Friday, October 7, 2011

A "sweet" Budget 2012

I will say this, Najib is nimble.

Big Dog has declared it an Election Budget. I am in agreement. The Budget contains a lot of sweets for many categories of Malaysians; from the civil servants to parents.

The fact that the "kaya" of goodies is spread quite thin must surely be because Treasury is mindful that one of the greatest concerns of financial observers, local and international, is the fiscal deficit. Well, the deficit is not expected to increase in spite of the goodies. In this sense, Najib is nimble.

Neither corporate tax nor personal income tax was touched. This, to me, is a prelude to the expected rollout of the GST after GE13. In this sense, Treasury has to hold the keel steady until more revenues can be extracted from the Malaysian economy when GST is rolled out.

Real Property Gains Tax

The part I quite like is the tweaking of the Real Property Gains Tax. From next year, anyone who buys a piece of property and flips it within 2 years must pay 10% of any gains. If he or she sells the property between 3 to 5 years later, the tax is 5% on any gains. There is no RPGT if the property is sold more than 5 years later.

I like it because a reversion to the much earlier 3-tier structure where the top RPGT rate was 30% is likely to have created a bubble-bursting effect (yes, I believe there is a bubble or, if you like understatement, then, "excessive frothiness" might be a substitute phrase). 

So, this is an attempt to effect a controlled release of air from the property bubble. 

Liberalisation of 17 services subsectors

An interesting matter is that among the 17 sub-sectors that will be liberalised include private hospital services, medical and dental specialist services, architectural, engineering, accounting and taxation, legal services, courier services, education and training services, as well as telecommunication services.

The one subsector that stands out is legal services. This is one sector that has been cloistered forever. The  other one is architecture. These 2 service areas will see major structural changes.

I foresee that the immediate impact is not so much that a lot of foreign lawyers will literally parachute into Malaysia so much as foreign law and architectural brands will become more prominent. They will hire lots of Malaysians and a sprinkling of expat (remember, there's still the issue of work permits...aha!!!).

I see this as a good thing because the work processes for the legal and architecture professions will be immeasurably improved over time.

No, I don't see the loss of too much market share by local players to foreign service providers because, from my observation, foreign service providers are mainly interested to handle international work entering Malaysia in the form of foreign investments, direct or indirect. And, they are also interested in doing work for Malaysian companies investing or exporting overseas. This is their cachet...the international reach. 

Malaysian-based clients can't afford to pay these international firms anyway!

The accounting firms won't feel a thing with this liberalisation because Malaysian accounting firms from Tier-1 to Tier-3 are already under foreign brands and varying legal ownership structures.

Anyway, this move has been a long time coming. Some say, it's overdue.

To borrow Stan Lee's expression, "Nuff said".

1 comment:

Raison D'etre said...

"excessive frothiness". Nice one.

Too bad about the budget though. Once again, we Mid Rangers are very much forgotten. So sad.