Malaysia unveiled a series of tax cuts and incentives to boost key industries in its 2004 budget, along with sharp increases in "sin" taxes on alcohol and tobacco while imposing new excise duty on imported cars.

Prime Minister Dr Mahathir Mohamad, presenting his last budget before retiring next month after 22 years in power, said additional income tax incentives would be offered to foreign firms setting up operational headquarters in Malaysia.

To boost local industries, he said the threshold of taxable income for small- and medium-sized industries would be raised five-fold to RM500,000 in a move that would free up RM322 million for investment.

Local firms investing in machinery and equipment would get pioneer status with a 70 percent tax exemption on increased income over five years, he said.

Excise duties

Ahead of the liberalisation of the auto market in 2005 under a regional free trade agreement, Mahathir also announced new excise duties on imported cars from next year to offset losses in import duties.

To support the transition to a knowledge-based economy, he said state-owned Telekom Malaysia would cut Internet access charges by 30-50 percent.

The budget also involved cuts in the export duty on food, agriculture, building materials and minerals, with a 10 percent import duty on health supplements abolished.

Import and excise duties on liquor, tobacco and cigar were raised by between 10 and 20 percent. - AFP