FMM: Lower SST, cut OPR to combat virus impact
O Govt urged to reduce sales and service tax by 2% and slash Overnight Policy Rate by another 50 basis points
PETALING JAYA: The Federation of Malaysian Manufacturers (FMM) has urged the government to expedite a stimulus package to minimise the impact of the novel coronavirus outbreak on the economy, including reducing the sales and service tax (SST) by 2% for 12 months.
To support businesses that might be affected due to a slowdown in trade and face cash flow constraints, it also proposed that Bank Negara Malaysia cut the Overnight Policy Rate by another 50 basis points to cushion any anticipated moderation in economic activities.
Last month, the central bank had trimmed the key rate by 25 basis points to 2.75% as a pre-emptive measure to support the economy.
FMM said in a statement that as SST is a single stage tax, which is embedded in the final costs of the products, a 2% reduction will boost business conditions and lead to higher investments and employment opportunities as well as higher disposable income for the rakyat.
It urged the government to grant exemption or relief of sales tax on all inputs for the manufacture of nontaxable goods as this will assist companies to lower the costs of production and remain competitive with their competitors importing these items.
It also called for the government to grant automatic relief of service tax or automatic exemption on any taxable services rendered to sales tax licensed manufacturers (advertisement costs, consultancy, accounting, engineering, security, IT services, customs agent, freight forwarding services) used by a licensed manufacturer. This will assist to address double taxation and reduce operating costs of manufacturers.
“We urge the government to expedite the GST refunds by only undertaking field audit based on company risk profile and instead carry out verification audit which is sufficient for companies with good track record,” said FMM, adding that as of February 2020, the outstanding GST refunds amounted to RM7.8 billion.
It suggested that levy payments to the Human Resource Development Fund be reduced from 1% to 0.5% for all employers for one year while urging the government to reduce electricity and gas tariffs for the next one year to help lower business costs and sustain operations.
Banks are advised to extend payment terms to affected companies by declassified non-performing loans from three months to six months.
To boost domestic consumption, FMM suggested expediting the approved local infrastructure and development projects such as the East Coast Rail Link, KL-Singapore HighSpeed Rail and Pan Borneo Highway as the first wave of economic stimulus to release more cash flow to businesses and to shore up short-term domestic demand.
“Full implementation of all these construction related projects will have a profound multiplier effect on more than 100 industries in all other sectors especially the manufacturing sector.”
It proposed reduction in the employees’ contribution to the Employees Provident Fund contributions by three percentage points which was done similarly in 2016 as this will put more cash to the rakyat’s pocket, thereby increasing consumer spending which can further stimulate the economy.