THE MALAYSIAN RESERVE. 16TH OCTOBER: The property sector was touted to be the biggest disappointment following the lack of fresh initiatives to reduce property prices and improve housing affordability for the M40 group, while the raise in service tax implies that the cost of construction will be passed down to purchasers, said Apex Research.
“With no new measures in the revision of Windfall Profit Levy, the plantation sector will continue its uphill battle with the rising cost of production,” it said in a note released today (OCt 16) on the proposed federal government Budget 2024,
It has maintained its 2023F and 2024F year-end target for FBM KLCI at 1,497 and 1,547, respectively, based on assigned 15x and 14x price-to-earnings ratios (PERs).
Apex Research said the surprise from the proposed hike of service tax to 8% under Budget 2024 may contribute to some negative impact on Malaysian equities today.
“Given that there was little to offer under the Budget 2024 as the government tightens its grip in the fiscal space, we reckon that near term upsides are now off the table. Meanwhile, we opine that investors will also take this opportunity to lock in recent profits,” said Apex Research in a note released today (Oct 16).
The research house noted that in bid to boost government revenue collection, services tax (excluding food & beverage and telecommunication) will increase to 8.0%, from the current 6.0%, and will include logistics, brokerages, underwriting and karaoke services.
Several taxes were also introduced including (i) capital gains tax at 10% and on unlisted shares and (ii) luxury tax (exempted for foreign tourists) on certain high value goods at 5%-10%, such as jewellery and watches, based on the threshold value of the goods to support the Federal government’s revenue collection which is expected to grow 1.5% YoY to RM307.6 billion.
Meanwhile, the global minimum tax is expected to only take place in 2025.
“Although the introduction of new taxes may tighten the belts that are aimed towards the T20 group, we gather that RM58.1 billion is allocated for various social welfare initiatives, including subsidies, incentives and assistance, with 50.0% of the allocation for controlling prices of goods and services.
“Additionally, cash handout under Sumbangan Tunai Rahmah (STR) will increase from RM8.0 billion to RM10.0 billion, while targeted subsidies will be implemented in phases. All in, the additional subsidies mainly aimed towards B40 and certain groups in M40 will serve as a progressive fiscal policy to address the wealth gap and reduce poverty in the nation,” it said.