By now, I guess a lot of people should know that the direction from government to reduce employee contribution towards EPF to be reduced from 11% to 8% starting Jan 2009 to Dec 2010 for 24 mths period.
In fact, this is a SCAM. This policy is unfair to us as the labour in this country. Government is simply trying to rip off more tax money from the people. Let see the mathematics:
Assumption:
- you didn't buy any life insurance
Case 1:
Monthly salary: RM 3000
Annual salary: RM 36000 (Considering that you do not have bonus)
8% deductions monthly: $240 x 12 = $2880
11% deductions monthly: $330 x 12 = $3960
Self deductions = $8000 (standard for everyone)
Total deductions (EPF + SELF)
8% = $8000 + $2880 = $10880
11% = $8000 + $3960 = $11960
After deduction total income - deductible income, to get the taxable income
8% = $36000 - $10880 = $25120
11% = $36000 - $11960 = $24040
Can you see the difference in taxable income? If opt of 8% deductions, you ended paying more tax at the end of financial year.
The taxable income above fall in 7% bracket.
First 20000 = $475
Subsequent times 7%
Hence
8% = $475 + ($5120*0.07) = $833.40
11% = $475 + ($4040*0.07) = $757.80
Meaning if you opt for 8% and your annual income is RM 36000 with monthly income of RM 3000, you ended up paying an extra RM 75.60 in tax to the government. Gosh.
Imagine if 1 million people pay extra tax RM 75.60. Over brilliant government simply make easy money by having extra RM 75 000 000. 00 in their pocket which is our HARD EARN MONEY. Damn in million ok !!!!!
Case 2:
Monthly salary: RM 4500
Annual salary: RM 54000 (Considering that you do not have bonus)
8% deductions monthly: $360 x 12 = $4320
11% deductions monthly: $495 x 12 = $5940
Self deductions = $8000 (standard for everyone)
Total deductions (EPF + SELF)
8% = $8000 + $4320 = $12320
11% = $8000 + $5940 = $13940
After deduction total income - deductible income, to get the taxable income
8% = $54000 - $12320 = $41680
11% = $54000 - $13940 = $40060
Can you see the difference in taxable income? If opt of 8% deductions, you ended paying more tax at the end of financial year.
The taxable income above fall in 13% bracket.
First 35000 = $1525
Subsequent times 13%
Hence
8% = $1525 + ($6680*0.13) = $2393.40
11% = $1525 + ($5060*0.13) = $2182.80
Meaning if you opt for 8% and your annual income is RM 54000 with monthly income of RM 4500, you ended up paying an extra RM 210.60 in tax to the government. Gosh.
Imagine if 1 million people pay extra tax RM 210.60. Our brilliant government simply make easy money by having extra RM 210 600 000. 00 in their pocket which is our HARD EARN MONEY. Damn in million ok !!!!!
IF ONLY IF, if you earn RM 6250 a month. Then you do not need to worry about the 8% & 11% thingy where your monthly deduction for 8% will exceed the maximum $6000 allocated for tax deductions.
Lesson learn here: Go buy insurance if your pay is low so that can help to reduce tax and in the same time provide some coverage to yourself and your family.
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