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The dream was crushed – there was no personal tax rate reduction, and no separation of EPF contributions and insurance premiums. For an ordinary wage earner, the 2008 budged was if not disappointed, unimpressed!

Through out the word, wage earners are the most dutiful taxpayers – they simply can’t escape the tax man. Well before they lay their hand on their pay, the government has already taken a bite on it. On top of that, wage earners do not have with them the large tax management tools or enjoy any tax incentives like businesses do, so we were counting so much on text rate and other relieves to reduce the tax burden.

But, how about the newly allowed monthly withdrawals of EPF from account II for housing loan repayment? Fueled by the quotes from some ministers, some people’s mind already in the over-drive creative mood on how to “buy a bigger and more comfortable house”, and how to ‘increase disposable income by paying less for the housing loan” etc.

Before we get excited, let’s assess the monetary effects first. Assuming one is allows to withdraw ALL MONTHLY contributions of account II, if he is earning RM2,000 to RM2,500 a month, he would have ‘extra’ RM138 to RM173; and if he is earning RM2,500 to RM3,000 a month, an ‘extra’ of RM174 – RM207 (see table one).

The ‘extra’ money is quite substantial even for one who is earning RM2,000 a month – that sum of money is equivalent to about 7% of his gross income. So does the extra money sufficient for one to buy a ‘bigger’ house? Probably not! The loan size is depends on the repayment capability, not the size of EPF account.

But if you already owned a house – this ‘extra’ money definitely can helps pay-off the loan faster, and save the interest provided you did not skipped the original monthly payment. But there is a trade-off; your EPF account growth will be stunted. Paying off your housing loan faster with EPF is not an issue of how much you possibly saved, but rather it is more about your personal outlook on managing today and tomorrow needs. If you are like Robert Kiyosaki, you probably won’t, a house to you, is a liability!

So how about using that ‘extra’ money to do the ‘fun stuff’ – you can use that EPF money to subsidies your loan payment and wow, you have more money to spend! Of course the question is, if this a smart thing to do?

But I guessed most of you are smarter than that, instead of spend it away, why not invest the money yourself with the aim of getting higher returns than the mere 5% from EPF? You can then go around telling people how your investment beats EPF’s.

Hey, isn’t this is more interesting? Forget about no personal tax cut, etc.

To be sure, the exact detail of how the fund in account II is to be withdrawal is still sketchy. A call made to EPF on Monday morning revealed nothing beside what has been published. According to EPF, detail of the scheme will be announced in December. But just like how the great anticipation was crashed on Friday, EPF will be smart enough to eliminate all possible loop holes for its members to abuse the scheme.

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