TAX AND INVESTMENT UPDATE OCTOBER 2000 Table of Contents INTRODUCTION After 2 years, Malaysia's economic growth has resumed. The focus of the 2001 Budget underscores the need to ensure sustained growth and to identify new growth initiatives as we continue with our plans to achieve developed nation status. In an effort to stimulate the nation's economic growth, the Budget emphasises certain new growth sectors which characterise the economy of the 21st century. Amongst those identified for significant allocation of resources for the development of the K-economy are information and communications technology and venture capital. Tax and non-tax incentives have been proposed to ensure accelerated growth in these sectors. The nation's future growth being spearheaded by knowledge-based industries will demand a constant supply of skilled world-class workforce. To this end, incentives have been proposed to encourage Malaysians working abroad to return. With the resumed economic recovery, GDP growth for 2000 is revised upward to 7.5%. Inflation continues to be subdued with per capita income increasing to RM12,883 exceeding that before the economic crisis. The major sectors in 2001 are projected to strengthen - the manufacturing sector expected to grow by 12%, services sector 5.2% and construction 5.5%. Balance of payment is expected to remain favourable with the current account surplus at RM29.8 billion. The Budget outlined 5 main strategies :- i. stimulating economic growth; ii. identifying new growth sectors; iii. continuing fiscal and monetary policies to support growth; iv. strengthening the nation's competitiveness; and v. enhancing the quality of life of the rakyat. This is again a people's budget, putting more disposable income in their pockets in a move to boost domestic consumption. Individual taxpayers, especially those in the lower income group, will stand to gain from the higher tax rebate (though no reduction in personal tax), deduction for medical check-ups, purchase of books, etc. The Update is divided into 2 main parts. The first part covering the 2001 Budget tax proposals is based on the Finance (No. 2) Bill 2000, the 2001 Budget Speech and other indirect tax instruments. The second part covers other recent tax and investment developments. As this publication has been prepared for clients and associates by way of general information, further details may be required. Readers are kindly advised to consult us at +603-7725 1888, 7712 5100 before acting on any material contained in this publication. Deloitte KassimChan Tax Services Sdn Bhd Deloitte Touche Tohmatsu Tax Services Sdn Bhd Malaysia 27th October 2000 Deloitte KassimChan Tax Services Sdn Bhd and Deloitte Touche Tohmatsu Tax Services Sdn Bhd are member firms of Deloitte Touche Tohmatsu, one of the world's leading professional service firms, delivering world-class assurance and advisory, tax and consulting services. We serve multinational and large national enterprises, public institutions and tens of thousands of fast-growing small businesses worldwide. With more than 90,000 people in over 130 countries, our internationally experienced professionals deliver seamless, consistent services wherever our clients operate. In Asia-Pacific, our 900 partners and 13,300 staff provide client services in 25 countries and territories.