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This is a few months late. When the government tabled the new budget for 2007 a few months back, I knew that something was going to be ammended with regard to the tax rebate on computers. I later found out that they made the following changes:

Needless to say, it ruffled some of my feathers. It ruffled PIKOM’s feathers as well. The article explained in brief my own sentiments about how the new tax relief only benefited those from the higher income bracket. While the old rebates never benefited the low wage earners who don’t fall within taxable income either, the new tax relief is WORSE!

As a general rule, tax rebates and reliefs are liability entries in the government’s account books. It directly affects the gross income taken in by the government from taxes. The difference is that rebates are applied after the tax is levied (i.e. you get your money back) while relief is applied before the taxes is calculated (e.g. you take it out of your taxable income).

Previously, the tax rebates for computers benefited everyone in the same manner. The reason being that you would get a RM500 deduction when you bought a computer regardless of its price. For example, if you bought an approved PC for RM500, and your annual tax was RM500, you would be paying zero (0) tax (or in other words getting a free machine).

With the new tax relief for computers, the higher the price tag on the computer and the higher your income bracket (higher tax %), the more you profit. I personally believe this is nonsense as those in the higher income brackets don’t really need the tax relief while those of the lower tax brackets wouldn’t get shit out of the relief since their tax % is minimal and they wouldn’t be able to afford the higher end computers in the first place. IMHO, the scales should be inversely proportional.

At the end of the day, the only ones that gain from the relief scheme are those earning an above average income (upper middle class and upwards), and the government. While they’ll tell you that the scales are fair and that they won’t profit from it, the truth is that the government will lose less and have more in their coffers because they end up paying less in the form of fixed cost rebates to the low wage group.

The problem with tax relief is that it benefits those who earn more. The problem with current tax rebate is it only benefits those with taxable income. If you were taxable for less than RM500, the government isn’t going to pay you back the extras. So if you were taxable for RM0, you gained nothing.

But if they revamped the rebate system such that they payed you back the difference on computer purchases regardless of your taxable income, then it’s a different ball park. That being the case, the rebate is on the computer unit purchased instead of taxes payed. If you payed RM1000 for a PC and they payed you back RM500, then you essentially purchased the machine for RM500. Which makes a whole lot more sense. It would encourage the purchase of computers (even low end entry level machines which costs about RM1000 nowadays), and REALLY increase PC penetration.

So what if they reduced the waiting period between tax relief claims for computer purchases? The majority rarely ever buy new computers every three years. The point of the matter is that the current scheme isn’t really targeted at promoting anything. It’s just a freebie hand out to the masses that is not really a freebie handout. A placebo if you will, trying to convince the people that the government is doing their homework and fixing some things, when the fix they are applying isn’t really doing anything effective at all. But then again, this is just one small minute section of the Budget 2007 that is really of concern once every three years…