Tuesday, February 23, 2010

How to pay less personal tax

THE 2009 tax-filing season for individuals has arrived. For many of us, April 30 will be just another day (perhaps accompanied by scrambling for our just-in-time filing) to settle our dues with the Inland Revenue Board by submitting the Form e-BE and paying any balance tax.

Before clicking the button to complete the e-filing, take a second look at the figures keyed in. Is the amount of tax calculated the lowest it can be? Here are some tips on saving tax that would not get you in trouble with the law.

1. Know your income: What is taxable and what is not.

Gone are the days when you agonise over the delay in receiving your Form EA from your employer. It is now a law for employers to issue the Form EA to their employees no later than the end of February. The key point to note is not all income in your Form EA is taxable! Scrutinise all the items in Form EA to see if there is any which should be tax-free. For example:

Travelling allowances

If you receive travelling allowance, up to RM2,400 for your travels from home to office is tax-free. What this means is if you receive an allowance of RM12,000 for such travel, you can deduct RM2,400 and only RM9,600 is taxable. Further, travelling allowance of up to RM6,000 for official duties is tax-exempt.

Meal, parking and childcare allowances

Many employees receive these allowances, do you? You would be happy to know that you can enjoy such perks with no worries about paying tax thereon (up to RM2,400 in the case of childcare allowance).

2. Make the most of all tax-free benefits.

Medical benefits

Medical benefits for traditional medicine including ayurvedic, plus maternity benefits are also tax-free.

Interest subsidies

Your employer may have subsidised interest on your housing, car and education loans. In the past, these subsidies would be taxable on you. Now you would be glad to know such interest subsidies are tax-exempt (so long as the total loans do not exceed RM300,000).

Broadband and telephone benefits

Who can leave home without the iPhone, Blackberry or PDAs nowadays? Getting such a device from your employer plus reimbursement for broadband and telephone bills are tax-free. So take advantage and enjoy the latest gadgets and services.

3. Know your limits.

Just as in drinking and driving, stay within the limits to avoid any trouble or triggering tax.

If you have enjoyed any staff benefits like discounts on your company’s goods or services and kept within the RM1,000 a year limit, you should enjoy tax exemption thereon.

Did you receive a small token from your employer on your achievements in service excellence, innovation or productivity which brought on a smile? Don’t blame your employer if they kept the awards below RM2,000 as no tax should be levied on you. Neither is the award for your long service with the company (for more than 10 years) forgotten. As long as your employer kept the value of all awards to you within the RM2,000 limit, the smile should remain on you.

4. Look for more tax-free income.

Bank interest income

You will note a subtle difference in your bank statement nowadays as it no longer shows the amount of tax withheld. Bank interest income is now tax-exempt.


Dividends need not be entirely taxable. Have a good look at the dividend voucher. If it states that the dividend is “tax-exempt”, then it is not taxable anymore.

5. Gain more deductions.

Purchase of sports equipment

If the slimming fad has caught on with you, keep the receipts of your purchases of any sports equipment. A claim of up to RM300 is a small incentive to shape those curves and muscles in a big way!

Have receipts or evidence to support more deductions

Medical expenses for your parents certified by a medical practitioner (restricted to RM5,000);

Medical expenses for serious diseases for self, spouse or child (up to RM5,000), including a complete medical examination for self, spouse or child limited to RM500;

Basic supporting equipment for disabled self, spouse, child or parents (ceiling of RM5,000);

Disabled person (self) (RM6,000);

Disabled husband/wife (RM3,500);

Education fee (self) up to tertiary level for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications for a masters or doctorate level, undertaken for the purpose of acquiring any skill or qualification (limited to RM5,000);

Purchase of books/journals/magazines/similar publications for self, spouse or child (up to RM1,000);

Net deposit in National Education Savings Scheme (ceiling of RM3,000);

Purchase of personal computer for individual (maximum deduction of RM3,000 allowed once every three years);

Premiums on life insurance plus EPF and other approved fund contributions (subject to RM6,000 restriction);

Premiums for education or medical insurance (restricted to RM3,000);

Relief of up to RM10,000 on the housing loan interest paid (conditions apply);

Payment of alimony to former wife (maximum total deduction for wife and alimony payment is RM3,000);

Zakat other than monthly zakat deduction from salary; and

Fees/levy paid by a holder of an employment pass, visit pass (temporary employment) or work pass.

The rule of the “game” of keeping your tax liability to the minimum when preparing your tax return Form e-BE is to do it right within the law. For a start, make the website of the Inland Revenue Board, www.hasil.gov.my, one of your favourites from now until April 30 to access its easy to read guides. Happy e-filing!

Ang Weina is executive director and global employer services leader with the tax practice of Deloitte Malaysia.

Thursday, February 18, 2010

Oil rises above US$77 a barrel

NEW YORK: Energy prices ticked higher Wednesday after government reports showed gains in U.S. industrial production and new home building.

Benchmark oil for March delivery added 32 cents to settle at US$77.33 a barrel on the New York Mercantile Exchange. Prices rose as high as US$77.82 earlier in the day, the highest in two weeks.

Weak fuel consumption has kept oil and natural gas prices from rising higher during the past few months.

But reports by the Federal Reserve and the Commerce Department suggested that the U.S. may soon increase its appetite for petroleum.

A report on industrial production from the Federal Reserve showed gains in manufacturing, mining and utilities.

It was the first collective increase since August.

The Commerce Department said new home and apartment construction increased in January to the highest level in six months.

However, home construction may not hold at that rate as applications for building permits fell nearly 5 percent.

Uncertainty about the European economy pushed prices in different directions over the past few trading days.

After jumping nearly 4 percent on Tuesday, oil prices have mostly leveled off.

"The market seems to have priced in all the news, and it's waiting for the next story," analyst Phil Flynn said.

In other Nymex trading in March contracts, heating oil increased 1.04 cents to settle at $2.0067 a gallon, and gasoline rose 1.89 cents to settle at $2.0071 a gallon.

Natural gas gained 7.6 cents to settle at $5.386 per 1,000 cubic feet.

In London, Brent crude added 59 cents to settle at $76.27 a barrel on the ICE futures exchange. - AP

Monday, February 15, 2010

US debt will keep growing even with recovery

WASHINGTON (AP): It's bad enough that Greece's debt problems have rattled global financial markets. In the world's largest economic and military power, there's a far more serious debt dilemma.

For the U.S., the crushing weight of its debt threatens to overwhelm everything the federal government does, even in the short-term, best-case financial scenario - a full recovery and a return to prerecession employment levels.

The government already has made so many promises to so many expanding "mandatory" programs. Just keeping these commitments, without major changes in taxing and spending, will lead to deficits that cannot be sustained.

Take Social Security, Medicare and other benefits. Add in interest payments on a national debt that now exceeds $12.3 trillion. It all will gobble up 80 percent of all federal revenues by 2020, government economists project.

That doesn't leave room for much else. What's left is the entire rest of the government, including military and homeland security spending, which has been protected and nurtured by the White House and Congress, regardless of the party in power.

The U.S. debt crisis also raises the question of how long the world's leading power can remain its largest borrower.

Moody's Investors Service recently warned that Washington's credit rating could be in jeopardy if the nation's finances didn't improve.

Despite election-year political pressure from voters for lawmakers to restrain spending, some recent votes suggests that Congress, left to its own devices, probably isn't up to the task of trimming deficits.

Biofuel 'miracle crop' jatropha failing to deliver

A "miracle" plant, once thought to be as the answer to producing renewable biofuels on a vast scale, is driving thousands of farmers in the developing world into food poverty, a damning report concludes today.

Five years ago jatropha was hailed by investors and scientists as a breakthrough in the battle to find a biofuel alternative to fossil fuels that would not further impoverish developing countries by diverting resources away from food production.

Jatropha was said to be resistant to drought and pests and able could grow on land that was unsuitable for food production. But researchers have found that it has increased poverty in countries including India and Tanzania.

Millions of the plants have been grown in anticipation of rich returns, only for growers to be hit by poor yields, conflict over land and a lack of infrastructure to process the oil-rich seeds.

Oil giant BP, which planned to spend almost £32m ($NZ72m)on a joint venture to set up jatropha plantations, has now pulled out and the charity ActionAid today warns that jatropha needs to be cultivated on prime food-growing land to produce significant yields.

Meredith Alexander, head of trade at Actionaid and co-author of its "Meals per Gallon" report, said: "Jatropha is a real gold-rush crop, and the same amount of common sense that applies in a gold rush has been applied to the jatropha rush.

"Jatropha was the subject of an explosion of fabulous propaganda. But this was an untried crop at commercial levels and the many thousands of marginal farmers who have gone into production have been experimented on with disastrous results. They are simply not getting the income they were promised and now cannot afford food for their families," she said.

A native of central America, Jatropha curcus was brought to Europe in the 16th century and subsequently spread across Africa and Asia. Until recently, its few uses included a malaria treatment and an indigestion remedy.

But despite jatropha's much-lauded ability to grow where food crops cannot flourish, campaigners say there is evidence that commercially viable yields can only be obtained in fertile soil.

In India, forecasted annual yields of three to five tonnes of seeds per hectare have been scaled back to 1.8 to two tonnes.

Japan still world's No. 2 economy

TOKYO (AP): Japan is still the world's second-biggest economy as fourth-quarter growth beat expectations and kept the country just ahead of a surging China.

Real gross domestic product grew at an annual pace of 4.6 percent in the October-December period, the government said Monday. The average forecast of 15 economists polled by The Associated Press was annualized growth of 3.4 percent.

The results indicate that Japan continues to benefit from government stimulus measures around the world, which have bolstered global trade and persuaded Japanese households to boost spending.

GDP, or the total value of the nation's goods and services, has climbed for three straight quarters. The annualized figure corresponds to quarterly growth of 1.1 percent. Japan posted zero growth in the July-September quarter.

Japan's nominal GDP for the 2009 calendar year came to about $5.1 trillion. China said last month its domestic output totaled $4.9 trillion.

Government officials said they were encouraged by the latest numbers, particularly since it was the first time in seven quarters for domestic demand to push GDP higher. Consumer spending, which accounts for about 60 percent of the economy, rose 0.7 percent from the previous quarter as shoppers took advantage of incentives on cars and home appliances.

Companies are also gaining confidence and starting to invest in factories and equipment.

Japan may now be strong enough to avoid falling back into recession, said Cabinet official Keisuke Tsumura, according to Kyodo News agency.

Analysts agreed but predicted that consumer demand will decelerate, dragging growth in the months ahead and putting pressure on Prime Minister Yukio Hatoyama to draw up more stimulus measures.

"Policy benefits will fade in subsequent quarters and deflationary tendencies remain stubborn," said Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs.

Corporate capital spending climbed 1 percent in the first expansion since January-March 2008. Public investment fell 1.6 percent, while exports jumped 5 percent.

The fourth quarter figures cap a miserable economic year overall that sent Japan to its steepest recession since World War II.

GDP fell a record 5 percent in 2009, the Cabinet Office report said in its report.

Japan managed to hold on to its spot as the world's No. 2 economy, though analysts expect a quickly growing China to overtake it sometime this year.

But it is precisely the strength of China and other emerging markets in Asia that has lifted Japan from its downturn, helping to offset domestic risks such as deflation and falling wages.

Exports in December rose for the first time since the collapse of Lehman Brothers in late 2008, powering industrial production up 2.2 percent from the previous month.

Other major economies also face uncertainty ahead.

The U.S. economy expanded at an annual rate of 5.7 percent in the fourth quarter, but many analysts predict a slowdown this quarter as double-digit unemployment chills consumer spending.

The 16 countries that use the euro barely grew in the fourth quarter, as a modest recovery stalled amid turmoil in financially troubled members such as Greece and a flat performance from Germany, the biggest euro economy.

Sunday, February 14, 2010

China Increase Bank Reserves

CHINA raised the level of reserves banks must hold for the second time this year today, spooking financial markets on the eve of its New Year holiday by showing it was intent to curb lending and inflation.

Although investors had been expecting the People’s Bank of China to push the reserve requirement ratio higher after an increase last month, few thought the second rise would come so soon.

Markets were rattled by fears that monetary tightening in the world’s third-largest economy would be more aggressive than had been reckoned on, potentially denting global growth.

Investors pulled back from riskier assets, buoying the dollar. Stocks and oil fell, while European and US bonds jumped.

Analysts said the reserve requirement increase should not be construed as serious tightening, because it only goes some distance to mopping up cash injected in the economy before the Chinese New Year, a week-long holiday which begins tomorrow.

But that did not diminish the surprise, particularly since China yesterday had reported an unexpected slowdown in consumer price inflation in January to 1,5% from a year earlier.

The dip in inflation is likely to be temporary because of seasonal factors, but markets had still interpreted it as a sign that the central bank could proceed more gradually with tightening after last year’s ultra-loose pro-growth policies.

With the reserve requirement increase, China’s biggest banks will now have to put 16,5% of their deposits on hold at the central bank, crimping their ability to lend.

The 50 basis point rise, which comes into force on February 25 after the New Year’s holiday, will drain about 300bn yuan.

The Chinese economy remains awash in cash after a record surge of 9,6 trillion yuan in bank lending last year. On top of that, the central bank injected a net 604 billion yuan ($88,6bn) in open market operations over the past three weeks, and a raft of bills are due to mature in March.


Sunday, February 7, 2010

What Is A Good Company?

I like to keep things simple.
So when I look at a company, 5 characteristics that I focus on to determine a relatively safer company to invest in:

1. A Simple Business: The fewer things in motion, the fewer things that can go wrong. Businesses that focuses on maximizing profits from its core operations, rather than massive corporations that have many and often puzzling divisions, diluting efforts away from their strength and taking unnecessary risk into unfamiliar activities. Furthermore, they are easier to understand, and you should not invest in a company you cannot comprehend.

2. Steady Demand: Verify that there is constant and future demand for the product or service. Industries or sectors with recession-proof demand will enjoy consistent demand in good times and bad (eg. consumables, staples, food, utilities, alcohol, tobacco, health care). And especially businesses that have a competitive advantage, a niche, differentiating themselves from the competition.

3. Positive Cash Flow: Check the cash flow statement of the company. If a company is not generating cash each quarter, the only way to carry on operations are to borrow or tap into cash reserves. This is not sustainable over the long-term. Consistent positive cash flow is also a strong indication of profitability.

4. High Cash Balance: Cash is still king when it comes to business. It acts as an insurance against any unexpected slowdowns and gives the company the capital to seize opportunities quickly. It gives confidence that the company is liquid enough to meet short-term obligations.

5. Minimal Need for Credit: Companies that do not need to raise large amounts of capital through credit will be less prone to interest rate fluctuations. Companies with a reasonable, or low debt load also ensures that interest payments will be more manageable. It is also a measure of solvency, the ability of the company to meet long-term obligations.

Of course, as we all know a key factor to a good company is management. But how often do we have access to them and what they respond might not always be the whole truth. However, if the above characteristics are present, it shows the fundamentals of the company are sound and management are doing things right.

Thursday, February 4, 2010

New Zealanders Unemployment Rate Rose to 7.3%

Statistics NZ said the number of unemployed New Zealanders kept climbing during the December quarter, jumping 18,000 to reach 168,000. New Zealand, which recorded an unemployment rate of 7.3 per cent for the December quarter, is still not doing too badly when compared with the rest of the world. The Reserve Bank of New Zealand (RBNZ) was expecting an unemployment rate of 6.6 percent, while the market was expecting 6.8 percent.

The NZ dollar fell to a five month low of US69.60c from US70.80c just before the report. It was at US69.80c at 5pm from US71.06c at the same time yesterday. The higher than expected increase in unemployment means interest rates may remain lower for longer, which makes the NZ dollar less attractive to investors.

The Government says a leap in the population is behind unemployment levels reaching their highest level since 1999. The jump in the unemployment rate was largely due to an increase in the number of people entering the labour force but who were unable to find work. There were 341,300 visitors in December, the highest ever recorded in one month, and a 6 per cent increase over the previous record of 322,200 in December 2008.

Tuesday, February 2, 2010

May 20 Overhaul of Tax Sytem Possible

The budget will be delivered on May 20 but New Zealanders may get a better idea about the Government's plans for the tax system next week, Finance Minister Bill English said today.
"The Budget will be about taking action to grow the economy over the next five years and beyond," English said in a statement.

He said his second budget would focus on improving the economy, getting the Government's books back in shape and could also address changes to the tax system.
It recommended a package of changes including a land tax, changes to the treatment of rental properties, increasing GST and lowering tax rates.

"Some sectors will pick up faster than others, some businesses will do better than others, some people are going to be carrying the cost of the recession some time yet as they look for jobs and try to get their incomes up," Mr English said.

"It will build on the Government’s substantial economic programme last year and give businesses the confidence to invest and create jobs.

The budget would try and create broad-based recovery and "incentives for hard-working Kiwis to get ahead" as well as increasing savings and investment.

Wage and Benefit Growth Hits Historic Low


Wage and benefit costs, both before and after adjusting for inflation, grew more slowly in 2009 than in any year since the U.S. government began tracking data in 1982, as double-digit unemployment weakened workers' ability to command higher pay.

In the past 12 months, the cost of wages and benefits received by workers other than those employed by the federal government rose 1.5%, according to the Labor Department's employment cost index. In the same period, consumer prices rose 2.7%.

Adjusted for inflation, wages and benefits fell 1.3%, after rising 2.8% in 2008, the first year of the recession. The inflation-adjusted cost of wages and benefits at the end of 2009 stood just 1.1% higher than at the end of the previous recession in 2001, the Labor Department said.

The Employment Cost Index measures the cost of labor independent of the influence of changes in compensation caused when high-wage sectors grow more or less rapidly than low-wage sectors. Unlike widely cited data on wages, the index includes the cost of benefits, which account for about 30% of total compensation costs.

Before adjusting for inflation, the index rose 0.5% in the fourth quarter, slightly higher than the 0.4% increase in third quarter. "The weak labor market will help keep inflationary pressures benign," said economist Anika Khan of Wells Fargo Securities. "As such, the Federal Reserve continues to have the flexibility to keep short-term interest rates at the current level."

State and local government workers' compensation in 2009 grew 2.4%, twice the pace of the 1.2% increases in the private sector. State and local government employees' compensation has outpaced private-sector increases for the past few years.

Private employers' health-insurance costs rose 4.4% in 2009, after increasing 3.5% the year before. The 2009 increase, though, was the second-lowest rate of increase in more than a decade, according to the survey. The Labor Department noted that this reflects, in part, employers' reducing their contributions to employees' health insurance or switching to lower-cost health plans.