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Group Assignment FIN533 full report latest

Personal Financial Planning (Universiti Teknologi MARA)

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PERSONAL FINANCIAL PLANNING

(FIN533)

GROUP ASSIGNMENT

ACADEMIC SESSION: MARCH 2022

PREPARED FOR:
DR NORLIZA CHE YAHYA

PREPARED BY:
1 MOHD AIMAN FAWWAZ BIN MOHD MALIKI 2017155277
2 AHMAD SHAHRUL BIN AHAMAD SHUKRE 2018630658
MUHAMAD FAKHRULLAH BIN MUHAMAD
3 2017303507
BAKRI
4 AZNEIL IZAIDY BIN AZAHAR 2019819832
SHARIFAH NUR HIDAYAH BINTI SYED
5 2021271124
ISMAIL

NBI4A

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ACKNOWLEDGEMENT

First and foremost, we like to express our gratitude to the Almighty God for
providing us with the strength and blessings necessary to achieve this mission.
Without His approval, we would not have made it this far.

Moreover, I want to express my gratitude to my Personal Financial Planning

(FIN533) lecturer, Dr. Norliza Binti Che Yahya, for the guidance and encouragement
in this group project. She had been given the guideline for conducting research for this
report. So, without her, we cannot successfully finish this assessment.

Not forget our group members; we would also like to thank our team for
providing all the information and resources for the project. This assignment cannot be
completed without effort from our group members, consisting, of Mohd Aiman
Fawwaz, Ahmad Shahrul, Muhamad Fakhrullah, Azneil Izaidy and Sharifah Nur
Hidayah. We always work hard to produce a good assignment with total commitment
and responsibility.

Last but not least, we want to thank our lovely parents and family for giving us
moral support, and because of them, we get the strength to spend time getting the
information and working hard to finish the task assigned to us. They always give us
super strong support from the s. Wet we are here until now whenever we are in the
process of finishing our assignment.

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SUMMARY

Taxation refers to the levies and financial duties that a government imposes on
its citizens. Almost every country in the world collects income taxes. Taxation, on the
other hand, applies to all mandatory levies paid, including income, corporate, property,
capital gains, sales, and inheritance. Taxation is compulsory. As a result, in order to
implement successful taxation, the government may resort to using force and threats.
Levies derived from taxation are not tied to any specific service delivery and are legally
recognised because the compelling establishment is a government authority rather
than a private institution. Taxation procedures differ depending on governing
structures and time periods. Taxation is also applied to physical assets and specific
contracts, such as business transactions, in modern times. However, political forces
have a large influence on modern tax systems.

Retirement planning establishes retirement income goals as well as the actions

and decisions required to meet those goals. Retirement planning entails identifying
sources of income, estimating spending, putting a savings strategy in place, and
managing assets and risk. Future cash flows are anticipated to determine whether or
not the retirement income goal will be met. Retirement planning should ideally be a
lifelong process. You can begin at any time, but it works best if you incorporate it into
your financial planning from the start.

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TABLE OF CONTENTS

NO CONTENT PAGE NUMBER

1. Title Page 1

2. Acknowledgment 2

3. Summary 3

4. Table of content 4

5. Introduction
• Background 5-7
• Purpose 8

6. Importance 9 - 11

7. Current issues 12 - 14

8.. Statistical information 15 - 17

9. Conclusion 18

10. Recommendations 19 - 22

11. References 23

12. Appendices 24-25

13 Infographic 26-27

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INTRODUCTION

BACKGROUND

Taxation

In almost every country, taxation is used to fund government activities. According to

the International Centre for Tax and Development (ICTD), tax revenues account for 80 percent
of total government funding in half of the world's countries. Governments can raise taxation
levels by changing taxation rules and expanding tax bases.

The revenue generated is mostly used to benefit taxpayers, which means that the
specific benefit obtained is independent of the individual contribution. There are few
exceptions, such as payroll taxes, when the taxpayer benefits directly from medical coverage
and retirement benefits.

The systems of taxation varies substantially between developing and developed

countries. Because of efficient taxation compliance processes and effective tax collecting
methods, developed countries collect more tax income than developing countries.

However, both of these elements are directly influenced by the political system's
competence. In general, wealthy countries rely more heavily on income taxation to generate
the majority of their national production than emerging countries, which rely largely on
consumption and trade taxes.

Types of taxation

1. Income taxes
Income taxes are levies levied on an individual's overall financial income, which
includes earnings, investments, and salaries. Most income taxes rise in tandem with
the taxpayer's earnings. This indicates that those with higher incomes pay more
taxes than those with lower incomes. This is also known as progressive taxes.
2. Corporate Taxes
Corporate income tax is imposed on business profits. The burden of corporation tax
is borne by the business, its customers, and its employees through raising prices and
paying low wages. Most countries levy a corporate tax rate of less than 30% to
stimulate economic growth.
3. Payroll Taxes
Payroll taxes are levies levied on employee earnings to pay social security funds.
Normally, the payroll tax amount is withdrawn from the employee's earnings and paid
by the employer on their behalf.

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4. Capital Gain Taxes

Capital gains taxes are levied on capital assets, which include personal property and
investments such as stocks, residences, bonds, automobiles, and jewellery. Capital
gain occurs when the value of an asset grows, such as rising stock prices.
As a result, when an individual profits from a capital gain, tax is levied on the profit.
5. Property Taxes
Property taxes are often levied on tangible assets such as land and buildings. They
are the principal source of revenue for municipal and state governments. Property
levies make for more than 70% of local tax revenues. Property taxes fund critical
public services including fire departments, schools, roads, security, and emergency
medical care.

Classes of Taxes

1) Direct Taxes
Individuals are exposed to direct taxes based on their net wealth, expenditure, or
personal net income. Net worth taxes are levied on the taxpayer's assets minus total
obligations, whereas expenditure taxes are levied on income that is not directed to
savings.
2) Indirect Taxes
Indirect taxes are levied on transactions such as imports and exports, as well as the
manufacture and consumption of products and services. Value-added taxes, legal
transaction taxes, manufacturing taxes, and customs taxes on import charges are
some examples.

Retirement planning

Retirement planning is analysing the different choices you may make today to help
provide for your financial future. You must forecast your future economic situations in order to
make sound decisions. Retirement planning means preparing for life after a paid working time

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ends, both financially and in other respects. Non-financial factors include lifestyle decisions
such as how to spend time during retirement, where to live, when to stop working fully, and so
on. A comprehensive retirement plan takes into account all aspects equally.

The Employees Provident Fund (EPF) reiterates its commitment to assisting members
in rebuilding their retirement income sufficiency and supports the cessation of any further
withdrawals of EPF investments under the i-Citra plan for individuals in order to protect people'
retirement future. The EPF is, first and foremost, a retirement fund tasked with protecting
members' savings for future retirement needs and well-being. The EPF, which has been in
operation since 1951, is administered by the EPF Act 1991, which states that Account 1 (70
percent of savings) is intended for retirement, while Account 2 (30 percent of savings) is
intended for discretionary withdrawals aimed at assuring a better retirement in the future.
However, there is no provision in the act that allows withdrawals in the event of a natural
disaster. The unprecedented scale and impact of the COVID-19 pandemic, as well as recent
natural disasters, have strained the country's current social protection, and the approach of
using EPF savings for emergency needs will almost certainly have a severe impact, as
members face very low savings in their retirement years, compounded by other uncertainties
such as rising healthcare costs. As the country's economy recovers and more people return
to work, the priority now is to strengthen and rebuild EPF savings. The EPF's objective now is
to continue to safeguard members' investments in accordance with its mandate, and to return
members to recovering and rebuilding their retirement savings to guarantee they may retire in
dignity.

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PURPOSE

This purpose study that our group choose is taxation and retire planning. This is
because we will involve in taxation and retire planning in our life. In order to collect
income tax is levied on the earnings of any individual, including corporations, that are
generated in Malaysia or received in Malaysia from outside Malaysia. Any non-
resident corporation that receives revenue in Malaysia that is generated outside the
country is free from income tax as of the year of assessment (YA) 2004. Assessments
are based on the current year's income, and Inland Revenue Board of Malaysia
(IRBM) currently uses the Self-Assessment System (SAS). SAS requires taxpayers to
be truthful in their income declarations and to determine their own taxable income.
Taxpayers now bear the brunt of the burden for dealing with tax issues. In order to
accurately and timely estimate their tax burden, they must possess significant tax
expertise.

There is a slew of other reasons why people put off saving for their golden years. Even
while most Malaysians understand the need of financial planning, most are unaware
of the numerous advantages it offers.

In addition, we used to simply plan for 15 to 20 years of retirement when it came to

financial planning. Today, it's becoming increasingly usual to live into your 90s. To
retire at 60, you'll need to budget for three decades of savings. According to the
Malaysian Department of Statistics, 60-year-old men and women should expect to live
an additional 18 and 21 years, respectively, according to the department. The number
of people in their 60s and older is also rising. Estimates for 2020 place the number of
persons in this demographic at 3.5 million, or 10.7 percent of the total.

To conclude, taxation and retirement planning are critical, and we need to be more
vigilant. This is due to the fact that Malaysia's economy will affect our tax rate. As part
of our retirement planning, we should carefully consider any loans we take out to
acquire homes or to take on more debt. Even if we've already retired, we'll have to
deal with this issue for a long time because we didn't prepare ahead.

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IMPORTANCE OF TAXATION

Malaysia, like many other countries, has its own system of taxation. All taxpayers in
Malaysia are subject to a self-assessment tax system that is based on the current tax
year. Taxes apply to all money earned in, derived from, or sent to Malaysia. Any
person (other than a resident corporation engaged in banking, insurance or sea and
air transportation) whose income is sourced outside Malaysia and received in Malaysia
is not subject to taxation. The fact that Malaysia has many double tax treaties available
to prevent double taxation is noteworthy.

When governments need to raise money for their budget, they levy fees and taxes on
their residents and enterprises. Financial support for public works and a business-
friendly environment are all part of this effort to boost the economy.

Governments would be unable to address the needs of their populations if they did not
collect tax revenue. To fund social programmes, the government collects and uses
taxes. Included in the list of projects are:

Health

It would be difficult for the government to make health sector contributions without
taxes. Social health care, medical research, and social security are all funded by taxes.

Education

One of the most deserving uses of public funds is education. Human capital
development is a top priority for governments, and education plays a critical role. The
public education system receives a portion of the money it collects from taxes.

Governance

For a country's affairs to function smoothly, good governance is a need. As a result of

poor administration, the economy of the entire country would suffer greatly. Proper
administration guarantees that the funds gathered are put to good use for the country's
population. Additionally, this money is used to pay for public officials including police
officers, members of parliament, and the postal service. There is no way to effectively
safeguard the public interest without a properly functioning system of government.

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Development of infrastructure, transportation, and housing are all critical areas as well.
In addition to social programmes, governments utilise tax money to finance critical
areas like as security, scientific research, environmental preservation, and so forth.

Funding initiatives such as pensions, unemployment compensation, and childcare

subsidies is also a part of the government's overall budget Without taxes, the
government would not be able to raise the funds needed to carry out these kinds of
programmes.

A portion of the money is also used to pay for programmes like pensions and
unemployment compensation. It would be hard for governments to raise funds for
these kinds of initiatives if they didn't impose taxes.

Businesses

Infrastructure such as roads, telephones, and electricity are all necessary for a
country's economy to thrive. There is a strong government presence in the
development of this infrastructure. When governments gather tax revenue, they use it
to fund infrastructure improvements, which in turn boosts the economy.

Because governments may utilise the money, they raise through taxes to fuel the
economy, taxation is vital to companies as well.

Increasing a country's level of living is made possible in part by the collection of taxes.
In general, those who have a better quality of life tend to consume more. When there
is a need for a company's goods and services, it thrives. Businesses may be certain
that domestic consumption will rise because of a better standard of living. Taxes are
necessary, and every person should be able to take use of the money they pay in.
When taxpayers don't pay their taxes, the government isn't only grabbing money from
them; it's also stealing from them in the long run.

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IMPORTANCE OF RETIREMENT PLANNING

Planning for retirement involves identifying desired levels of income in retirement and
taking the required steps and decisions to get there. Identification of income sources,
estimation of expenditures, implementation of a savings strategy, and management of
assets and risk are all part of retirement planning. To see if the retirement income goal
can be met, future cash flows are forecasted.

There is the importance of retirement planning:

Medical Emergencies

Getting older and having health issues are inseparable. As a person ages, he or she
faces more health-related issues and emergencies. Thus, post-retirement medical
costs might have a significant impact on one's income. Medical or health insurance
policies may not pay for all of a patient's medical costs. As a result, with the right
retirement strategy, you may amass sufficient assets to cover any medical expenses
that may arise after retirement.

Inflation

The rising cost of goods and services is what is meant by the term "inflation." Given
that inflation is on the rise, even a seemingly insignificant influence in the short term
might have significant ramifications over the course of many years. There will be a rise
in the cost of everything from groceries to lodging to medical care in the future because
of this. As a result, when planning for retirement, one may consider this element and
build a sufficient retirement fund in order to enjoy a stress-free life.

Deal with Uncertainties

To put it another way, adequate retirement planning is essential. After retirement, a

person may face any emergency or uncertainty with confidence if they have the
greatest retirement plan in place. In addition, they can provide the financial security of
their loved ones.

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CURRENT ISSUES – TAXATION

31,000 tax evaders are identified by Inland Revenue Board of Malaysia (FMT, 2022).
The Inland Revenue Board (LHDN) has determined that there are 31,598 entities,
including people, firms, corporations, and other types of organisations, that have not
yet declared their revenue. According to LHDN, these entities, which comprise
approximately 24,000 persons, were identified based on their ownership of assets as
well as their potential to arrange loans and securities with a value of RM500,000 or
more.

It is predicted that the government has lost a total of RM665 million in revenue due to
unpaid taxes. If prompt action is not taken to handle this considerable amount, it may
have a negative influence on the economic stability of the country. The organisation
suggested to all 31,598 entities, especially the 23,751 people, that they voluntarily
present themselves at the LHDN branches that are closest to them to register their
income tax files and disclose their income. From the 15th of June through the 15th of
July in 2022, the tax evaders will be allowed a grace period of one month.

Those individuals who had failed to submit their tax declaration forms within the
allotted time frame would be subject to civil and criminal inquiries, as well as audits by
the relevant tax authority, after the grace period comes to an end. Because of the
criminal investigations, allegations of tax evasion would be brought before the court
under the Income Tax Act of 1967.

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CURRENT ISSUES – RETIREMENT PLANNING

For the previous two years, Malaysians have been able to take money out of their EPF
accounts at various times. A total of RM101 billion was taken out by 7.4 million
members under the i-Lestari, i-Sinar, and i-Citra programmes. Because of this, the
EPF estimates that there are presently 6.1 million members with savings totaling less
than RM 10,000, with 79% of them having savings totaling less than RM 1,000 as a
result. Even though 28 percent of Filipinos had essential funds in their EPF accounts
before to Covid, the epidemic has simply made the situation worse (Hussain, 2022).

Large segments of the population are not saving enough money at this time, which
shows how unequal income is distributed. Ben Bernanke invented the term "savings
glut" in 2005 to describe the phenomenon of high-income savers holding onto their
money rather than spending or investing it. Savings would eventually become more
than the amount of money required to keep the economy moving, resulting in a savings
glut.

According to Credit Suisse's estimates, Malaysia's total wealth to GDP ratio would be
1.87 by the end of 2020, which is a result of a disproportionate supply of savings by
people in the upper income brackets. A bleak image of inequality is painted as well,
since the typical household's wealth is just a third of the country's average wealth per
adult. This is further supported by EPF statistics, which shows that less than 0.5% of
members have more than RM1 million in EPF savings, which is equivalent to the
combined savings of the poorest 50% of members.

Statistics show that there is an excess of savings compared to the amount of money
needed to generate economic activity, suggesting that there might be a savings glut.
The valuation of financial and non-financial assets would rise out of proportion to
productivity as the savings of the wealthy continued to rise. Consequently, the gap
between the rich and the poor will continue to widen, as the wealth gains will not lead
to further economic activity that would allow lower-income individuals to participate in
the economy.

Since income inequality tends to rise after economic shocks, the gap is likely to grow
much more in the post-pandemic era. Due to a steady rise in the number of high-

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earners over the years, the income distribution in Malaysia appears to follow a power-
law pattern for the higher tails. The inequality in wealth accumulation, especially
among the top 10% of income earners, is a prevalent issue in many nations and is not
unique to Malaysia. According to historical data, the country's GDP growth is mostly
driven by the country's wealthiest 10%. However, this difference has mainly
contributed to the current catastrophe resulting from the epidemic. Those who are self-
employed or work in the informal sector have been exposed to the absence of social
support in dealing with economic crises.

In the short term, it would be better to use disaster relief funds directly instead of taking
money from retirement savings. By 2030, Malaysia is expected to become an ageing
nation and its lack of reserves for the golden years would lead to a bigger fiscal burden
in terms of healthcare expenditures and income security. More than 600,000
Malaysian homes would fall below the poverty line by the end of 2020 since the poverty
threshold has been lowered from RM 2,208 to RM 2,208 per household, which means
more than half of Malaysia's population will fall below the poverty level. In the next five
to ten years, the government will have to think about providing social security for
persons in this cohort who are retiring and need it. Non-contributory pensions are
appropriate for this.

More urgent is the need to help individuals with low incomes bridge the retirement and
pension gap in the long run. For example, Nobel Prize winner Abhijit Banerjee's
research reveals that a one-time injection of cash and consumer support over a
lengthy period promotes higher social mobility and increases productivity rather than
the assumption that it leads to sloth.

As a result, the next generation of individuals getting the boost will have higher
prospects for education and better jobs in the future. The boost, on the other hand,
must be a significant one, accompanied by further assistance in the form of education
about money management and other life skills.

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STATISTICAL INFORMATION

i) Taxation

Based on articles of the selected current issues, The Inland Revenue Board (LHDN)
has determined that there are 31,598 entities, including people, firms, corporations,
and other types of organisations, that have not yet declared their revenue. The
organisation suggested to all 31,598 entities, especially the 23,751 people which
recorded at 75.2%, that they voluntarily present themselves at the LHDN branches
that are closest to them to register their income tax files and disclose their income.

Entities Evade Paying Tax

7,847
(24.8%)

People
23,751
Other entities
(75.2%)

Figure 1: Entities Evade Paying Tax

31,000 tax evaders are identified by Inland Revenue Board of Malaysia (FMT, 2022).
According to LHDN, these entities, which comprise approximately 24,000 persons,
were identified based on their ownership of assets as well as their potential to arrange
loans and securities with a value of RM500,000 or more.

It is predicted that the government has lost a total of RM665 million in revenue due to
unpaid taxes. If prompt action is not taken to handle this considerable amount, it may
have a negative influence on the economic stability of the country. From the 15th of
June through the 15th of July in 2022, the tax evaders will be allowed a grace period
of one month.

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ii) Retirement Planning

Based on official website of EPF, almost 14 million contributes to EPF. It9s stated that
7.4 million members which are 53% involved under withdrawal programmes to
withdraw that is more than a half of the member. Meanwhile, almost 6.6 million not
withdraw following the i-Lestari, i-Sinar, and i-Citra programmes.

EPF's Member Withdraw

Following Programmes

6.6 million 7.4 million

(47%) Withdraw
(53%)
Not Withdraw

Figure 2: EPF’s Member Withdraw Following Programmes

From 7.4 million EPF9s members that choose to withdraw through this programmes,
the majority that recorded 4.8 million members at 65% had their account balances
below than RM1,000. Other than that, both category of the members withdrawing
those have more than RM10,000 and range between RM1,000 to RM10,000 each at
17.5% with the total of 2.6 million members.

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Total of Withdrawing Members Based

On Account Balance

1.3
million More than RM10,000
(17.5%)
1.3 Between RM1,000 to
million
4.8 million RM10,000
(17.5%)
(65%)
Below than RM10,000

Figure 3: Total of withdrawing members based on account balance

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CONCLUSION

We have to relate our retirement planning with our commitment in taxation in order to
minimize tax in retirement. When we retire, our income usually flows from 3 possible
sources, either from our social security benefits, individual retirement accounts (e.g.:
EPF) and retirement plans, and funds from other savings and other investments. We
have to make a brilliant step in order to retire without heavy burden from the taxation
itself.

Retirement comes with several financial risks. Here are some of the biggest risks
retirees face.

1. Health care costs – medicare may not cover all your health expenses
2. Market volatility – adding more bonds at the end of career should help reduce
market volatility
3. Inflation – even have a lot of money in cash, and living in fixed income, inflation
may threaten to erode your standard of living year after year.
4. Running out of money – try overcome in delaying Social Security payments and
buying an annuity.
5. Death of Spouse – harder to pay bills, reduce pensions benefits.

Personal income taxes are a high-cost way of collecting revenue – It is very damaging
to have high rates of tax and it is also very damaging to have a tax bias against savings
and investment. Unfortunately, a personal income tax is the usual way that politicians
impose these two indicators of bad tax policy. Jurisdictions such as Hong Kong show
it is possible to have a sensible income tax based on a low rate and no double taxation,
but it is far more likely that a personal income tax will be a vehicle for destructive policy.

Personal income taxes discourage people from earning and reporting income by
driving a wedge between pre-tax income and post-tax consumption. There is
considerable recognition that tax rates discourage output and undermine
competitiveness. However, many government officials do not understand that
economic harm grows exponentially as tax rates increase. This also means that high
tax rates impose enormous damage, not only to economic performance, but also can
backfire on governments by generating less revenue.

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RECOMMENDATION ON TAXATION

The Malaysian Institute of Certified Public Accountants (MICPA) on their 2021 journal,
proposed out with several recommendation for individual income tax in a way to move
forward to Malaysian tax system. Their president, Dr Veerinderjeet Singh said that
Malaysian Tax System has to-date seen some progress, albeit not at the desired
speed nor completeness in certain areas of tax reform. It is time for the government
introduced structured approach in reforming the Malaysian tax system which can lead
to desired outcome to most taxpayers including foreign direct investors that are looking
for business bases in our region.

These are several proposals that they think the government should be consider of:

1. Tax Relief targeted for B40 and M40 groups

The Government should not only maintain the existing relief but should also
consider increasing the relief for EPF & life insurance premiums. This can be
done by simply maintaining the existing combined relief of RM 7,000 for
EPF/approved scheme (currently restricted to RM 4,000) and life insurance
premiums (currently restricted to RM 3,000), by removing the restriction on the
respective category of RM 3,000 and RM 4,000. With a gross salary of RM
3,050 per month, the EPF contribution would be RM 335 (11%) x 12 = RM
4,020. An income of up to RM 4,849 per month falls under the B40 group. EPF
contribution is compulsory whereas contributing RM 3 000 per year for life
insurance may not be affordable to B40 and the lower range of M40 group (RM
4,850 – RM10,959).
2. Review rates for M40 groups
Lower the tax rate by 1-2% points for those earning an annual chargeable
income of between RM70,001 and RM100,000 can be done to increase the
disposable income of M40 groups, as well as broadening the income brackets
and reducing the number of bands.
Increase tax relief for individual and lifestyle too. Say, RM10,000 and RM3,000
respectively from RM9,000 and RM2,500 currently. This may help to improve
consumers9 sentiment and restore their purchasing power.
3. Exemption from filing Income Tax returns for Senior Citizens (70 years and
above) who only have Malaysia sources pension and interest income

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Hope that government may exempt senior citizens income in a financial year.
They should not file income tax returns (ITR) anymore as their receipts from
pension and interest received from money deposited in all approved institutions
are tax-exempted.
4. Simplification of Personal Relief
The IRB has listed 17 personal relief that a resident individual may claim in the
filing of Income Tax Return Form for YA 2020. So based on that, it is proposed
that the number of reliefs need to be reduced. The proposed deductions may
fall into 2 categories:
• Category 1 Personal relief: individual – single RM15,000; married or
divorced and paying alimony RM30,000; if handicapped, additional
RM10,000; with child/children, additional RM10,000.
• Category 2 (with statements/receipts): a maximum of RM 20,000 to
cover all categories that have an element of savings – National
Education Savings Scheme, life insurance/employee provident fund,
medical/education insurance, private retirement scheme/deferred
annuity and contribution to SOCSO.

5. Tax deduction for Donations to charitable organizations

The restriction under Section 44(6) of the Income Tax Act 1967 that presently
allowed companies and individual to claim deduction of 10% of their aggregate
income has impact on the total amounts of donations that the private sectors /
individuals wish to make for charitable purposes. The government should
consider removing the limitations to claim for donations made to charitable
organisations. Government also needs to consolidate the granting of charitable
status to various organisations to curtail possible abuse. All institutions which
are entitled to claim charitable status must also maintain proper financial
documents, perhaps, charitable status for income tax purposes should be
limited to a fixed period of 10 years to enable the institution to build its reserves
through fund-raising and after that, they could apply for an extension of another
10 years.

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RECOMMENDATION ON RETIREMENT PLANNING

Generally, there are 2 types of fundamental retirement plan for the Malaysian
workforce, EPF and pension scheme for a government servant. Now we all knew that
these plans alone will not be enough. It is because we live longer, we have a longer
lifespan than ever before due to medical and technology advancements. Second, the
inflation. Cost of living goes higher, year by year, and so does your day-to-day
expenditure, healthcare cost, children education cost and so on.

This is a very common issue because now we realized that we may not have
enough savings for our golden age when we9re about to retire. (That would be a little
too late.) Worse still, escalating costs of children private education can easily drain our
savings, especially for those who have two to three children. So we have to

Start saving for your future self the moment you start earning an income, no
matter how small the amount. If not now, then when? Stay investing in the stock
market regardless of the bull or bear market with a time frame of 20-30 years. (Invest
for long term)

Researching and educating yourself to invest in a solid and quality investments

(Whether it9s stock or unit trust) is a MUST before making such a decision to avoid
scams.

Channel 30% of your gross income into a pension fund (mandatory 11%+ additional
19%). Of course, the quantum very much depends on your age, financial commitment
or desirable retirement lifestyle.

Always prioritize not to lose your hard-earned money. For example, choosing a
regulated investment, diversify into different asset classes, and set your own
investment criteria, discipline, and strategy, and stick to it (If it works) no matter what.

Take action to maximize your retirement savings while you are young and fit to actively
earn income, make time and compound interest your best friend as money-making
leverage for you.

• Key actions that you can start taking are:

• Setting up an emergency fund
• Paying off debts

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• Get sufficient insurance protection (trust me, medical inflation over 10% will
wipe off your savings in months)
• Maintain a healthy lifestyle.

Make efforts to improve your medical conditions if you are Obese, Overweight or Pre-
diabetes. These health situations are reversible and would save on your future medical
bills. Diversify your investment portfolio, consider alternatives to EPF.

Some strategies that we can take to make it happen are:

• Track and reduce your spending.

• Increase savings
• Create a second and third streams of income.
• Delay in retirement.
• Look for investment products that match your risk-return profile as well as being
highly liquid with low or zero tax applicable.
• Simple investments with low capital outlay are his favourite.

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References
FMT. (2022). 31,000 Possible Tax Evaders Identified. Free Malaysia Today.

Hussain, H. I. (2022). EPF Withdrawals - The Problem of Income Inequality. The Sun.

KWSP. (2022). Organisation Structure. https://www.kwsp.gov.my/about-epf/corporate-

profile/organisation-structure

Julaina Baistaman, Zainudin Awang, Wan Masnieza Wan Mustapha (10 December 2019)
Financial Retirement Planning In Malaysia:A Conceptual Model.
http://www.ijmtbr.com/PDF/IJMTBR-2019-10-12-07.pdf

theedgemarkets.com (2 November 2020) Addressing concerns about retirement planning.

https://www.theedgemarkets.com/content/advertise/addressing-concerns-about-retirement-
planning

Juliana Mohd Abdul KADIR, Saunah ZAINON, Rina Fadhilah ISMAIL, Siti Noor Ain AZIZ,
Ahmad 8Afi Izzuddin AMRAN (2020) Retirement Planning and its Impact on Working
Individuals. https://ejmcm.com/pdf_3874_e380785274ec0504f09c0ca557e16d25.html

Apoorva, 17 June (2022), Retirement Planning, https://cleartax.in/g/terms/retirement-

planning#:~:text=Introduction,and%20managing%20assets%20and%20risk.

CFI Team, 26 March (2021), Taxation,

https://corporatefinanceinstitute.com/resources/knowledge/finance/taxation/

MICPA MALAYSIA – The Way Forward For Malaysian Tax System

https://www2.deloitte.com/content/dam/Deloitte/my/Documents/tax/my-the-way-forward-for-
the-malaysian-tax-system.pdf

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Appendix

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INFOGRAPHIC

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