The Prime Minister, who is also the Finance Minister has just tabled the 2008 National Budget, which I see as an election budget. This could be the last budget before the 12th General Election is called, expected in early 2008 (some say end of 2007).

Selected Highlights

• Single-tier tax system, effective from the year of assessment 2008. Under a single-tier tax system, profits are only taxed at the company’s level and dividends received are exempted from tax.
• Further reduction of the corporate tax to 25% in 2009.
• Effective 1 January 2008, private valuation of property will be allowed for purposes of assessment in stamp duty payment. This will enable the transfer of property to be executed pending the final valuation from the Valuation and Property Services Department.
• To further stimulate the property sector in particular housing, the Government proposes that a 50% stamp duty exemption on documents of transfer be given for the purchase of one house of not more than RM250,000 per unit.
• The examination fee for Sijil Tinggi Agama Malaysia and the annual fee for primary and secondary schools will be abolished.
• Beginning the 2008 school session, the Text Book Loan Scheme will be provided to all students, irrespective of their families’ income and with no restrictions on the number of eligible children. With this, 5.7 million students will benefit from this Scheme compared with 4.5 million students currently. With these measures, schooling in Malaysia is now completely free.
• The Government recognises that a number of primary and secondary schools have been funded and well managed by trust and charitable bodies. To support their efforts, the Government proposes that these schools be given income tax exemption. This exemption will benefit particularly Chinese and Tamil schools, as well as religious schools.
• To promote a culture of life-long learning among Malaysians, the Government proposes tax relief of up to RM5,000 on education fees be extended to all post graduate studies.
• In line with efforts to establish a knowledge-based economy and narrow the digital divide, the Government has targeted to increase the broadband penetration rate to 50% of households by 2010, from 12% currently. For this, an effective public-private partnership will be required to accelerate the rollout of broadband. As part of this effort, developers will be encouraged to provide telecommunication infrastructure in new housing areas.
• The Government also proposes that last mile network facilities providers be given Investment Allowance of 100% on capital expenditure incurred for broadband up to 31 December 2010; import duty and sales tax exemptions be given on broadband equipment and consumer access devices; and tax deduction be given to employers on benefits in kind in the form of new computers and payment of broadband subscription fees for employees. Such benefits in kind received by the employees will also be tax exempt.
• To ease the burden of home loan repayment, the Government will allow EPF contributors to make monthly withdrawals from the balance in Account 2. The scheme will be effective 1 January 2008 and is for the financing of one house. This is a major move, which will benefit 5 million active EPF contributors. This scheme will enable contributors to own better houses than they could otherwise afford as well as lessen their monthly financial obligations. This scheme will make available up to RM9.6 billion annually for the purchase of houses.