28 October – BUDGET 2019 will be one of many firsts – the first in 17 years where the finance minister is not the prime minister, the first in November and the first under the Pakatan Harapan government.
It will also be one that will require prudence and a degree of finesse, to be mindful of the government’s need to cut costs as well as to ensure that the voting public does not feel the burden of a government tightening the purse strings.
Corporate Malaysia looks to be mindful of this need also, as they tell the SunBiz team their essential incentives to maintain attractiveness in doing business in Malaysia and the policies that can help in attaining this.
On the supply side, property developers and builders hope to see initiatives that would reduce the overall cost of doing business.
According to Real Estate and Housing Developers’ Association Malaysia (Rehda), compliance cost is the most significant factor affecting a developers’ cash flow. Compliance cost accounts for 15% to 20% of the overall cost and any reduction would have a direct impact on total cost, enabling developers to lower housing prices by passing down the savings.
The Master Builders Association Malaysia (MBAM) wants the government to revisit several existing policies that stifle business competitiveness and allow foreign workers to renew their work permits for a longer period at reasonable cost. It urged the government to continue reducing the cost of doing business and to refrain from introducing policies that will increase it.
On the demand side, house buyers want the government to review the stamp duty imposed on owners or buyers of multiple properties. The National House Buyers Association (HBA) recommends that the stamp duty be increased to 5% of the property’s value for the third property owned, 7.5% for the fourth property and 10% for the fifth property.
Meanwhile, real estate agents want a system to eradicate “illegal brokers” to be established by the police as provided for in Act 242 and as echoed by the Housing and Local Government Ministry.
• Reduction of compliance costs;
• Review of bumiputra quota policy – transparent and automatic release mechanism; and
• Government to take on bigger role in providing social/public housing.
• Human resources – shortage of skilled labour, longer work permits, foreign worker levy;
• Continuity of projects; and
• Taxes – allow a two-year grace period for contractors to settle their final account and the full GST fees to ease the cash-flow burden.
• Entry cost – increase stamp duty for owners/buyers of multiple properties;
• Exit cost – increase real property gains tax (RPGT) for owners/buyers of multiple properties; and
• Implement build-then-sell 10:90 to avoid abandoned projects
> Malaysian Institute of Estate Agents (MIEA)
• Eradicate “illegal brokers”;
• Boost the sector by providing financing schemes for first-time house buyers and lower the threshold on foreign buyers from RM2 million to RM1 million; and
• Set up fund for skill development and training for real estate agents and negotiators, RM3 million grant for innovation and technology to enhance the profession.
In asking for tax incentives Federation of Malaysian Manufacturers president Datuk Soh Thian Lai said, while it appears that there will be an impact on tax collections, the proposals would result in medium and long-term business expansion, which would in turn generate economic growth income and better job opportunities.
> Grant automatic relief on:
i. All inputs for the manufacture of non-taxable goods; and
ii. Any taxable services rendered to manufacturers
• All direct tax incentives must be with minimum red tape to support not only new but more importantly, existing investors in their efforts to expand, upgrade and diversify.
• There should be greater certainty and transparency in direct tax benefits, particularly under the self-assessment tax system.
• Reinvestment Allowance (RA) Tax – The RA was extended in Budget 2016 for three years and will expire in 2019. Remove time bar and extend reinvestment period beyond three years as companies reinvest continuously at different times.
• Capital Allowance on Automation Expenditure Tax – Remove time bar (from 2017-2020) for capital allowance or extend for 15 years. Increase qualifying expenditure to RM10 million.
• Automatic Research & Development (R&D) Double Deduction Incentives – Remove the RM50,000 threshold and time bar since the current double deduction incentive does not have a cap or timeline.
• Maintain automatic approval to reduce a company’s exposure to risk of Intellectual Property theft and administrative burden to the government and companies.
• Double Tax Deduction for Expenses Incurred in LEAN Management System – doubling tax deductions would help to lower costs and help companies preserve their HRDF funds.
• Tax incentives like pioneer status, tax-free income for the first five years and preferential tax rates at 50% of the prevailing rate for the next five years for implementation of Industry 4.0.
• Tax deduction for companies implementing waste minimisation, recycling, water conservation activities that would contribute to the sustainable development agenda.
• Tax credit on cost of new machinery and equipment contributed by companies to local technical institutions and skills development centre
• Form a special economic and investment committee to review constraints and strategies to boost local and foreign investment.
• A national taskforce to ensure comprehensive and practical policy implementation; consider holistic impact on business sustainability; and mandate on national policy on development and implementation of regulations, which includes regulatory impact analysis and meaningful consultation.
• Ensure business friendly investment climate and policies by reducing the unnecessary regulatory burden to address the threat of premature deindustrialisation. A more friendly regulatory environment with simple, more transparent, reliable, easy to comply, consistent and fair regulations.
> Procurement /Asset monetisation
• Procurement system should be revamped to save billions, avoid corruption and the presence of “fat cat” middlemen.
• In the case of land, including state land, which has been alienated/sold “cheaply” over the years. A proper transparent system supported by a robust commercial valuation service is essential. Such assets should be put on the reserved list to be opened for tender
> Foreign workers
• The RM10,000 levy payment for workers who had stayed more than 10 years, should be reduced to RM3,000.
• Government should consider granting them permanent resident status for foreign workers with skills and experience.
> Minimum wage
• To address the minimum wage level issue for Malaysian workers the government can implement a monthly citizen “cost of living subsidy” of RM200-500 per month. Since it is a subsidy it will not affect overtime work and compulsory EPF, Socso and HRDF contributions.
Retail sales remain weak after September 2018 despite minimum increases in prices of retail goods and services, as local consumers hold back on spending. Retail consulting firm Retail Group Malaysia, and mall operator Sunway Malls & Theme Parks and Malaysia Retail Chain Association believe that the following measures would go a long way.
Managing cost of doing business
On conducting business, retailers want to be able to manage costs effectively, citing electricity rebates, friendly foreign workers policies and incentives to adopt technology and innovation for new digital retail as enablers for the challenging retail landscape.
Electricity constitutes the single largest cost component in operating a mall, where electricity can go up as high as 40% of the overall cost depending on mall size. The industry wish list is to reinstate electricity rebates to be reviewed on a six-month basis.
While the mall industry generally is still highly dependent on foreign workforce, as automation is not possible in areas of services, security, and food and beverage, some retailers are open to a gradually reducing dependence on them over a period of three for five years, with incentives to train, reskill and upskill and hire Malaysians.
Retailers also called for a boost in tourism numbers, especially high-spending countries like China, by implementing visa-free travel to drive tourist arrivals and spending in Malaysia.
On the economic front, retailers want the government to improve consumer confidence, stimulate broad-based economic activities, and have a tax structure that encourages consumer consumption and other expansionary policies.
Small and medium-sized enterprises (SMEs) form 98.5% of the total establishments in the country and according to the mid-term review of the 11th Malaysia Plan, SMEs are expected to contribute up to 41% of the country’s GDP by 2020. Besides asking for lower taxes and tax incentives as well as support in adopting Industry 4.0, SMEs are seeking support in terms of the following.
> More projects
Industry insiders hope the new government will set a certain ratio or target for all procurement by government departments, agencies and government-linked companies to be from SME vendors in order to encourage greater market access for SMEs.
The sector also hopes the administration will strengthen domestic demand and market by enforcing “buy made in Malaysia” in government procurement activities including government development/mega projects to reinforce support and confidence in locally manufactured products
Boost SME lending
The industry also hopes the government will provide tax exemptions for investors in peer-to-peer financing platforms and equity crowdfunding to encourage greater flexibility of financing for SMEs, and provide market and product development grant to enhance export capacity.
– THE SUN