Govt urged to boost consumer spending
Economist in favour of stimulus package but against plan to cut SST
GEORGE TOWN: Malaysia should quickly take steps to boost consumer spending and counter the negative hold the novel coronavirus (Covid-19) has on the economy.
Economist Prof Yeah Kim Leng is all for the general stimulus package to boost consumer spending but is against a proposal to reduce the Sales and Services Tax (SST) that is currently at 6%.
“If the SST is reduced by half to 3%, say for six months, the government will have to bear an estimated RM7 billion in revenue loss based on last year’s reported collection.”
While a temporary SST rate reduction will benefit all consumers, a less expensive measure would be to focus on the low-middle income and middle income groups – the B40 and M40, said Yeah in an interview.
The Sunway University Business School economics professor suggested that the Finance Ministry bring forward the “Bantuan Sara Hidup” payments for this year.
“The low income groups have a higher propensity to spend and if coupled with carefully crafted domestic tourism stimulus packages, these combined measures can encourage consumer spending and boost sectors experiencing adverse effects from Covid-19.
“Tax relief, deferment of loans and special funds to provide soft loans to affected businesses as working capital, especially employee wages, are some forms of assistance that can also be helpful.”
National Tourism Council committee member Eric R. Sinnaya opined that Malaysians, like many other citizenry, like to travel but industry players need to come up with the right government intervention formulas to par down costs, and make travel and accommodation affordable across all income groups.
”All consumerism market pricing, from food to accommodation and transport, need to be reduced to lure Malaysians to domestic locations,” he said.
He proposed rates for leisure activities be looked into, and cited entry fees into amusement parks, entertainment outlets, museums, places of interests, even restaurants.
“These need to be lowered for now, especially during the coming school holidays, to draw customers,” said Eric, referring to the trend in Malaysia of raising prices during peak seasons.
“It turns consumers off, and with many affordable alternatives online these days, people tend to travel regionally or those who can afford it, visit farther-away destinations,” he added.
Price increases during peak periods are common but travel trade operators should not spike prices sky high, especially during this challenging time, he said.
“The days of reaping quick, big bucks are no longer viable in a globalised economy, businesses need to build their base and focus on branding,” Eric added.
Yeah suggests the government find more ways to put cash in the hands of consumers by giving tax exemptions and increasing wages, providing incentives to tourism operators who offer discounts and creative packages that boost travel, and stimulate the tourism sector by granting tax exemptions to investors who set up enterprises in the sector.