LOWER corporate taxes and personal tax holidays top the wish list of businesses for Budget 2021 as these would boost investment and consumption to revive the coronavirus-stricken economy, a survey showed.

In the survey held by the Associated Chinese Chambers and Commerce and Industry (ACCIM), nearly 84% firms wanted Putrajaya to reduce the corporate tax rate to 22% for large companies and 15% for small- and medium-sized enterprises.

Malaysia’s corporate tax rate of 24% is the highest among neighbours Singapore (17%), Thailand (20%), and Vietnam (20%).

A corporate tax reduction would motivate businesses to invest in expansion and revive domestic and foreign direct investments, the survey’s authors said.

“With the escalating tensions between the United State and China, foreign companies are searching for a safe place to reshore manufacturing plants and services hubs,” the ACCIM said.

“Malaysia may be losing such an opportunity to neighbouring countries given its uncompetitive tax rate.”

The survey of 828 firms, of which 93.8% were SMEs, was conducted in mid-May to early June.

The survey aimed to gauge business sentiments and expectations for the latter half of 2020 and 2021, following the worldwide Covid-19 outbreak.

The respondents were also asked to state what additional measures they thought were necessary to help the economy come out of the recession resulting from the pandemic.

Putrajaya is expected to roll out the Economic Recovery Plan and Budget 2021 in October and November.

About 44% of the survey’s respondents said weak business and consumer sentiments were the top impediment to economic recovery. 

To overcome this, 72.6% said next year’s budget should offer a tax holiday to those earning RM100,000 and below.

This would benefit about two million individual taxpayers, most of whom were in the middle-income bracket, and increase their spending power, ACCIM said.   

“Although this may cost the government about RM5 billion in lost tax revenue, the government can partially recoup this from indirect tax revenue.”

The survey found that more than two-thirds of businesses felt that targeted spending on public infrastructure was needed to spur domestic demand. 

Nearly 65% of respondents felt Putrajaya’s top priority should be to expedite the RM4 billion in small-scale projects announced in the Penjana package.

About 62% said Putrajaya should intensify efforts to attract high quality FDI and DDI. – August 6, 2020.