Income tax cuts in Budget 2015?

comments     Stephanie Jacob     Published     Updated

KINIBIZ The federal budget (Budget 2015) is likely to focus on tax levels, in line with the goods and services tax which comes into effect in April 2015. This may include cuts to income and corporate tax rates.

Kenanga Research said that it expects the goods and services tax (GST) to remain in the limelight in Budget 2015 with the government expected to iron out the final details before its implementation in April 2015.

Impact from the GST is expected to result in moderate to sharply slower growth for at least two quarters after GST comes into effect. However there should be a gradual rebound by the end of 2015, as businesses and consumers adjust to the new system, said the research house.

The GST is expected to add around RM2.5 billion to government coffers in its first year, and this could help the government achieve its 2015 deficit target of 3 percent of gross domestic product (GDP – goods and services produced).

But Kenanga added that hitting the target will also depend on prudent operating expenditure.

Overall the research house said it expects the fiscal deficit to fall to 3.3 percent of GDP and for GDP to come in at 5.1 percent higher next year.

The government is likely to implement measures aimed at increasing disposable income to boost private consumption, particularly in the wake of GST.

One such way would be a reduction of the individual income tax rate.

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