The exemption of income remitted from overseas was formerly given only to companies and unit trust, but it is now extended to resident individuals, trust bodies, cooperative and Hindu Joint Family too. This step is certainly in the right direction to bolster domestic initiated investment growth. The changes are likely to have positive long-term results.
Another long-standing grouse put to rest among businessmen, is allowing entertainment expenditure. The 2004 Budget admitted that disallowing entertainment expenditure has in fact, increased the cost of doing business. The deduction is now given in two parts, i.e. 100% tax deduction on expenses incurred for sales promotions; and 50% on “other business entertainment expenses”.
The onus of making an entertainment claim under the self-assessment regime is becoming greater and trickier. There is now a need to prove that the expenditure was incurred, and it was related to the promotion of the business. There will also be a catch on how the Inland Revenue Board will distinguish between a potential customer and an existing customer. Will the entertainment expenses incurred for potential customer for the purpose of potential sales be given a 100% deduction? After all, it might end up not being “wholly and exclusively incurred in the production of gross income” – the most fundamental way to judge the deductibility of a revenue expense.
Full tax exemption on fees and honorariums received by lecturers or experts providing services for validation, moderation or accreditation process to ensure franchised education programmes are of the same standard and quality as those of their franchise institutions will help achieve Malaysia's ambition as the central of education in the region. The measure is an encouraging one. However, the incentive of 50% tax exemption on income from royalty and honorarium received from the commercialisation of the researcher's findings could be made more attractive with a 100% exemption. Such a measure would go a long way to motivate the development of local research and development. This would be in line with the need to increase competitiveness in the wake of regional trade threats.
The incentive provided to employers for the employment of graduates by giving a double deduction for 2 years on salaries paid by an employer that hires such graduates is a pre-emptive move by the Government. It is a known fact that unemployed graduates can cause serious social unrest leading to revolutions, as well as the downfall of governments. However, to avoid administrative confusion in claiming deduction, the authorities must be clear and specific in setting the fulfillment conditions, e.g. period of registration with Economic Planning Unit before such a person is employed, etc.
Overall, this is a good budget that balances well both financially and socially, with a streak of religious message running through as befitting for our nation.
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