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20.
The Government has also allowed contributors to the
Employees Provident Fund (EPF) to make withdrawals for
the purchase of computers for the use of their
children in institutions of
higher learning and schools. Some contributors,
however, have abused this facility. The Government is,
however, confident that there are still many among
rakyat who wish to be in the mainstream
of ICT development. I, therefore, propose that all
contributors are also allowed to make withdrawals for
the purchase of computers for their own use. In
addition, I propose the following measures:
i. new computers given by companies to their
employees, which are presently deemed as benefit in
kind, be exempted from income tax while such expenses
incurred by the company be allowed as tax
deductions;
ii. Government employees be allowed to apply for a
computer loan once every five years; and
iii. contributions in cash and in kind to projects
promoting ICT culture be allowed as tax deductions.
21. To supplement the above efforts, the Government
will provide tax incentives to nurture and cultivate
the reading habit, which is the basis for ensuring the
continued acquisition of knowledge in any society.
Therefore, I propose that an income tax relief of 500
ringgit per annum be given to individuals for the
purchase of books, including school textbooks.
Developing the Information Communications Technology
Industry and Venture Capital
22. Emphasis on ICT will be continued as ICT-based
applications are necessary to enhance the nation’s
productivity and competitiveness. The development of
infrastructure in MSC marked
the beginning of these initiatives. We need to review
the overall implementation of MSC. In addition, the
Multimedia Development Corporation (MDC) has been
entrusted with ensuring that the
integration of various MSC flagship applications is
implemented efficiently and effectively. In this
regard, MDC will be further strengthened with new
expertise while opportunities will be given to
the younger generation who are more ICT-savvy and have
strong inclinations towards ICT revolution. MDC must
strive to attract world-class ICT companies, which
will be a pull factor in attracting other ICT
companies.
23. The Government is aware of the important role of
venture capital as an alternative source of capital
financing, particularly for ICT. I, therefore,
announce the establishment of another Venture Capital
Fund totalling 500 million ringgit. To ensure that the
Fund is fully utilised, the Government is prepared to
outsource the management of the Fund. The Government
recognises that there are high risks associated with
the venture capital industry. As such, the Government
is prepared to assist
business angels in investing equity in capital
start-ups. For this purpose, I propose that
investments in venture companies at start-up, seed
capital and first stage financing be given deductions
equivalent to the amount invested against the
statutory incomes of the investing companies. However,
to prevent abuse of this incentive, the investor is
only allowed to divest his shares in the venture
company after it has been listed.
24. In addition, an agency to coordinate the national
development of venture capital will be established
under the Ministry of Finance. This agency will act as
a one-stop agency and
be responsible for ensuring that the venture capital
industry develops and expands more efficiently and
effectively. This agency will formulate, coordinate
and monitor all policies, strategies and
incentives as well as supervise the development of the
venture capital industry. To facilitate the access of
venture capital companies to the capital market,
several listing requirements on
MESDAQ will be liberalised, including reducing the
requirement that 70 per cent of the listing proceeds
be used in Malaysia.
Research
and Development
25. To support Government
efforts in developing venture capital and ICT, the
Government will broaden the scope of research under
the Intensification of Research in Priority Areas (IRPA)
to venture capital companies interested in carrying
out research and development (R&D) in MSC and
other places approved by the Government. Under the
Pre-Packaged Incentives, the Government has mandated
that one per cent of total annual sales be allocated
for R&D. If the company is unable to fully utilise
the allocation, the balance will be transferred into
the IRPA fund. In this context, R&D efforts are
not necessarily confined to research work in new areas
but also encompass work on upgrading, enhancing and
adapting existing technologies. Where necessary, the
Government is prepared to acquire new technologies
through the acquisition of equity in foreign
companies. Towards this end, the Government will
provide sufficient allocation for the purpose of
acquiring technology and commercialising new
technology. To create support services as well as
R&D work for high technology industries, the
Government will allocate a sum of 16.7 million ringgit
to equip the Tecno Centre in the Kulim Hi-Tech Park.
Pre-Packaged Incentives
26. In efforts to accelerate
growth and further strengthen economic fundamentals,
private investment will be encouraged in line with the
objective of making the private sector the engine of
growth. In this respect, the Government will continue
to provide the Pre-Packaged Incentives to attract
greater domestic and foreign investment. Thus, the
Government welcomes proposals from all sectors for
consideration for this special incentive. Besides, I
propose that the incentive scheme for reinvestment be
enhanced by providing Accelerated Capital Allowance on
reinvestments in promoted activities on the expiry of
Reinvestment Allowance. I further propose that tax
incentives for promoted areas, expiring at the end of
this year, be extended to end- December 2005.
Therefore, projects located in the Eastern Corridor of
the Peninsular, Sabah and Sarawak will continue to
enjoy better tax incentives.
Increasing Domestic Consumption
27. The Government will
continue to increase domestic demand, in
particular private consumption to generate growth. As
ameasure to further increase disposable income and
encourage consumption, I propose that individual
taxpayers from the low and middle-income groups be
given a higher tax rebate. With effect from the year
of assessment 2001, current tax rebates given to
individuals will be increased from 110 ringgit to 350
ringgit. The rebate for the wife is also increased
from 60 ringgit to 350 ringgit. The eligible taxable
income bracket for this rebate is also increased from
10 thousand ringgit to 35 thousand ringgit. This would
benefit 1.23 million taxpayers. However, it would also
reduce Government revenue by approximately 434 million
ringgit. I hope that taxpayers will utilise this tax
rebate to spend wisely to improve their quality of
life while contributing to economic growth. The
Government will continue to implement a low-tax regime
to encourage domestic consumption as well as enhance
the nation’s competitiveness.
SECOND: IMPLEMENTING STRATEGIC
INITIATIVES TO
ENHANCE THE NATION’S
COMPETITIVENESS
28. The global economy has
evolved to become more sophisticated and competitive
in recent years. The implementation of Vision 2020 was
somewhat interrupted during the past two years of the
crisis. I would like to stress, however, that our
Vision remains unchanged. We have to review, however,
the implementation strategies to take into account
these new changes. As such, in this Budget, I would
like to introduce several strategic initiatives that
will propel the nation towards achieving Vision 2020.
Among others, we will have to give a new perspective
to the concept of strategic partnerships, the role of
FDI and the development of the capital market. We also
need to adopt strategic initiatives to enable Malaysia
to become a hub for production, distribution and
transshipment in the era of AFTA and WTO.
Strategic Partnerships and FDI
29. The role of FDI
should not be confined only to increasing the
nation’s stock of capital. We also want FDI to play
a role in increasing the nation’s competitiveness as
well as positioning it in the international value
chain. Apart from expanding production capacity,
we must also encourage foreign companies to invest in
human capital and undertake technology transfer.
30.
We continue to welcome the presence and participation
of foreign investors not only in production but also
strategic alliances in sectors such as ICT, energy,
ports and the financial sector. As such, foreign
investment participation is allowed through smart
partnerships not only by way of foreign equity
holdings but also at the management level. The
Government has also allowed foreign equity
participation in the nation’s airline as well as the
national car industry.
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