LOWERING the rate of employees’ contribution to the Employees Provident Fund (EPF) temporarily is part of the Government’s bag of tricks to rouse the economy.
This time around, an employee can reduce his EPF contribution from 11% of his salary to 8% for two years from Jan 1. The idea is to boost private consumption by putting more money in workers’ pockets.
Unlike the last two occasions, the next rate cut will be on a voluntary basis. The Government has estimated that RM4.8bil a year will be freed up for spending in the economy if all EPF contributors opt for the rate cut.
We are clear about the argument that increasing workers’ disposable income is good for the economy.
BUT THE REAL QUESTION IS..."IS THE EPF CUT GOOD FOR THE WORKERS?!?"
The EPF has often said that for most workers, their savings are already insufficient to see them comfortably through their old age. There will even be less available when the contributions are reduced. Taking into consideration that at retirement age, the worker will find it more difficult to get a job, it is better that he tries to manage with the present take home pay than to have less savings upon retirement.
Considering the cost of living has gone up and our purchasing power has been significantly reduced in recent times, there is little this magical three percentage points can do for the individual per se.
And the most important thing is......... there is now a tax-free limit on EPF savings and insurance premiums amounting to RM8,000. If, by reducing our contributions, we go below the limit, it can also have implications on our tax bracket.
This means while it may look like we may have extra disposable income from the EPF cuts......what actually may happen is that the govt will take back the extra income through taxing back your higher disposable income!!!
(Mark my words! Lets see if the govt will raise income tax rate next year!)
QUESTION OF THE DAY!
Is the goverment being sneaky about this lower EPF scheme!
(source Malaysiakini and TheStar)
This time around, an employee can reduce his EPF contribution from 11% of his salary to 8% for two years from Jan 1. The idea is to boost private consumption by putting more money in workers’ pockets.
Unlike the last two occasions, the next rate cut will be on a voluntary basis. The Government has estimated that RM4.8bil a year will be freed up for spending in the economy if all EPF contributors opt for the rate cut.
We are clear about the argument that increasing workers’ disposable income is good for the economy.
BUT THE REAL QUESTION IS..."IS THE EPF CUT GOOD FOR THE WORKERS?!?"
The EPF has often said that for most workers, their savings are already insufficient to see them comfortably through their old age. There will even be less available when the contributions are reduced. Taking into consideration that at retirement age, the worker will find it more difficult to get a job, it is better that he tries to manage with the present take home pay than to have less savings upon retirement.
Considering the cost of living has gone up and our purchasing power has been significantly reduced in recent times, there is little this magical three percentage points can do for the individual per se.
And the most important thing is......... there is now a tax-free limit on EPF savings and insurance premiums amounting to RM8,000. If, by reducing our contributions, we go below the limit, it can also have implications on our tax bracket.
This means while it may look like we may have extra disposable income from the EPF cuts......what actually may happen is that the govt will take back the extra income through taxing back your higher disposable income!!!
(Mark my words! Lets see if the govt will raise income tax rate next year!)
QUESTION OF THE DAY!
Is the goverment being sneaky about this lower EPF scheme!
(source Malaysiakini and TheStar)
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