‘ Lim­ited’ tax in­cen­tives for busi­nesses

> More could have been done to spur growth of SMEs and larger cor­po­ra­tions, say in­dus­try ob­servers

The Sun (Malaysia) - - MEDIA & MARKETING - BY EE ANN NEE

PETALING JAYA: Bud­get 2017 is per­ceived to have lit­tle tax in­cen­tives for the busi­ness com­mu­nity at large, while ben­e­fits given to small and medium en­ter­prises (SMEs) could have had more bite, say in­dus­try ob­servers.

“From a busi­ness per­spec­tive, not much in­cen­tives are given to com­pa­nies and we had hoped for an ex­ten­sion of rein­vest­ment al­lowance,” KPMG Tax Ser­vices Sdn Bhd ex­ec­u­tive di­rec­tor Soh Lian Seng told Sun­Biz.

But he said from a tax per­spec­tive, the sig­nif­i­cant gain from the bud­get could go to the SMEs, given that many ini­tia­tives have been al­lo­cated for this group, from the 2017 Startup & SME Pro­mo­tion Year, the im­ple­men­ta­tion of pro­grammes un­der SME Mas­ter Plan, to the ex­ten­sion of guar­an­tee un­der the schemes of Syarikat Jam­i­nan Pem­bi­ayaan Per­ni­a­gaan.

He said the re­duc­tion in tax rate be­tween 1 and 4 per­cent­age points for com­pa­nies with a sig­nif­i­cant in­crease in tax­able in­come for years of as­sess­ment 2017 and 2018 is a good ini­tia­tive but noted that it is only for two years.

“Look­ing at the cur­rent eco­nomic sit­u­a­tion, how many com­pa­nies and SMEs would be able to gen­er­ate such rev­enue? And the more money your com­pany makes, you do en­joy a sav­ing. But to say a big­ger sav­ings, I beg to dif­fer,” said Soh.

He lauded the es­tab­lish­ment of the Col­lec­tion In­tel­li­gence Ar­range­ment un­der the Min­istry of Fi­nance, say­ing this will en­hance en­force­ment ac­tiv­i­ties and pro­vide ef­fi­ciency in tax col­lec­tion.

Mean­while, Crowe Hor­wath KL Tax Sdn Bhd man­ag­ing di­rec­tor S.M. Than­neer­malai said the re­duced tax rate from 19% to 18% for SMEs with tax­able in­come up to first RM500,000 is quite a sum and this will help them.

He agreed that the re­duc­tion in tax rate be­tween 1 and 4 per­cent­age points for com­pa­nies with sig­nif­i­cant in­crease in tax­able in­come is a small in­cen­tive to en­cour­age SMEs but pointed out that the rate has not sig­nif­i­cantly dropped.

“It’s small and it’s not go­ing to make a huge dif­fer­ence. What would make a dif­fer­ence is a big­ger tax re­duc­tion, that is in line with other coun­tries such as Thai­land (20%) and Sin­ga­pore (17%),” Than­neer­malai said.

Price­wa­ter­shouse­Coop­ers Malaysia tax leader Jagdev Singh said re­ward­ing suc­cess­ful SMEs through lower tax rates will spur them to rein­vest fur­ther in the busi­ness, and po­ten­tially ex­pand be­yond our shores.

“Have we done enough to en­cour­age star­tups and SMEs? Prob­a­bly not. What would have been good is more rad­i­cal mea­sures to pro­mote in­no­va­tion and R&D. A for­ward-think­ing idea would be to give cash re­bates for in­no­va­tion and R&D,” said Jagdev.

He said the in­tro­duc­tion of life­style tax re­lief is rel­e­vant in cur­rent times. Look­ing at this broadly, many new cat­e­gories have been added, but the ac­tual in­crease in tax re­lief is mar­ginal. “It would have been nice to see a higher limit of RM5,000.”

Fed­er­a­tion of Malaysian Man­u­fac­tur­ers (FMM) pres­i­dent Tan Sri Saw Choo Boon said the re­duc­tion in in­come tax for com­pa­nies would mo­ti­vate busi­nesses to in­crease their rev­enue. “How­ever, FMM hopes to see this in­cen­tive ex­tended to over­all charge­able in­come in view of com­pe­ti­tion from other re­gional economies that have re­duced their cor­po­rate tax rates ag­gres­sively.”

Saw wel­comed the pro­grammes and in­cen­tives fo­cused on SME devel­op­ment, par­tic­u­larly the ex­port pro­mo­tion funds, in­sur­ance credit fa­cil­i­ties, the 2% re­bates on in­ter­est rates, the re­duced cor­po­rate tax rate, ex­ten­sion of in­cen­tives for ven­dor devel­op­ment and ad­di­tional schemes to sup­port start-ups.

Jagdev Singh

Soh Lian Seng

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