Essential economic contributors must be protected


Pankaj C Kumar

INDUSTRIES like alcohol, tobacco and gaming remain essential contributors to the Malaysian economy and the government must do more to ensure that these industries are not severely disrupted by the Covid-19 pandemic.

This is in light of the issues following the recent controversies surrounding the manufacturing and sale of essential and non-essential products during the Full Movement Control Order (FMCO) that began on June 1, 2021.

The FMCO is necessary to limit the movement of people and flatten the curve to mitigate the spread of the Covid-19 virus. Soaring cases and limited supply of ICU (intensive care unit) beds have given the government no choice but to put the FMCO in place.

Nevertheless, uncertainties and confusion on what is essential and non-essential goods as well as unclear SOPs (standard operating procedures) are bad for business. Moreover, industries like alcohol, tobacco and gaming often bear the brunt of these unclear policies due to politicisation and impractical rhetoric.

Excise duties that are mainly imposed on these “sin industries” are significant revenue contributors to the government. For example, in 2020, the government collected almost RM10bil in excise duties and this was approximately 23.5% of the total indirect taxes of RM41.9bil collected in 2020.

In addition, these industries generate many employment opportunities for Malaysians, with total direct and indirect employment of hundreds of thousands of Malaysians. It also creates a positive multiplier effect on the economy and generates FDIs (foreign direct investment).

The government must do all it can to protect its revenue stream in order to fund economic recovery, invest in vaccines and re-energise the country’s competitiveness to attract FDIs.

I am not talking about giving these industries incentives or special financing, but to ensure that these industries continue to provide revenue to the government in the form of taxes, both direct and indirect.

What these industries need to recover and continue contributing significantly to our national coffers are clear and practical policies that minimise operational disruptions. Fiscal stability is also very important to these industries and it goes without saying that raising excise taxes for alcohol, tobacco and gaming now will be akin to killing the goose that lays the golden egg.

In addition, the government can enhance its enforcement measures by fully enforcing the bold Budget 2021 controls that were implemented to tackle illegal tobacco and put in place laws that can effectively counter it. Smuggling of contraband alcohol and cigarettes continues to weigh down the performance of legal manufacturers while illegal internet gambling is a bane to licensed operators.

Understandably, for the government, money is extremely tight. It is now more critical than ever to protect and not punish legal industries that are already contributing towards post-Covid-19 recovery.

Pankaj C. Kumar is a long-time investment analyst. The views expressed here are his own.

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