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Friday, 7 September 2007

Malaysia's Budget 2008 offered tax relief and plenty of incentives to promote Islamic finance in quest to be the top global Islamic banking centre

KUALA LUMPUR (Thomson Financial) - Malaysia has proposed a further cut in the corporate tax rate to 25 percent in 2009, surprising many who had been expecting a cut in personal tax instead. The government's 2008 budget offered tax relief and plenty of incentives to promote Islamic finance and further the country's position as the top global Islamic banking centre but disappointed the man on the street with a lack of populist measures. The government had been widely expected to present a people-friendly budget as it prepares to hold early elections at the end of this year or early next year. In the 2007 budget, the government announced a progressive cut in the corporate tax rate from 28 percent to 27 percent in 2007 and to 26 percent in 2008. There was no increase in tobacco or alcohol taxes, as widely expected. Prime Minister Abdullah Ahmad Badawi, who presented the budget speech, said in line with the objective of positioning Malaysia as the International Islamic Financial Centre, foreigners will be allowed to wholly own Islamic fund management companies. Islamic fund management companies will also be allowed to invest all their assets abroad. Pension fund, the Employees Provident Fund (EPF), will farm out 7 billion ringgit to be managed by Islamic fund management companies. Fund management companies will be given income tax exemption on all fees received for Islamic fund management activities, until year of assessment 2016, Abdullah said. 'It (the budget) does not feel like an election budget,' Rating Agency Malaysia Bhd chief economist Yeah Kim Leng told Thomson Financial. 'There had been widespread expectation of a cut in the personal income tax. So, that would be a major disappointment,' he said. He said quite a number of measures to boost the country's competitiveness had been announced during the year and the government's proposals today are merely to fine-tune what had been announced. He said the budget proposals appeared to have emphasised on the needs and social welfare of the lower income group. Abdullah proposed to increase the disabled workers monthly allowance to 300 ringgit from 200 ringgit. He also said the government will raise the allowance of the poor and needy senior citizens from 200 ringgit to 300 ringgit effective January 1. - (7 Sep 07)
Full text of PM's Budget 2008 speech
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