Question

3. Amir's financial and personal position for the tax year 2017 are as follows: His salary working as a private high school economics teacher was RM4,950 per month. He also worked part-time as a taxi driver, earning an average of RM580 per month. He owned 6000 units of VC (a listed company) shares which the price increased from RM0.85 to RM1.20 per unit during that year. He sold 3000 units of the shares at RM1.20. His employer gave him a health insurance benefit RM350 a month. He lived in his own apartment with estimated rental of RM1000 per month. (20 points) (a) Derive his comprehensive income as per Haig-Simon definition. (7 points) (b) Derive his gross (total) income under the Malaysian income tax system. (7 points) (c) Assuming no deductions and exemptions, compute his total tax payable to the government. (Use the enclosed tax rates) (6 points)

Answer 1

(a)
Haig Simon income includes the following as components of income:
(i) Actual earnings like wages,salaries,income from business,rental incomes,interests etc.
(ii) Transfer payments like employment health benefits
(iii) Gifts of inheritance received
(iv) Income in kind like accommodation in self occupied house
(v) Net increase in the value of net assets
Hence, the comprehensive income of Amir as per Haig Simons definition would be as under:
Income Description				Nature as per Haig Simons Income Definition			Amount (RM)
Salary earned as economics teacher				Actual earnings			59,400
Earnings as part time taxi driver				Actual earnings			6,960
Profit on sale of shares				Actual earnings			1,050
Health insurance benefits from employer				Transfer of payments			4,200
Appreciation in value of shares held				Net increase in value of assets			1,050
Rental value of own apartment				Income in kind			12,000
Total Comprehensive Income							84,660
(b)
Income Description				Amount (RM)
Income from Salary				59,400
Perquisites in nature of Health benefits				4,200
Part time income from self employment				6,960
Profit on sale of shares				1,050
Gross (total) income				71,610
(c.)
Taxable income			Rates	Income(RM)	Tax (RM)
Up to 2500			0%	2,500	-
More than 2500 to 5000			1%	2,500	25
More than 5000 to 20000			3%	15,000	450
More than 20000 to 35000			7%	15,000	1,050
More than 35000 to 50000			13%	15,000	1,950
More than 50000 to 70000			19%	20,000	3,800
More than 70000 to 100000			24%	1,610	386
More than 100000 to 250000			27%	-	-
More than 250000			28%	-	-
Total				71,610	7,661