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Budget 2008 is indeed an election budget. What I really like is that all dividends will be tax-exempted. This will benefit all and sundry. Those in the high income group and those who never claim back the tax deducted from their dividends are the ones to benefit most.
Stamp duties for properties transferred to one's spouse are also exempted. It would be much more commendable if this is extended to the children as well.
Overall, the budget is an excellent one; in fact, the best I know of, so far.
Three cheers to that.
Saturday, September 08, 2007
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25 comments:
yea, good, don't forget to look at the part where they raise the current minimum brokerage from RM12 to RM40
Actually I thought it was a rather imprudent budget.
Corporate tax further cut - this may look good but actually, where would the govt get the money from?
GST perhaps. But then it would burden the people more when it is implemented.
Competitiveness would not be enhanced when GST comes into the picture.
We re at the peak or peaking times of the economy. A master strategist would not do such imprudent move. In times of war, prepare for peace. In times of peace, prepare for war, Sun Tzu Art of War.
When recession comes, which it would eventually - its the normal economy cycle, the government would be hard pressed for cash. The people would be burdened with GST. This would be further compounded with inflation (hopefully not hyper inflation mode), when the Govt decides to take the easy way out to print more ringgit - further devaluing the currency which would not be spared in the recession.
Property prices are peaking and when the crash comes, nobody would be looking to buy. The incentives, I doubt would do much to allay the situation.
Overall, this is a budget which I dislike. A budget which is very much shortermism. A budget which will have much averse impact in the long term timeframe.
ben, u sure the 1 tier tax credit regime (i.e. tax free dividend) is good? the tax free dividend may sound good, but it may not for pensioners. also... u said it's best for ppl who never claim back the tax deducted... i beg to differ.
The minimum brokerage charge raised to 40 from 12 is really something from the blues.
This will be a severe blow to the small time retailers. To and fro, the cost will be more than 80 plus when we add in the stamp duties and clearing fees. Contra players and retail traders will be the hardest hit. There is no way they can make money with these overhead charges. So unless you can raise your stake a bit higher, better stay away to avoid the disadvantage.
For internet trading and cash upfront transaction, the fee is now negotiable. Those who have the cash should definitely go for it. In the long term, plenty can be saved.
The budget may not be prudent because it gives out too much goodies as pointed out by Max. I disagree. In fact, I think our corporate tax is still on the high side. China is now at 25%; France 20%; Netherlands 25.5%; Hong Kong and Singapore are in their mid-teens or below 20%. Goods and services tax (GST) are not mentioned in this budget. So we can only assume.
For the first time, Chinese nationals from mainland China will be allowed to invest in Hong Kong in about 2 months’ time. When this happen, Hong Kong will be flooded with cash. This is likely to cause a spillover and some of this money will come to us. Together with oil money from the Middle East and the enthusiasm of our government to develop the Iskandar Development Region (IDR), there is bound to be a boom here in the foreseeable future.
The price of our land, presently, is extremely low when we compare it to Singapore or Hong Kong. This is bound to change when the development of the IDR shifted gears. My opinion is that we are at the threshold of escalating land prices. Keck Seng has 10,000 acres of land in Johore. I think some of them are at or near the IDR. These lands are much more valuable than their book value.
I can’t see why tax-free dividends are not good. Perhaps, Zewt has a different story. Over to you, Zewt; care to share with us your point of view?
GST is not an assumption, it is a deduction. Haha. The gov will implement it. And the intention has already been announced. Question is only when, not if it would or not be implemented.
Another reason which I missed out is the EPF withdrawal... when recession comes.... imagine how hard it will hit us.
Sigh...
singapore company tax (about 18% for year of assessment 2008) is lower than us, but the same time employers have to pay higher CPF (i.e our EPF) for their employees:
Let's look at their 07 budget on CPF.. "Raising the Employer CPF Rate
To help the majority of Singaporeans save more for their future needs, the employer component of CPF contribution rates will be increased by 1.5% from 1 July 2007." to about 14.5%.
I think the kiasuland's way is a better one... and max, me too, sigh...
Looks like so far, the budget sent all the accountants sighing. Hahaha
Malaysian Govt is dynamic and creative. Living up to the Malaysia Boleh values, I am confident that things can and will be changed to suit the reality as time progress. There is nothing fixed for many years to come. I am least bothered and concern over every little things. I can them as they come. There is nothing to prevent any amendments later on. Bean counters? Will continue to count everything that is their mindset...pity
Which is why Bolehland remains Bolehland... hahaha... and you ll need to change the mindset of accountants = bean counters. Thats 20 years ago. Do keep up with times yeah :)
well, most pensioners rely on tax refund from dividends to survive... cos dividend carries a tax credit and pensioners, being exempted from paying tax... are able to get a refund from the tax credit. with exempt dividend... no refund available.
i will be doing more reading on this and will be attending some conferences next week. will have a better picture then.
one thing i heard... the guidelines per the finance bill is very confusing... as alway.
The day when bean counters can count the number of fruits in the durian seed that will be the day the bean counters has kept with time Otherwise they can only count durians....and they have been counting durians since they are trained taught condition to counts durian from day one and that will be forever..cant change the mindset of bean counters even they decided to quit the industry. I have yet to meet a bean counter that has transform. or maybe that is how bean counters keep up with time.
Hahaha, perhaps your horizons are limited. Hahahaa... today not only finance/accounts people but all departments are aligning with each other and the corporate objective as a whole - we call it being a business partner. Very much unlike 20 years ago. Hahahaha. But oh well, can't help it if people refuses to see the light right?
Its like trading a little. It takes time until people see the value of emotional control, discipline etc.
So, haha, take your time, then keep up with the times. Kekekeke
Two men look out from the same window. One sees the stars; the other sees the grass.
Good or bad, it really comes from the angle you take your vision.
If your daddy gives you too much goodies, don't blame him if you put on weight.
You really have to be fully responsible for your own action.
EPF withdrawal to pay for house loan installment is allowed but is not compulsory. You should take action only when it benefits you.
Pensioners are not immune to tax. So,like everybody, they should also benefit when the dividends they received are tax-exempted.
Ben,
I have put up a more detailed analysis on the exempt dividend issue in my blog, in case you wanna know.
Thanks, Zewt, I shall look into it.
Ben,
You got me wrong... when i gave the 100 / 27 / 73 example... i am talking about percentage of profits.
to put it simply...100% of profits will be divided as 27% tax (paid to govt) and 73% goes to retain earning, from which dividends are paid.
so i may be talking about 73... but the actual amount could be 100, 1000, 1500, 20000, 500000.... what i am trying to say that the net dividend represents 73% of of the gross dividend... and with the new rule... the 27% tax portion is no longer refundable... because the 73% is declared as tax exempt.
i went to tax conference today and my analysis has been confirmed by consulting firms.
Zewt,
If you don't mind, I need further clarification.
Let's say a company made a profit of 1000 and wish to distribute 500 as dividend and retain 500 in the company. Presently we are under the Dividend Imputation System which means,in this case, 500 will be taxed at corporate rate and 500 at shareholders rate. If the shareholders who are entitled to a claim-back did not do so, who benefits; the Government or the Company? If it's the Government, then it does not affect the company at all. Right?
In 2008, we will switch to the One-tier Corporate System which is quite straight forward. If the company made 1000, the tax is 260 and the balance of 740 belongs to the company. Out of this 740, the company can distribute all or part of it as tax-free dividend. What really matters to the minority shareholders is how much will be paid out to them.
Ben,
If a company makes 1000 profit, the company MUST pay corporate tax for all 1000... currently 27%, means 270. Left with distributable reserves in the form of retained earnings of 730.
Under imputation system... say the company pay 500 out of the 730 retained earnings... this 500 will be franked with tax credits. 500 is net and as such being grossed up to 635 (500 net dividend + 185 tax). When this reaches the hands of the shareholder, and if the shareholder's tax is say... 10%. He will only have to pay 10% on 635, i.e 63.5 only. The additional tax paid earlier of 121.5(185 - 63.5)... will be refunded.
under the new 1 tier system. If a company wishes to pay 500 out of the 730 retained earnings... it will be paid as 500 tax free dividends. no matter what tax rate the shareholder belongs to... he will not get a refund.
the difference comes in the potential refund to ppl with low tax bracket, or ppl with zero tax bracket such as pensioners. pensioners will have full refund of tax paid under the old system. under the new one... none.
Zewt,
Thanks for the explanation.
But you have not answered my question of who benefits when people who have the potentials to claim back did not do so. Is it the Government or the Company?
Your answer will oblige.
The refund comes from the government. When refund is no longer applicable... who benefits?
Zewt,
A senior accountant told me that if a company made 1000 and distributed all the 1000 as dividends and assuming that all those who received the dividends are not taxable and therefore can claim back in full, then the Government, in this case, did not get anything. Is he correct?
In the single-tier system, the Government will tax according to the rate of the corporate on the profit and thereafter whether the balance is retained or paid out as dividend is not of concern to it (the Government) any more.
that 1000, is it pre-taxed or post tax?
The 1000 is before any corporate tax.
When the Company pays the dividend it has to retain the franking credit which presently is at 27%. Right?
ben, do drop me a mail at zewtness(at)gmail.com
zewt,
I have no wish to discuss the subject further.Someday if we happen to meet, we shall talk about it.
Thanks anyway.
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