Maintaining good physical, mental health shouldn’t be taxing

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Malaysia has a high number of people suffering from heart disease and obesity, which may be attributed to low health literacy among Malaysians.

The statistics on causes of death among Malaysians in 2021 indicated that heart-related diseases were the second main cause of death (13.7 per cent) after deaths due to Covid-19 infections (19.8 per cent).

Tax policies could play an instrumental role in promoting a healthy lifestyle among Malaysians – with various tax policies implemented over the years to achieve these objectives.

As individual taxpayers, there are several tax reliefs that residents of Malaysia could be of use. Broadly, the currently available tax reliefs – i.e. for Year Assessment (YA) 2022 – related to health and wellbeing include for medical care, medical treatment for spouse or parents, purchase of sporting equipment and medical insurance.

Many Malaysians were found to have mental health problems, according to the National Health and Morbidity Survey 2019 (NHMS 2019). To address the rising mental health problems among Malaysians, effective from YA 2022, the scope of qualifying expenses (restricted to RM1,000) for medical examination has been expanded to include expenses incurred on mental health-related check-ups or consultation services from:

  • Psychiatrists registered with the Malaysian Medical Council under the Mental Health Act 2001 (Act 615);
  • Clinical psychologists registered with the Malaysian Allied Health Professions Council under the Allied Health Professions Act 2016 (Act 774); OR
  • Counsellors registered with the Board of Counsellors Malaysia under the Counsellors Act 1998 (Act 580).

In the recent Budget 2023 (re-tabled), it was proposed that the scope of qualifying expenses (restricted to RM4,000) be expanded to include intervention expenditure for Autism, Attention Deficit Hyperactivity Disorder, Global Development Delay, Intellectual Disability, Down Syndrome and Specific Learning Disabilities, provided that:

  • The diagnostic assessment is certified by a medical practitioner registered with the Malaysian Medical Council;
  • The early intervention and rehabilitation programme is conducted by a health professional practitioner registered under the Allied Health Profession Act 2016.

With the expanded scope above, which is expected to be effective from YA 2023, the aggregate amount of tax relief for medical treatment expenses is proposed to be increased from RM8,000 to RM10,000.

While tax reliefs would incentivise Malaysians to embrace a healthy lifestyle, they are claimable only to the extent of the chargeable income of an individual taxpayer.

This would mean that certain low, or middle-income groups may not be able to fully enjoy the tax reliefs.

Instead, the government may consider providing cash aid or subsidies targeted at healthcare to benefit the wider public.

For every tax relief claimed, taxpayers must keep the supporting documents, such as receipts, for at least seven years from the year of tax filing, in the event of an audit by the Inland Revenue Board.

The NHMS 2019 survey also found that one in two adults in Malaysia was either overweight or obese. To address issues of obesity, diabetes, and other noncommunicable diseases associated with nutrition, an excise duty of RM0.40/litre is currently imposed on several categories of ready-to-drink, sugar-sweetened beverages.

In addition, it was proposed that the scope of excise duty for sugar-sweetened beverages be expanded to include pre-mixed preparations of chocolate or cocoa, malt, coffee, and tea, such as “2-in-1” and “3-in-1” pre-mixed beverage sachets.

However, the initial implementation date of April 1, 2022, has been deferred. The levy imposed on sugar-sweetened and pre-mix beverages should affect Malaysians’ purchase decisions, which may lead to reduced consumption of these beverages.

However, there will still be demands for such beverages by a certain group of people (e.g., coffee may be a necessity for some people, and pre-mix coffee may be more affordable than artisan coffee). Taking this into account, the government should constantly review and adjust the levy accordingly, with regard to inflation.

In the government’s efforts to reduce smoking among Malaysians, it was proposed from Jan 1, 2021 onwards, that a 10 per cent ad valorem excise duty is imposed on all cigarette devices (electronic or non-electronic). In addition, an excise duty of RM0.40/millilitre of vape liquid is also imposed. A sales tax of 10 per cent on cigarette and tobacco products sold on all duty-free islands and in any free zones was also imposed, beginning Jan 1, 2021.

In addition, it was proposed in Budget 2023 (re-tabled) that the import duty and sales tax on nicotine replacement therapy products be exempted for a period of three years for applications received from April 1, 2023, to March 31, 2026.

In summary, healthcare-related tax policies may be used to influence consumer behaviour – but their effectiveness in encouraging Malaysians to adopt a healthier lifestyle would ultimately depend on awareness and implementation. – The Health

Nik Faiziman Affandi is Associate Director, Corporate Tax at KPMG Tax Services Sdn Bhd.