PETALING JAYA: While the Islamic banking sector is expected to receive tax breaks and incentives in Budget 2007, the banking industry hopes the Government will not neglect other areas that will improve its competitiveness and spur the industry to a higher level.
Citigroup country officer and Citibank Bhd chief executive officer (CEO) Piyush Gupta said: “The Government should look to reduce the Employees Provident Fund's (EPF) burden by capping the contribution once an account with the EPF has reached a certain threshold, say RM1mil.
“This will allow diversion of savings to the financial markets through the banking sector. On the same note, flexibility should be accorded to contributors with respect to how they spread out their investments, for example, by allowing investment in bank-issued principal protected deposit/market linked deposit as an alternative to unit trusts.”
Tax relief, Piyush said, should also be provided to banks for income generated abroad. For example, profits from trading in foreign currency securities with offshore market participants should not attract Malaysian corporate tax as this would give banks an incentive to develop their external and international capabilities in preparation for eventual liberalisation, he noted.
According to Piyush, the threshold for application of withholding taxes for consumer deposits should be increased to RM500,000 from RM100,000 in view of rising income of the population.
From a tax perspective, HSBC Bank (M) Bhd deputy chairman and CEO Datuk Zarir J Cama said the bank hoped the Government would continue with measures that would ensure a tax regime that was simple, transparent and responsive to the needs of the taxpayers. He said the Association of Banks in Malaysia (ABM) had recommended a banking focus group comprising taxpayers, policy-makers and administrators be set up.
As financial products and transactions were continuously changing and new ones introduced, including syariah-based products and transactions, the focus group would be able to provide feedback on new legislation or clarity where there was ambiguity, he said.
He said it would also be timely for banks to be given some tax breaks on costs incurred for product development to encourage more local development and innovation of banking products.
Affin Investment Bank Bhd president and CEO Datuk Dr Sheikh Awab Sheikh Abod said it was equally important that clear guidelines and key performance indicators (KPIs) were outlined in the budget for companies undertaking private financing initiatives (PFIs) under the Ninth Malaysia Plan (9MP).
He added that this would give investment banks the added security that funding would be given to companies able to deliver targets set by authorities.
He said: “For Malaysia to be seen as moving in tandem with the robust development in India and China, the PFI projects can be made highly attractive by offering incentives to attract foreign investment in mega projects earmarked in the 9MP. This will spur the economies in the southern and northern corridor regions of Malaysia to better compete with these two countries.”
The Government should also consider stamp duty and tax exemptions or relief to draw the much-needed investors into the country, he noted.
Alliance Banking Group CEO Bridget Lai said the bank hoped for measures and incentives that would encourage continuous investment in human talent development and information technology - a key to enhancing overall competitiveness in the industry and the delivery of excellent customer service. The bank hoped to see continued support and incentives for the Malaysian small and medium enterprises in developing them for globalisation.
“As we move closer to 2010, we look forward to measures to support the development of a more robust domestic financial sector that will promote healthy competition in structured finance, investment banking and Islamic product offerings,'' she said.
Standard Chartered Bank Malaysia Bhd CEO Shayne Nelson said the bank wished for Budget 2007 to bring about greater liberalisation in branch network and setting up of automated teller machines.
“Another significant area is to have a more liberalised environment for wealth management products not constrained by principal guarantee. In this way, we can better cater to customers who are constantly searching for best yields.
“Right now, we are losing those customers to neighbouring countries and it is unfortunate that Malaysian money is contributing to the strong growth of private banking in other countries,'' Nelson added.
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