SMALL- and medium-sized enterprises (SMEs) and manufacturers are hoping to receive “goodies” in Budget 2023.

Business owners told The Malaysian Insight they wish to see incentives for automation and digitalisation and corporate taxes that are competitive with neighbouring countries.

They are also hoping for tax breaks for training workers.

Federation of Malaysian Manufacturers (FMM) president Soh Thian Lai said the government should continue supporting companies in research and development, building a skilled workforce, automation and digitalisation, and green growth and sustainability.

FMM also wants the government to keep the special reinvestment allowance to help existing manufacturers become more competitive and productive through continuous upgrading, expansion and diversification during the recovery period.

“The government should consider introducing a competitive tax regime by gradually lowering the corporate tax rate to 20%; lowering the corporate tax rate for SMEs to 13-15% over the next two years or alternatively, to a flat corporate tax rate of 17%,” Soh said.

“Putrajaya can also reduce corporate tax rate by 1-5% for companies that are able to localise their content from 30% onwards; gradually bring down personal tax rates to increase disposable income and encourage greater consumption; and restructuring personal income tax bands so that taxpayers would not hit higher tax rates too quickly.”

Soh said the FMM industrial linkage programme can also help SMEs grow their capacities to be part of global supply chains and expand their market reach by providing funding and assistance to SMEs.

He also called for double tax breaks for logistic expenses.

To encourage automation and digitalisation, Soh said the government should introduce a new tax Incentive up to RM5 million for the establishment of manufacturing AI and robotic systems.

FMM is also looking to build an integrated food supply hub in Pahang to ensure food security and to create new economic opportunities.

Wage subsidy

SME Association of Malaysia president Ding Hong Sing said the government should continue encouraging employers to recruit new workers.

Ding said a three- to six-month wage subsidy programme should be included in the budget, along with more funds for B40 entrepreneurs and benefits for gig economy workers.

“We suggest that there is a need to train at least 50,000 new entrepreneurs and to allocate a budget of RM10,000 each,” Ding said.

“(This will allow for the) reskilling of graduates in the labour market. There is also a need to allocate more funding specifically for youth and women entrepreneurs.”

The government should also review personal and company income tax rates and gradually reduce the income tax rate so as to be competitive with neighbouring countries and to attract more direct foreign investment, Ding said.

The association also hopes for electricity rates and fuel tariffs to remain unchanged in 2023.

As for tourism, which was the sector hardest-hit by the pandemic, Ding said the tourism tax exemption should be extended to 2023.

Financing facilities such as zero interest loans for the duration of eight years sans legal or stand duty should be made available in the budget, he said.

More social welfare benefits

Huazong president Goh Tian Chuan said an election budget should include more fund allocations for lower-income groups, civil servants and small businesses.

Goh said the government is expected to stabilise the ringgit and stimulate economic growth to attract foreign investments and create job opportunities.

On top of that, he said there must be political stability to attract foreign direct investments.

Support for the lower-income group should continue in the form of tax breaks, Goh said.

Goh said the overnight policy rate (OPR) will not be increased again as as it will burden businesses and the people.

“The central bank should be more cautious and flexible.”

On Thursday, Bank Negara raised the OPR by 25 points to 2.25%, the third increase this year.

Lower corporate tax rates

Koong Lin Loong, who chairs the SMEs committee of the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), said corporate tax rates should be reduced as businesses have yet to recover from the effects of the pandemic.

“We faced cash flow problems, followed by inflation and now a labour shortage,” Koong said.

“We hope the government can help SMEs ease their cash flow problems by giving out low-interest loans and support programs that spur the economy.”

Koong said ACCCIM is going for incentives for companies that hire locals. Similarly, those who invest in automation and machineries should be given double tax breaks, he said.

He also said the corporate tax for SMEs should be reduced from 17% to 15%.

“The standard corporate tax should be reduced from 24% to 22%, while the 17% tax on SMEs should be charged on the first RM1 million instead of RM600,000.”

ACCIM also wants the government to start fulfilling its environmental, social, and corporate governance commitments.

Minimal business interference

Bumiputera Retailers Organisation president Ameer Ali Mydin said the government should meddle less in businesses next year.

“Let us do our business, the government has to listen to what we are saying,” Ameer said.

He was referring to the maximum working hours which were reduced from 48 to 45.

He said this is costing his supermarket chain, Mydin, RM1.5 million a month.

“As there is the labour shortage, we have to ask our employees to work overtime and our cost has doubled.

“I think the government has to focus more on subsidies,” he added.

The budget will be tabled on October 7. – September 10, 2022.