Malaysian employees will be contributing 3% less for their Employees Provident Fund (EPF) every month this year, Prime Minister Datuk Seri Najib Razak announced today when unveilling the revised Budget 2016.
He said the reduced contributions, starting in March, would boost spending by an estimated RM8 billion annually. However, employers would still have to pay the same rate in contributions, he said.
Malaysians earning RM8,000 and below will also receive a tax exemption of RM2,000 for the financial year of 2015, a move that would affect two million taxpayers.
"With this step, even though the government will lose revenue of RM350 million, it could result in individual tax savings of RM475 million.
"This good news will benefit a total of two million taxpayers," said Najib, in presenting the revised 2016 Budget, at the Putrajaya International Convention Centre (PICC), today.
Experts had expected a reduction in the EPF contribution in the budget review, saying such a move would allow consumers to help stimulate the already sluggish spending trend following the introduction of the goods and services tax (GST), the spiralling ringgit and low oil prices.
During Budget 2009, Putrajaya lowered the workers’ EPF contribution from 11% to 8% for two years, also meant to stimulate the economy.
Since the minimum retirement age had been increased from 55 to 60 in 2013, employed individuals up to 60 years old were to contribute 11% of their salaries, while employers were obligated to contribute 12% (for those earning above RM5,000) or 13% (for those earning RM5,000 and below).