KUALA LUMPUR, 13 September 2003 — Malaysian Prime Minister Mahathir Mohamad yesterday provided tax boosts for businesses in his final budget after 22 years in power but offered few goodies for the man on the street ahead of impending elections.
The 77-year-old premier imposed sharp “sin tax” increases for smokers and drinkers, and dashed hopes of corporate or personal income tax cuts as well as cheaper cars under a regional free trade pact in 2005.
“It falls short of expectations of an election budget. There are not many goodies across the board,” said Ngu Chie Kieng, research chief at TA Research.
“Expectations of a corporate or personal income tax cuts, or rebates at least, didn’t materialize. They could have done a bit more.”
Another analyst said there was “no parting gift” from the premier who retires next month but noted a 7.3 billion ringgit ($1.9 billion) stimulus package in May left the government little room to offer more goodies.
Mahathir did however give an additional half-month bonus for civil servants to take bonus payments for the year to a full month salary. He also raised child relief for taxpayers and abolished road tax for motorcycles below 150cc to help lower-income group.
In a three-hour speech broadcast over national television, he listed tax incentives for the manufacturing, agriculture, education, tourism and technology sectors in a 2004 budget seeking to boost economic competitiveness. Mahathir, who is also finance minister, said it was designed to make the domestic private sector the growth engine, strengthen small- and medium-sized enterprises (SMEs) and stimulate private consumption. “We must act immediately to make a quantum leap to become the nation’s investor, producer and exporter... we must redouble our efforts to become a global trader by promoting Malaysian products,” he said. The threshold of taxable income for SMEs will be raised five-fold to 500,000 ringgit in a move to free 322 million ringgit for reinvestment, he said.
Additional income tax incentives will be offered to woo more foreign firms to set up operational headquarters in Malaysia.
State-owned Federal Land Development Authority will be listed to enrich thousands of small farmers, he said.
To support the transition to a knowledge-based economy, Mahathir said state-owned Telekom Malaysia would cut Internet access charges by 30-50 percent.
Import duty on 104 tariff items will be reduced while that on seven items abolished with immediate effect, he said. But import and excise duties on tobacco and cigarettes will be raised by 10-20 percent to promote a healthy lifestyle, the premier said.
For the auto sector, Mahathir noted car sales had declined since February in anticipation of lower car prices under the ASEAN Free Trade Area but said this would not happen. “The government proposes to levy excise duties on imported cars when import duties are reduced from Jan.1, 2004,” he said, urging consumers to buy cars now. He did not give details. The budget also provided a 228 million ringgit allocation for programs to boost Islamic teaching.
The 112.50 billion ringgit budget, the country’s seventh straight deficit budget, allows a smaller deficit of 3.3 percent of gross domestic product, compared with 5.4 percent in 2003.
Standard and Poor’s said in a statement the budget was a positive step in curbing the government’s deteriorating fiscal position.
Mahathir said the economy was expected to grow at least between 5.5 and six percent next year, spearheaded by the private sector in manufacturing.
