created 

     

  • RM205mil for Tuition Voucher Scheme for children from low-income group 

    Abolishing or Reducing Import Duties on Selected Goods 

     

  • Current import duty on surgical gloves, carpet, glassware and semi-finished components for wood-based industry of between 5% and 25% abolished 

     

  • Current import duty on raw materials for apparel industry and herbicides from between 10% and 35% to between 5% and 30%. 

     

  • Pioneer status or Investment Tax Allowance for existing companies relocating manufacturing activities to promoted areas, including Eastern Corridor of Peninsular Malaysia, Sabah and Sarawak. 

     

  • RM2.5bil development allocation for East Coast Corridor, RM3.8bil for Sabah and Sarawak. 

    Developing the ICT sector 

     

  • Target to create additional 100,000 high value-added jobs to existing 20,000 in Multimedia Super Corridor 

    SMEs 

     

  • soft loans and matching grants will continue 

     

  • SMI Fund 2 will be increased by RM1.6bil to RM4.5bil 

     

  • New Entrepreneurs' Fund 2 increased by RM550mil to RM2bil 

     

  • Enhance marketing and promotion capabilities, scope of Market Development Grant expanded to include marketing and promotion, expenses for negotiations for Mutual Recognition Agreement. Maximum increased from RM60,000 to RM100,000 

     

  • RM50mil fund for enhancing marketing skills 

     

  • RM100mil fund for enhancing product design, packaging and labelling capabilities 

    Eradication of poverty 

     

  • RM94.2mil for Housing Assistance Programme, Income Generating Programme, Dietary Food Supplement Programme, Mindset Change Programme and Training and Educational Programme. 

     

  • RM205mil for Tuition Voucher Scheme for children from low-income group (also in education) 

    Orang Asli 

     

  • RM77.3mil for improving standard of living for Orang Asli, including a comprehensive development plan in education, health, property ownership and infrastrucre development and mindset development 

    Disabled, children and elderly 

     

  • Additional tax relief from RM5,000 to RM6,000; and RM2,500 to RM3,000 for disabled spouses 

     

  • RM25 monthly allowance for each disabled child who participates in the COmnunity Rehabilitation Programme or who attends special schools sponsored by voluntary welfare organisations 

     

  • Increase daily expenditure on food from RM3.90 to RM8 per person for children, elderly and disabled in rehabilitation and shelter institutions 

    Rural areas 

     

  • RM130mil for rural electricity supply programme 

     

  • RM174mil for construction of kampung roads 

     

  • RM50mil for building and completion of rural roads 

     

  • RM18.7mil for improvement of rural health 

     

  • Info Desa and Internet Desa programmes will be expanded 

    Computers 

     

  • Tax rebate for purchase of personal computers increased from RM400 to RM500 

    Books 

     

  • Tax relief increase from RM500 to RM700 for purchase of books 

     

  • RM30mil for National library to buy reading material 

    Housing 

     

  • Additional 100,000 units of affordable homes to be implemented through Industrialised Building System 

     

  • Housing developers fully exempted from CIDB levy if IBS component usage exeeds 50% 

     

  • Additional RM778mil for construction of 21,000 units of low cost houses under Project Perumahan Rakyat 

     

  • Additional RM177mil in loans for construction of 3,000 units under Projek Perumahan Awam Kos Rendah 

     

  • Additional RM100mil for 2,500 farmers and fishermen and the poor to finance construction of homes under Projek Perumahan Mesra Rakyat 

     

  • Pilot project on integrated development in Mukim Pantai Dalam to house 1,000 households living in longhouses 

     

  • Pudu Prison site to be developed as commercial and residential centre. 

    Tax on Cigarettes and Liquor  

     

  • excise duty on cigarettes to be increased from RM58 to RM81 per 1,000 sticks; and  

     

  • excise duty on liquor be increased from between 5 sen and RM23.40 to between 10 sen and RM28 per litre.

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