Malaysia budget 2023: Anwar aims taxes at ‘rich elites’ amid cost of living crisis
- The government will spend US$87 billion to help people struggling with soaring inflation, including on handouts for the poorest and income tax cuts for middle earners
- The wealthy face higher taxes on luxury goods and capital gains, while e-cigarettes will also be taxed to fund health services
“Considering the income and national wealth that is concentrated among the rich elites, it is only reasonable that the country’s revenue focuses on the low and middle-income groups,” said Anwar, who is also finance minister. “Everything that is luxurious should be taxed properly.”
Anwar, 75, said the government would expand its tax base among higher-income earners, including a luxury goods tax on top-tier items such as premium watches and fashion.
The government also planned to introduce a capital-gains tax at a “low rate” for unlisted disposal of shares by companies starting 2024.
“Even though nicotine-laced vape remains illegal, the fact is it is sold widely and is estimated to be worth 2 billion ringgit,” Anwar added. “How good it would be if it is regulated and taxed so that it does not encourage vape usage.”
Inflation stalks the economy
Inflation was expected to come in the range of 2.8-3.8 per cent in 2023, but could worsen depending on foreign exchange rates and further supply disruptions, the government said in its pre-budget report.
Anwar said the government would set aside 2.5 billion ringgit in cash handouts for more than 400,000 recipients. That was in addition to money to upskill and build capacity of poor communities, including to help young people join businesses such as delivery driving and ride-hailing.
For middle-income earners, the government would reduce the income tax rate by 2 per cent for those earning between 35,000 and 100,000 ringgit annually. The tax rate would nose up between 0.5 and 2 per cent for individuals earning between 100,000 and 1 million ringgit.
Anwar said the government would also bolster enforcement to crack down on smuggling of diesel – which is heavily subsidised – and alcohol and cigarettes, which are taxable products, by criminal syndicates.
The prime minister had ruled out a broad-based consumption tax such as a goods and services tax which would add to pressure faced by the poor.
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To manage the nation’s burgeoning national debt, which reached 1.079 trillion ringgit as at end-2022, Anwar said the government would table a Fiscal Responsibility Act in parliament this year to legislate more transparent and responsible management of the economy.
“We are at a critical juncture in history,” he said. “This administration will strive on the principle of accountability, to manage our fiscal position including managing our debt issues, and at the same time ensure economic growth.”
Anwar’s budget was marginally smaller than the government’s total spend last year, in part as state subsidies for 2023 would be 3.4 billion ringgit cheaper as global commodity prices eased.