Credit Card Service Tax May be absorbed by Banks

27th Oct 2009
Banks likely to come up with a scheme for users

PETALING JAYA: Banks are likely to absorb the RM50 service tax on credit cards, considering that they already provide cardholders with rebates worth more than this.

For example, RHB Bank gives a 2% rebate for cardholders who shop at Tesco and Citibank does the same for its members using their credit cards at Giant.

Banks are also providing similar rebates for petrol purchases. “A 2% rebate on a RM200 a month bill works out to close to RM50 a year. So it is no big deal for the banks to subsidise the RM50 service charge, but it would only wish to do so with active users (of the credit cards),” noted an industry player.
Charles Sik... ‘Details have yet to be made known to the banking fraternity and much would depend on how it is implemented.’

Hence, it is understood that banks may come up with a scheme where only users who spend a certain amount on the cards will enjoy a waiver of the service tax.

Under Budget 2010, the government said it would impose an annual RM50 service tax on each principal credit and charge card, including free cards, and RM25 for each supplementary card from January next year.

Until the banks decide on the service tax waiver, cardholders with unused credit cards may decide to cancel them.

Indeed, the measure is expected to promote prudent spending with the number of credit cards having increased from more than 2 million in 1997 to 11 million as at August 2009, excluding 285,000 charge cards.

Meanwhile, analysts said the impact of the service charge on credit cards was expected to be “mildly negative” for the banking industry.

A Kenanga Research analyst who covers the sector said credit card loans in the country’s banking industry made up less than 5% of total loans.

“It’s pretty hard to quantify the impact at this juncture, but based on this alone, I would say the impact would be mildly negative,” he said.

Jupiter Securities head of research Pong Teng Siew said he was expecting about 25% of current cardholders, especially those with more than one card, to cancel their inactive cards following this proposal.

“On the whole, the banking industry’s profitability might not be affected much, but in the case of some banks, especially those which have depended on their credit segment to drive growth these past years, the impact could be substantial,” he said.

There are currently 9.7 million and 2.3 million principal and supplementary cards respectively circulating in the system, up from 2.8 million collectively in 2000.

In a note to clients yesterday, ECM Libra said the service tax could well see the banking system incur up to RM542.5mil in additional expenses arising from this measure should they wish to maintain existing levels of business.

Alternatively, they could “lose” as much as 50% of the cards issued but the “subsidy” to potential spenders from the system (on the assumption of the current 21.6% utilisation rate) may be reduced to about RM280mil, the research house said.

OCBC Bank (M) Bhd head of consumer financial services Charles Sik said it was “probably too early” to establish the specific implications of the move to impose the across-the-board service taxes.

“Details have yet to be made known to the banking fraternity, and much would depend on how it is implemented. In any case, the consumer or the banking industry would have to bear the cost for this new source of income for the government.” Sik told StarBiz.

Most major banks declined comment when contacted.

Tax on Credit Cards - 2010 Budget

During the budget speech on 23 rd October 2009 our PM annouced that to curb credit cards abuses, the government will impose a tax ob RM50 per annum tax for primciple card and RM25 for supplementary card.

This will certainly prompt people who hold more than one card to return them to the issuers. Certainly this will have an impact on the usage of credit cards, and mostly affecting the card issuers as more people opt to hold fewer cards.

Whether this move will curb spending is yet to be seen. Because instead of spending on several cards,people will spend on a fewer cards in hand, thus the total spend may not reduce.

Writing a Will

Recently the there was a news that a total of RM1.5 billion of assets were left behind by people who died without a will or intestate. Beside there are many complications when someone died without a will. The surviving benefit(s) has to obtain a letter of administration from the Land office, and this usually takes any time from 2 to 3 years.

To ensure your assets are distributed according to you will to the rightful beneficiaries you need to write a will. It may seem unimportant when you are young and healthy, but you never know whether you will get into an accident or heart attack and leave this world suddenly.

There are many professional services for will writing like Public Trust, Rockwill, and in fact many financial service institution provide such service.

Guide lines for a will

· Anyone aged 18 and above is eligible to get a Will written.
· Information required: person’s assets, names of beneficiaries, details of executors /guardians (if any) and instructions on how the assets should be distributed.
· The Will can be hand-written, typed or printed, and in any language.
· Two witnesses must be present at the signing of the Will
· The Will takes effect only upon death.
· It is revocable before your death when:
a. You (re)marry.
b. You make a new Will
c. You convert to Islam
· Choose carefully who you want to be the executor(s) of your Will. The ideal number is two although you can have a maximum of four.
· If you are unable to find a suitable executor, you can name a trust corporation to act as executor.
· If you have young children, appoint a personal guardian for them, especially if you feel your spouse is incapable of looking after them.
· You may choose a different person to handle financial matters.
· Having joint property or joint bank accounts with your spouse does not mean that he or she will automatically inherit your half share if you die intestate.

Gold Price Hit Record High

The price of gold struck an all-time high Tuesday as the dollar fell on a news report of a plan by Gulf states to stop using the greenback for oil trading.

LONDON (AFP) - – The price of gold struck an all-time high Tuesday as the dollar fell on a news report of a plan by Gulf states to stop using the greenback for oil trading.

Gold hit 1,045.00 dollars per ounce on the New York Mercantile Exchange in late trades.

Hours earlier on the London Bullion Market, gold surged to 1,043.78 dollars beating the previous record high of 1,032.70 dollars an ounce struck in March, 2008.

Barclays Capital precious metals analyst Suki Cooper said dollar weakness appeared to be related to reported secret talks about oil being priced in a basket of currencies including gold rather than the dollar,

This "has added to concerns about the future role of the dollar in international financial markets," Cooper said.

The dollar's future as the world's top currency was thrown into doubt on Tuesday as a report said Arab states had launched secret moves with China and Russia to stop using the greenback for oil trading.

Arab states have launched steps with China, Russia, Japan and France to stop using the dollar for oil trades, British daily The Independent reported on Tuesday, but the report was denied by Kuwait and Qatar and reportedly by other nations.

The Independent's Middle East correspondent Robert Fisk wrote in his paper: "In the most profound financial change in recent Middle East history, Gulf Arabs are planning -- along with China, Russia, Japan and France -- to end dollar dealings for oil."

They would instead switch "to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council (GCC), including Saudi Arabia, Abu Dhabi, Kuwait and Qatar," added Fisk.

Gold, viewed as a safe-haven investment, has won back favour in recent months as the global economy struggles out of its worst slump in decades.

The run-up in gold has been largely driven by weakness in the dollar, which makes dollar-priced commodities cheaper for holders of stronger currencies, boosting demand.

Gold also wins support from fears about higher inflation because the metal is widely regarded by investors as a safe store of value.

Precious metals consultancy GFMS last month warned that the current upward trend in gold may not be sustainable should global stimulus packages fail to boost flagging demand in the battered world economy and inflation fall as a result.

The Group of 20 leaders of emerging and developed nations recently agreed at a summit in Pittsburgh not to roll back massive stimulus measures that helped contain a severe global recession.

VIPs Blacklisted for not paying study loans

It is a good move of the government to bar these defaulters from travelling abroad. Of all people these Vips should undesrtand that they are depriving deserving students from obtaining the study loans. This is big money,people owing RM400 million!

VIPs blacklisted for not paying study loans
By KAREN CHAPMAN

PETALING JAYA: They are known as Yang Berhormat and Yang Berbahagia (YBs) but now some of them have earned the not-so-pleasant status of Yang Berhutang (debtor).

These YBs (the prefix used for elected representatives and those who carry honorary titles like Datuk) are not the only public figures on the list of National Higher Education Fund Corporation loan defaulters.

Professionals and celebrities are also among the 26,000-odd people who owe a whopping RM400mil.

The corporation’s chief executive, Yunos Abd Ghani, said the defaulters included those who studied medicine, law and business.

He said the corporation had to resort to barring the defaulters from leaving the country because they had been ignoring repeated reminders to repay their loans for more than five years.

Of the 26,627 names submitted to the Immigration Department since the corporation started recommending the travel restriction in August last year, 4% or 1,018 had settled their loans amounting to more than RM20mil, he said.

“This (overseas travel ban) has been an effective method as they have no other alternative but to settle what they owe,” he told The Star.

“We don’t apply double standards in implementing the action,” he said, adding that borrowers could check if they were barred from travelling overseas via the corporation and Immigration Department websites.

When asked what excuses the borrowers gave for not settling their debts on completion of their studies, Yunos said they often claimed they did not receive the corporation’s notices.

“Change of address is a favourite excuse despite their legal obligation to update their latest addresses with the corporation,” he said.

Yunos said barring defaulters from going overseas was a last resort.

Since the corporation began operations in 1997, he said it had disbursed RM18bil in loans.

In general, Yunos said that 76% of borrowers start repaying their loans as soon as they finished their studies.

Source: The star on line

Don't Put Off Making a Will

If you don’t have a legal will, take heed – without your will, there is no guarantee your loved ones will be provided for when you die. In fact, your treasured possessions could become government property. Here are some tips to get started:

Do your homework Research the estimated value of your belongings and assets. You may be surprised at how much you are worth.

Seek expert advice While do-it-yourself kits are readily available, it is worth enlisting a solicitor to draft your will and ensure it is legally valid.

Keep it updated Any major life event, such as marriage or the birth of grandchildren, should prompt you to change your will. Make sure you include the phrase “I revoke all previous wills” in the new version.

Store in a safe place You won’t be around to find your safely stowed-away documents. Let loved ones know where to find your will, or give it to your solicitor for safekeeping.

Think beyond the grave Many people nominate a charitable cause as a beneficiary. Contact your favourite charity to find out more about their recommendations for bequeathing funds.

Source:Reader Digest

Gold Vs Dollar