Prime Minister Najib Tun Razak had announced in Budget 2013 that Real Property Gain Tax will increase from 10 to 15 for the investors who dispose their property within two year and 10% will be charged for those who dispose their property in two to five year (TheStar, 2012a). The purposed of increased the tax rate is to curb speculation and ensure the houses is at affordable price. By doing so, government may assist low income earner who wanted to buy house with reasonable price and these can also avoid unfairness to the poor. In contrast, James Wong from real estate firm mentioned that, increase of RPGT is unnecessary as there is a slowdown situation facing by real estate market. Government also aim to increase the revenue by increasing RPGT, however, some critics claimed that it would not make any difference as most of the investor does not sell off their property within two year. Also, most construction project usually took more than two year and these do not affect investor decision (TheStar, 2012b). Besides, President of (CAP) SM Mohamed Idris argued that, the increase rate of RPGT does not give impact as the loans from banks are still cheap (FMT news, 2012). This suggests the revenue of the country may not be having any changes even though there are increases in RPGT.
On the other hand, when it does not curb speculation, the houses will then become more and more expensive. The potential increase of price will induce developers to build more houses. This will caused negative impact to lower income earners as they could not afford to buy high price house and may result in renting houses from others. This can create imbalance between poor and rich in the country because most of the lower income earners hold lesser opportunities to own a house. This can be proved in the research done by Bakhtyar et.al (2009) who found that numerous lower income residents are paying high rental for inferior house. Some argue that lower income earners could probably enjoy the affordable houses launched by government. However, there are insufficient affordable houses although there will be RM1.9billion allocate by government for building 123,000 affordable houses (TheStar, 2012a). This is due to the reason of demand exceed supply; deliver of housing units is inadequate as most of the nation are facing with receiving low income (Yong et.al, 2012).
Personal Income Tax
To minimize cost of living and enhance the disposable income of the nation, government proposed in budget 2013 and mentioned that there would be 1% deduction in personal income tax for chargeable income below RM50,000 (KPMG, 2012). This reduction of tax rate indicates that government has the intention to let nation relief from tax burden, especially middle-income population. When there are reduce in personal income tax rate, nation will have more money to spend and these will bring them to have private consumption. Individual spending could enhance country growth as economics team from MARC Alias, Hussein and Mohamad (2012) stated that in the past 6 year, 3.1% has contributed by consumer spending to the economy's growth. Besides, it can be said that disposable income drives up consumer demand subsequently enhance country's growth. When consumers start spending, businesses will thereafter increase their sales and pay more taxes; it will then follow by the increasing in country's revenue.
Government Revenue Breakdown
Source: Teo (2012)
Graph above showed the government revenue breakdown. Teo (2012) predict that the highest increase of revenue would be personal income tax in 2013 as there will be increase of 9.5% of revenue from personal income tax where it increases from RM 25.67 billion to RM35.67 billion.
Other than that, with the 1% of tax deduction, middle class earners who earn between RM6000 to RM7000 benefit the most (Aruna, 2012). This indicates the motive will be able to advantage majority as most of the nations are in the category. Around RM1000 will be able to save by them while compared with those who have higher income. This had matched with the canon of equality principle where high income populations deserve to pay more taxes than lower income population because they have been protect by government authorities to earn higher income. Also, 170000 of taxpayer were removed from the taxpayer's list which shows the advantages to the nations (The Malay Mail, 2012). Another impact of deducting personal income tax is encourage talented nation to stay at Malaysia instead of migrating to the country that offer them with greater disposable income due to the broader tax bands. Reducing personal income tax may probably assist in eliminating the brain-drain consequence (TheStar, 2012c). Although the 1% of personal income tax is just little, it might be helpful in preventing nations move to other country unknowingly.
In a nutshell, the increase of 5% in RPGT will not able to solve speculation problem as it will only give a small effect to the speculator. National House Buyers Association (HBA) suggested that RPGT should hike to 30% for those who sell their property within two years to curb the excessive speculation (Huong, 2012). Nevertheless, government should consider other reason as economy of collection in canon of taxation mentioned that taxes should not be expensive and discourage business; government should be able to measure the outcome and come out with a perfect tax rate. For personal income tax, the deduction of 1% is an advantage to the taxpayer and also country. It is a great incentive that enables to help nations in rising their cost of living and thus economy growth.
