Budget 2025: CTIM Calls For Reevaluation Of Individual-based Income Tax Model

KUALA LUMPUR, Sept 26 (Bernama) -- The Chartered Tax Institute of Malaysia (CTIM) has proposed that the government redefine the current classifications of the B40, M40, and T20 income tax models to reflect the evolving economic landscape.

CTIM president Soh Lian Seng suggested a detailed study to be conducted to evaluate whether the current individual-based income tax system should shift to a household-based model.

“It is also time to review the personal relief in light of changing economic conditions.

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“The personal relief for individuals (currently at RM9,000) and dependents, including reliefs for medical treatment for parents, spouses, and disabled individuals, needs to be reviewed to better reflect the rising cost of living,” he said in a statement today.

Soh highlighted that the relief for disabled individuals, which has remained at RM6,000 since 2005, requires immediate revision, and proposed that the amount be doubled to align with current economic realities.

The much anticipated Budget 2025, themed “Ekonomi Madani: Negara Makmur, Rakyat Sejahtera” will be presented on Oct 18, where the government is expected to propose measures to generate additional tax revenues to meet its medium-term goal of achieving a 3.0 per cent deficit target while also keeping an eye on future spending needs.

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“To ensure Malaysia’s tax base supports sustainable growth, a progressive tax system that reduces tax leakages and enhances tax compliance is crucial,” said Soh.

He also proposed the introduction of a Multi-Year Tax Framework (MYTF) in Budget 2025 to enhance investment certainty and accelerate MADANI economic reforms.

"The framework could establish clear tax policies and rates for a defined period, such as three to five years. This will create a stable and predictable tax environment, fostering confidence among businesses and investors," Soh said.

A well-designed MYTF should address key areas such as Tax Policy Objectives, Tax Legislation Reforms, Tax Administration and Compliance, and Tax Incentives and Exemptions.

To improve tax compliance with recent developments, Soh recommended allowing tax services fees (not limited to tax filing) to be deductible expenses without restriction, aligning with the general deduction provisions in the Income Tax Act 1967.

He also proposed a comprehensive empirical study to explore the feasibility of a Unified Tax (UT) system.

“This unified approach should incorporate elements of both transactional and consumption taxes. The study should involve industry consultation with the stakeholders and consider lessons learned from the previous  Goods and Services Tax (GST 1.0),” he said.

The proposed UT should provide comprehensive coverage, applying a single tax on goods and services from the manufacturer to the consumer.

It should also include input tax credits to allow businesses to claim tax credits on inputs, ensuring that tax is only levied on value-added thereby promoting transparency and fairness.

Additionally, the UT should incorporate an automatic refund mechanism, leveraging technology for tax filing and payment to improve tax compliance monitoring and accelerate refund processing to enhance the taxpayer experience, he said.

To support micro, small, and medium enterprises (MSMEs), Soh suggested that the government introduce incentives such as special concessionary corporate tax rates, as seen with the Forest City Special Financial Zone.

“We anticipate that proposals may include double tax deductions for green expenses, financing schemes, and digital support for MSMEs.

“A carbon pricing or tax mechanism is also expected to be announced soon, either in Budget 2025 or in next year’s budget,” he added.

Soh also urged the government to consider tax incentives and financing options for businesses, particularly MSMEs, to adopt renewable energy, green building practices, and energy efficiency measures. 

-- BERNAMA