FINANCE Minister Lim Guan Eng has indicated that an expansionary budget is in store which aims to boost economic growth by putting more money in the hands of consumers and businesses to spend.

Tomorrow when he tables Budget 2020 in the Dewan Rakyat, businesses and trade associations will find out what this entails, and whether it meets their wish list for a more business-friendly year ahead.

After the austerity measures of the last budget introduced in Pakatan Harapan’s first year in power, the business community is hoping for budgetary allowances that will create a more conducive environment for industries to thrive.

Those interviewed by The Malaysian Insight said Budget 2020 was important as it would set the tone for the 12th Malaysia Plan which goes into execution next year.

They shared key areas they hoped Putrajaya would address:

Foreign labour

Federation of Malaysian Manufacturers (FMM) says Putrajaya should make public the findings and recommendations of the Independent Committee on Foreign Workers which was set up in September last year to coordinate foreign labour policies and management.

It has been a year since the committee was formed, and employers are expecting to hear the details of a review of the government policy on foreign workers, FMM said.

It noted that manufacturers continued to face problems in recruitment and employed foreign workers to overcome labour shortage.

Master Builders’ Association Malaysia (MBAM) urged Putrajaya to simplify the approval process for importing foreign workers.

“This will help enable the contractors to meet the project deadlines. Rejected applications tend to be due to minor errors such as typos and auditing hiccups that can be (easily) rectified,” said MBAM president Foo Chek Lee.

Bureaucracy and the involvement of third-party service provides were the other complaints about the current policies, which are overseen by the Home Ministry and Human Resources Ministry.

FMM urged Putrajaya to consider the following:

- A single ministry in charge of foreign worker policy and management.

- Single online end-to-end processing and approval system for recruitment to repatriation.

- A market-based levy mechanism with easy-to-meet and transparent criteria. This should be announced at least three years’ ahead of the deadline.

- Planning ahead with a transparent schedule of any cost increases related to foreign worker recruitment.

- Increasing rates in a gradual manner to minimise impact on business costs.

- Incentivising or reward businesses which reduce their use of foreign labour.

- Removing ratios/caps and third party service providers

- Reinvesting the foreign worker levy in industries to support initiatives in mechanisation, automation and productivity improvements.

Increasing competitiveness, moving away from low-cost labour

FMM said the government could incentivise businesses to break away from low-cost competitiveness and labour intensive production. 

This required a transformation model with significant investments and disruptive strategies which would impact employment.

Some “low-hanging tax incentives” Putrajaya could offer to help the transformation along are:

- Removal of time limit for reinvestment allowance.

- Extension of automatic double tax deduction on research and development beyond SMEs to cover all companies especially mid-tier and large companies that have the capability to spur innovation and creativity.

- Support for Industry 4.0-related manufacturing by facilitating university and industry research collaboration with tax incentives and/or funding.

- Removal of RM200,000 ceiling on market development grant.

- Reinstating the brand promotion grant to complement Malaysian brand promotion efforts.

- Extending the scope of the Malaysia-Singapore third country development fund to include exhibitions and trade fairs, while raising the ceiling for bigger delegations and scrapping the 3:2 participation ratio.

- Support for locally manufactured products via enforcement of a buy Malaysia policy in government procurement development, mega projects and government-linked companies. This includes required compliance with a minimum 35-40% local content, establishment of an oversight system and a high level committee for public complaints on non-compliance.

- A single agency such as a TVET (technical and vocational training) commission governed by an act of parliament to drive technical and vocational training forward.

Construction and building

Foo of MBAM said Putrajaya should speed up the contract award process especially for big projects that are to move into the second phase, such as the Pan Borneo highway in Sabah and the East Coast Rail Link on the peninsula.

“Malaysian contractors are concerned and looking for new jobs as most existing projects would be completed either by year-end or in mid-2020.

“We hope the government can award small packages while extending implementation to a longer period. This will enable small contractors to keep going. The industry will stall if they are jobless,” he said.

Taxation

Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) tax committee head Koong Lin Loong called for better and more transparent planning of taxes so that industries could plan ahead.

On corporate tax, Koong said Putrajaya ought to set a schedule for the gradual reduction of taxes, for example, by commencing in 2021 and reducing by 1% each year to reach 20% in 2024.

The current corporate tax rate is 24%.

“I also propose that the government revises the taxable threshold for small and medium enterprises (SMEs) to an annual turnover of RM2 million from the current RM500,000,” he said.

The current corporate tax is 17% for SMEs with an annual turnover of more than RM500,000.

“This will help businessess to plan; if sentiments are good, investments, too, will increase and in turn increase tax revenue for the government.”

On real property gains tax (RPGT), Koong said the current 5% RPGT rate should be reduced. It currently applies to Malaysian-owned properties or shares in property holding companies which are disposed after a period of five years. Properties below RM200,000 are exempted from the tax.

“The government should increase the holding period to seven years to reduce pessimism among property owners,” Koong said.

On personal tax relief, he said items eligible for this should be consolidated under a relevant category as currently there were different rates for different personal items.

“The list of items for personal tax relief is too long. Why don’t we simplify it? Malaysia’s list of personal relief is even longer than Singapore’s and Hong Kong’s.There are about 20 to30 items under the list of tax relief.

“For example, why not give a tax relief of RM2,500 for the lifestyle category, and it’s up to the individual to decide on what they spend on as long as it is within the category, instead of putting a rate for each item,” Koong suggested.

On the sales and services tax (SST), he proposed a task force to study the tax structure to “harmonise” the shortfall of revenue from the abolition of the goods and service tax last year. The base of items taxable under the SST could also be expanded, he said.

More centralised oversight of SMEs

Koong, who is also ACCCIM’s SME committee head, said all agencies overseeing SMEs should be consolidated under one roof.

“For example let SME Corp handle SMEs.”

SME Association of Malaysia president Michael Kang said Putrajaya should have a detailed plan for how it would achieve its goal to have the SME sector increase its contribution to gross domestic product (GDP) from 38.3% to 50%

“This is not easy. There should be a detailed plan on how to achieve this. There should also be a single entity handling matters pertaining to SMEs so that it eases planning and approval process.

“What we have now is too decentralised, as there are many ministries and agencies involved in SME affairs. There is no clear direction and system, which has prompted many entrepreneurs to give up mid-way,” Kang said.

Better organisation of incentives and rules

FMM said part of creating a business-friendly investment climate was to reduce unnecessary regulation.

It called on Putrajaya to make it mandatory for all ministries and agencies to adhere to the National Policy on the Development and Implementation of Regulations launched in July 2013.

The policy covers the regulatory impact assessment for all new proposed regulations or review of existing regulations which impact business, investment and trade.

MBAM also called on the government to looking for more ways to reduce the cost of doing business as well as compliance in the current challenging economy 

ACCCIM’s Koong said that to encourage productivity-related investments, the government should extend the reinvestment allowance beyond 15 years.

There are also too many ministries providing incentives for companies, and these should be consolidated.

“The government should also study the feasibility and structure of the current incentives to improve productivity of companies and reduce bureaucracy,” Koong said. – October 10, 2019.