Clearer guidelines needed for SMEs
There needs to be effort to measure the effectiveness of grants and incentives given out to SMEs
MANY have lauded the government’s focus on SMEs in Budget 2018. But there needs to be certain tweaks for government incentives to achieve effectiveness in helping SMEs grow, says YYC Group chief executive officer Datin Yap Shin Siang.
She notes that some measures, although meant to help SMEs, are not as easily accessible or understood by small businesses.
“For example, the tax incentives announced were focused on a few areas, like automation, which is very good. This will help them increase efficiency.
“But the incentive requires Mida’s approval before it can be used. It is not like the Reinvestment Allowance, where you only need to prepare the documents and put a claim for it. For this Automation incentive, Mida needs to approve whether the investment qualifies for automation or not before you make the investment.
“So for SMEs that are not aware of such grants, by the time they buy the machine, it is already too late. All these need pre-approval. And this also means a longer time needed before the companies can make the actual investment,” she explains.
Automation is a big undertaking for SMEs and every help available to aid them in taking the leap forward would be much appreciated. But there needs to be clearer guidelines on the definition of automation for the grants and how to go about maximising this form of support.
Yap adds that many SMEs don’t think the tax cut that was announced last year would benefit them as they don’t understand the qualification for the tax cut.
Note that last year, the government announced a scheme for companies in the year of assessment 2017 and 2018. Companies that declare a higher chargeable amount compared to the previous year will get rebates of up to 4%.
For example, if a company declares RM300,000 in income in 2016 and RM800,000 income in 2017, under the new scheme, the first RM500,000 will be subjected to a tax rate of 18%. The remaining RM300,000 will be taxed at 20%, a rebate of 4% from the standard corporate rate of 24%.
“The actual calculations can be quite complicated so many of them don’t understand how this benefit can apply to them. It would have been easier to do a cut across board for corporate tax.
“Business owners like more direct cuts. It’s also easier to explain them to foreign investors,” she says.
Yap was a little disappointed that there was no reduction in corporate tax under Budget 2018.
“But we are still happy with the SME focus in the Budget. It is an inclusive one,” she says.
She also notes that there should be more effort to measure the effectiveness of the grants and incentives given out to SMEs.
While there are many grants available for SMEs for different purposes, little is known about how effective they are in helping companies reduce their cost and grow.
“Growth can come in many areas, whether through expansion of operations, diversification, export and increase in sales channels. But we don’t know whether they are growing one their own or whether it is because of the grants and incentives. So we don’t know how effective these measures are and whether these grants are really helping businesses reduce their cost.
“It would be good if there was more coordination among the different agencies and parties involved so that we can measure these successes and provide really effective grants,” says Yap.
Rising cost of doing business is a growing concern for SMEs. Notably, the right measures would go a long way in boosting SME growth and contribution to the country’s GDP.
Yap notes that small businesses that have planned ahead are in a better position to weather competition and other challenges such as technology.
SMEs need to be proactive. “SMEs need to understand all the grants that are relevant to them. They need to find out what can benefit them and find out the trends in the market so that they know what types of products and services to push next year. For example, based on the focus given in the Budget, we know that there is attention given to logistics, digital and construction.
“They need to look at themselves this year and plan out how they can take advantage of all these when Budget 2018 takes effect next year. Then, they will be better prepared for 2018. Competition will only get stiffer. So those who plan will be better prepared for the competition,” she says.