‘Lower corporate tax can boost capital flow’
KUALA LUMPUR: Malaysians can hope for the “least painful” 2018 Budget with tax cut and relief for corporates, individuals and households as the economy continues to improve.
The Socio-Economic Research Centre (SERC) expects further incentives like a higher BR1M (1Malaysia People’s Aid programme), special cash aid for targeted groups as well as bonus for civil servants.
SERC executive director Lee Heng Guie said the fiscal budget for next year should provide a competitive tax structure for Malaysia, adding that a lower corporate tax rate would lead to rising capital flow that would boost investments and production.
At 24 per cent, Malaysia’s corporate tax is among the highest in Asean, above Vietnam, Thailand and Cambodia (20 per cent), Brunei (18.5 per cent ) and Singapore (17 per cent).
Should the government lower the corporate tax rate to 23 per cent and personal income tax by one to two per cent, the rate could further be lowered to 17 per cent for the small and medium enterprises (SMEs)
“In keeping with the worldwide trend, strategies and initiatives must be in place to drive competitiveness and productivity,” he said at a media briefing on the quarterly economic tracker from July till September.
Apart from a competitive tax structure, an improvement in foreign workers management, a higher Industry 4.0 adoption and the creation of a dedicated pool of investment funds would also drive the agenda.
For instance, a smart-delivery system could be developed to help automate and scale delivery for SME merchants while a smart logistics open platform-approach would help find the best cost-effective shipping rates and quickest delivery time.
“The entry of Alibaba into Malaysia’s e-commerce system must be made ‘inclusive’ and spur domestic linkages via strategic collaborative partnership with domestic SMEs.”
A widening retirement savings gap and sharply rising healthcare expenses are also requiring a substantial fiscal cost on healthcare, social protection and housing for the elderly population.
Lee said the local economy was on track for expansion at 5.5 per cent this year and 5.1 per cent for next year.
Medium-term growth prospects for the economy were also positive, driven by domestic demand. Rupa Damodaran