by ASILA JALIL / pic by ARIF KARTONO
THE Federation of Malaysian Manufacturers (FMM) has proposed for the government to waive both corporate and individual income taxes for this year and next year in a bid to reduce the impact of Covid-19 onto the country’s economy.
In the federation’s wishlist for Budget 2021, its president Tan Sri Soh Thian Lai said the waiver will allow businesses to strengthen their finances and rebuild from the pandemic, while consumers will have higher disposable income for consumption.
“A key booster will be the waiver for both corporate and individual income taxes for the year of assessment 2020 and 2021. Since taxable income is greatly reduced, the loss in tax revenue to the government may be comparatively minimal.
“Both corporate and personal income taxes have to be waived for a stronger impact and multiplier effect from consumer to business to workers in the virtuous cycle of supply and demand,” he said in a statement yesterday.
To ensure a conducive and friendly business and investment climate, FMM proposed for a more competitive tax regime for personal and corporate tax.
This includes a gradual reduction in corporate tax to 20% and flat corporate tax rate for small and medium enterprises (SMEs) at 15%.
The federation called for an extension on the moratorium up until March 2021 to relieve business cashflow.
Although Bank Negara Malaysia has been reaching out to SMEs for the restructuring and rescheduling of their loans, Soh said an extension of the moratorium is the preferred and more effective assistance.
The government should also allow flexibility in the definition of company size based on sales turnover to help companies that have suffered significant decline that cause them to fall within the scope of the national SME definition.
“These companies are among the most badly affected and in dire need of assistance and support, and will likely be the mid-tier companies (MTCs), which also have the potential to create a strong multiplier effect.
“MTCs as defined in Malaysia External Trade Development Corp’s Mid-Tier Companies Development Programme are companies with annual revenues between RM50 million and RM500 million in the manufacturing sector, and between RM20 million and RM500 million in other sectors.
“Tax relief and assistance accorded to SMEs should also be accessible to MTCs for at least the next two years to help in their recovery,” said Soh.
He noted that there are approximately 10,000 MTCs in the country and they collectively contribute around 30% of the country’s GDP, while employing over 22% of the workforce.
It added that the Wage Subsidy Programme (WSP), which is limited to only the first 200 employees in a company with a salary cap of RM4,000, is inadequate for MTCs and larger companies with more than 200 employees and a turnover exceeding RM50 million.
“We propose that the government considers removing the 200 employees limit and RM4,000 salary cap.
“Further, it can be more targeted to MTCs by a restriction perhaps not exceeding 800 workers. Extend the WSP to assist companies impacted by the third wave of the Covid-19,” added Soh.
Among other measures proposed by FMM include a conclusion for the Regional Comprehensive Partnership Agreement and implement free trade agreements which have been signed, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to provide market access for Malaysian exporters.
It also suggested the reinstatement of the Goods and Services Tax at 3% with a threshold of RM500,000 and a transition period of six months.
The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index slowed in September from August driven by a loss of momentum in new orders.
It posted a reading of 49 last month compared to 49.3 in August as output moderated for the first time in four months.