Govt needs to expedite the convergence of marginal tax rate

KUALA LUMPUR, Sept 10 (Bernama) -- The Federation of Malaysian Manufacturers (FMM) has called on the government to expedite the convergence of marginal tax rate to 25 percent to avoid the setting up of personal companies.FMM president Tan Sri Yong Poh Kon said the gap between personal tax and corporate tax would encourage individuals to create "creative accounting" which would not do any good to the country."Don't let the citizens do all sorts of funny things," he said when participating in a Post-Budget Panel Discussion here today.When tabling the 2008 Budget last Friday, Prime Minister Datuk Seri Abdullah Ahmad Badawi announced a further corporate tax cut to 25 percent in 2009. This is said to have been a surprise to many who were expecting a reduction in personal income tax instead.The current personal income tax rate is 27 percent.Yong said the current tax bands were also narrow and tax payers would hit the maximum tax band very fast.A Finance Ministry official who attended the forum said the government would look into the tax matter.Another panelist at the forum, Prof Dr Norma Mansor, a dean with University Malaya's Faculty of Economics & Administration, said the government needs to look into the current tax regime as the high rate presently was unattractive to draw knowledge workers.On the implementation of the GST (good and services tax), a Finance Ministry official said the government has yet to decide the time for its implementation.The official said the government was working with the private sector for the implementation."It (GST) is still on the table," she said.On the manufacturing sector, Yong said the important issue now was to improve efficiency through curbing rising costs of doing business amid intense competition.Another area of concern was the availability of natural gas at stable prices to enhance the manufacturing sector's cost competitiveness, he said.FMM noted that manufactured exports are estimated to grow only by 2.1 percent this year, a significant drop from the 10.1 percent growth in 2006.