As the country emerges from its deepest recession since independence, Malaysia's Budget 2000 announced on 29th October, 1999, emphasises expansionary policies to sustain continuing growth as we move into the New Millennium.

After six quarters of depressed economic conditions since the third quarter of 1997, the Budget position remains admirably healthy to allow for reflationary measures to spur private investment and consumption spending.

With a stronger 7.2% growth in the second half of 1999, GDP is expected to grow 4.3% overall this year.

In line with the improved performance in the major economic sectors, the manufacturing sector is expected to grow by 8.9%, agriculture sector 4.6%, services sector 2.4% while the construction sector will contract at 3.6% weighed down by existing excess capacity. Export value has increased by 23.1% for the period January to August 1999. Even with import values increasing, the Budget reports a trade surplus for 22 consecutive months up to August this year. Up to 28th October, 1999, external reserves have increased significantly to US$30.2 billion.

The Budget Strategy focuses on:

  1. continuing the recovery through revitalising economic growth to a level consistent with the growth potential of the nation;

  2. strengthening further the competitiveness and resilience of the nation to external risks;

  3. transforming services into a lead economic growth sector in addition to strengthening the development of the agriculture sector;

  4. developing the human resource in respect of their skills and knowledge; and

  5. extending social programmes and programmes for the well-being of the people and environmental preservation.

As expected, there are tax benefits to the individual taxpayer like the 1% reduction in tax rate, increased personal relief, new deduction for annuity premium and increased deduction for medical and education insurance premiums. There is the well-received exemption of interest income from loan growth and deduction of interest-in-suspense for financial institutions, deduction of expenses incurred in debt restructuring schemes, tax incentives for stockbroking firms mergers, etc. The Budget is business friendly aimed at revitalising economic growth through stimulating private sector activities.

The Update is divided into two main parts. The first covers the 2000 Budget tax proposals and the second, other recent tax and investment developments.

The first part is based on the Income Tax (Amendment) (No. 2) Bill 1999, the 2000 Budget Speech and other indirect tax instruments. The proposed changes herein are subject to enactment.

As this publication has been prepared for clients and associates by way of general information, further details may be required. Readers are kindly advised to consult us at any of our offices shown on the back cover before acting on any material contained in this publication.

Kassim Chan Tax Services Sdn Bhd
Deloitte Touche Tohmatsu Tax Services Sdn Bhd

29th October 1999


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