Significant tax proposals announced in Budget 2017 are pegged to be targeted measures to aid small and medium enterprises (SMEs) towards transformative growth, although relief for individuals were not as great as anticipated.

KPMG Tax Services Sdn Bhd executive director Regina Lau said in the lead-up to the budget announcement,Prime Minister Datuk Seri Najib Tun Razak had expressed that the nation must embrace opportunities in information and communication technology, take advantage of science and technology transformation and move towards innovation and creativity to further strengthen the domestic economy.

"In fact, as SMEs form 97 per cent of all businesses in the country, expectations were that there would be targeted tax measures to support SMEs towards transformation by innovation to improve productivity and be globally competitive to support domestic growth" she told The Borneo Post over the weekend.

"The disappointment in the lack of these in the budget is somewhat made up by the proposal to reduce the income tax rate of SMEs by one per cent for the first RM500,000 of chargeable income.”

Meanwhile, Lau said non-SMEs have something to cheer for in the form of a tiered reduction in the income tax rate based on the percentage increase in their chargeable income over the immediately preceding year.

Non-SMEs will be looking at a tax reduction of one per cent for a minimum increase in chargeable income by five per cent to a tax reduction of four per cent for an increase in chargeable income by at least 20 per cent.

"Individuals however are greatly disappointed that their income tax rates remain status quo" she added.

"Many had hoped for some reduction since GST is now in full force. It is equally disappointing that some reliefs long overdue for review, such as that for EPF and life insurance premiums, remain status quo.

"While a new relief of up to RM2,500 is introduced for lifestyle, it is in fact a combination of the existing reliefs for purchase of reading materials, computer and sports equipment which total up to RM4,300 if one qualifies to claim for all the reliefs.

"Although the new relief means that the relief for purchase of computer is no longer restricted to once in every three years, still, in consolidating the three existing reliefs to one, effectively the amount that one can claim is reduced.

"As it seems that the lifestyle relief will only be given up to the actual amount incurred capped to a maximum of RM2,500, the government should consider giving it as a standard relief (like personal relief) without the need to substantiate the claim with invoices/official receipts.

"After all, the lifestyle expenses which the relief purports to cover are what one would actually spend on in this day and age. In addition, it will help reduce compliance costs for taxpayers.”

One notable proposal which helps working parents is the new tax relief of RM1,000 for enrolling their children aged up to six years old in registered preschools and nurseries, Lau noted.

"While we welcome the new tax relief of up to RM1,000 every 2 years for the purchase of breastfeeding equipment by mothers, more individuals especially in the M40 group would benefit if the government had chosen to revise the EPF/life insurance premiums relief instead.

"Generally, the budget isn't exciting for taxpayers. Granted, tax measures are but one component in measures to stimulate economic growth.

"With the dire lack of tax incentives in the budget towards this objective, we hope that the budget allocations for the various programmes to fill the gap will be utilised optimally and most importantly, for checks and measures to be in place on such utilisation.”