KUALA LUMPUR (Feb 28): The service tax scope expansion and rate hike from 6% to 8% on select services is expected to generate an extra RM3 billion in revenue for the government’s coffers, according to the Ministry of Finance (MOF).
The service tax’s scope expansion, which took effect on Monday (Feb 26), and the upcoming 2% tax rate hike effective this Friday (March 1), are done in order to support the government’s ongoing efforts to strengthen the country’s fiscal foundation.
“The expanded tax system is expected to generate an estimated additional RM3 billion in revenue to the country, which will help the Madani government increase its support for the rakyat through better social assistance schemes and improved critical public infrastructure like healthcare, schools and roads,” the MOF said in a statement on Wednesday.
The competition for tech talent has existed since before the outbreak of the Covid-19 pandemic and with tech advancing rapidly, there is a widening gap between the ever-changing needs of industries and the academic curriculum of tertiary educational institutions. To bridge this gap, passionate industry players are taking bold steps by providing upskilling opportunities that ensure graduates are industry-ready.
The service tax’s scope is expanded to include maintenance (preventive and corrective), brokerage, underwriting and karaoke services.
The services that will see its tax rate unchanged at 6% are logistics, food and beverage (F&B), telecommunications and parking space services.
For logistics services, service tax is exempted on a service that was procured by a customer, but subcontracted to another company. For example, if a customer procured for a haulage service for 1,400 containers to a logistics company, but the company could only provide the service for 700 containers, and procured another haulage service provider for the rest of the containers, service tax is exempted on the procurement of haulage services from the second provider.
As for maintenance services, service tax is exempted for repairs, sinking funds, and maintenance charges imposed by a joint management body for residential buildings.
According to the MOF, new registered businesses will have by April 1 to implement the service tax on the newly taxable services, while existing registrants will begin implementing it on Friday.
“The government does not anticipate the changes to engender sharp price increases that would lead to an economic shock as the small two-percentage increase affects selected taxable services,” it added.
According to the MOF, the service tax amendments have been designed to protect the rakyat from shouldering higher consumption tax for key essential services, reiterating that the tax rate hike from 6% to 8% will not affect key essential services, such as food and beverage, telecommunications, parking and logistics.
The ministry noted that for electricity services, the service tax is only applicable for usage above 600kWh — equivalent to an electricity bill of RM219.80.
“Almost 85% [of] electricity users fall below this threshold, and therefore will not be affected by the service tax,” it said, adding that service tax does not apply to treated water supply services.
“To truly transform our economy, the government has taken a measured approach to reform our tax system. While it is important for the government to raise its revenue, there is a balancing act that we have to consider between improving the tax base and cushioning the rakyat from any undue burden,” said Minister of Finance II Datuk Seri Amir Hamzah Azizan.
“It is necessary for us to broaden the tax base to realign and strengthen our national fiscal foundation as we set the stage for a new era of economic growth under the Ekonomi Madani framework. At the same time, we will continue to take on a ‘Whole of Government’ approach to right our economic trajectory, including being more prudent in our spending, reducing leakages and attract FDI (foreign direct investments),” Amir Hamzah added.
Malaysia has been trying to shrink a long running fiscal deficit that stretches back to the 1998 Asian Financial Crisis. Most recently, the government has introduced a slew of measures ranging from trimming subsidies to imposing additional taxes in a bid to fix its weakened finances.
This year, the government is targeting to narrow its budget gap as a proportion of economic output to 4.3% from 5% last year.
The inclusion of maintenance and repair services under the taxable scope of the service came as a surprise to tax consultants as it was not previously announced under Budget 2024, which listed the inclusion of logistics, brokerage, underwriting and karaoke services.
At a media briefing on Wednesday, MOF Treasury secretary general Datuk Johan Mahmood Merican explained that the wider scope of the service tax than what was previously announced in Budget 2024 was the result of ongoing engagements with industries, and was to ensure consistency of tax treatments.
“It is the shortcoming of me and my team…we should have [had] more extensive communications [prior to the national budget],” Johan commented when asked why the wider scope of the service tax was not included in Budget 2024.
By Izzul Ikram.
Source: The Edge Malaysia. https://theedgemalaysia.com/node/702760. 28 February 2024.
Boeing slashes DEI department in latest staff shake-up. Machinists also set to vote on contract proposal delivering 38% wage increase over 4 years Boeing dismantled its global diversity, equity and inclusion department on Thursday, according to a report by Bloomberg citing sources familiar with the matter. The report stated that staff from Boeing’s DEI office will be combined with another [...]
AI technology helps fleet managers detect drowsy drivers. Half of all truck drivers fall asleep at the wheel, report says Drowsiness while driving is a critical risk, contributing to thousands of crashes and hundreds of deaths each year, with drowsy drivers being three times more likely to cause accidents. To mitigate these scenarios fleet managers have turned to artificial intelligence [...]
How global trade actors are turning to fintech to tackle fraud. Cross-border payments generally are slow and lack transparency With billions of dollars processed every day, cross-border trade payments have become increasingly complex. Companies must navigate a range of banks, clearinghouses and payment processors, all of which assess fees and contribute to potential delays. Traditionally, cross-border payments are slow, [...]
Scroll To Top