Some good news for micro businesses

Glimmer of hope: Those in the lower-middle and lower income group along with micro businesses can expect some help including tax breaks.

PETALING JAYA: The focus of Budget 2021 will be on easing cash flow for micro businesses, likely through tax exemptions, but there will definitely be no new taxes, says International Trade and Industry Minister Datuk Seri Azmin Ali.

The Senior Minister said those in the lower-middle and lower income group along with micro businesses could expect measures to help them cope with the pandemic and economic slowdown.

“We will look at micro businesses and assist them with their biggest problem at the moment – cash flow.

“There will be no new taxes and the needs of the B40 (lower income group), M40 (lower-medium income group) and the small and medium enterprises (SMEs) will be the main beneficiaries of this budget, ” said Azmin, whose ministry is also in charge of micro businesses.

Housing and Local Government Minister Zuraida Kamaruddin said her ministry had sought tax exemptions on homes for the M40 group.

“We asked the Finance Ministry to give tax exemptions for houses priced below RM300,000 and between the range of RM300,000 and RM500,000, as this is what is usually affordable for the M40 group. I think the government will listen to our request, ” she added.

According to former Bank Negara Malaysia deputy governor and economist Tan Sri Dr Lin See-Yan, helping micro businesses ease their cash flow would in turn cause a multiplier effect on bigger corporations, which could then earn enough taxable revenue.

The government, Lin said, then would be able to recoup despite a deficit budget.

“This is the time I will say go for a deficit budget, and the time for the government to borrow, then help the smaller businesses to expand and stimulate demand so as to create a multiplier effect in the economy.

“The main problem why there is no cash flow for micro businesses such as hawkers and SMEs is because there is a lack of demand. People are not spending or eating out or shopping.

“The government should borrow and pump the cash into the micro businesses by stimulating demand but the money must be well spent. Saving is always good but this is not the time.

“Never mind if there is a deficit as long as the borrowing is spent wisely to maximise the multiplier effect, ” added Lin.

He said the main challenge in repairing the micro economy was to change the cautious mindset of business owners who think they must save now and not expand, and also to encourage people to spend.

“It will be a slow process to regain what the government spends after the deficit budget as investors are also cautious.

“We need a fiscal policy (with more spending by government and tax policies to encourage businesses to take risks to expand and people to consume more, ” said Lin.

Federation of Malaysian Manufacturers (FMM) president Tan Sri Soh Thian Lai said the government should target boosting sectors which were able to create strong and extensive multiplier effects that could cascade throughout the supply chain, in both upstream as well as downstream activities.

“A key booster will be the waiver of both corporate and individual income taxes. Since taxable income is greatly reduced, the waiver will allow businesses to recoup and strengthen their internal finances to rebuild their businesses while employees as consumers will have higher disposable income for consumption and demand for goods and services.

“Both corporate and personal income taxes have to be waived for a stronger impact and multiplier effect from consumer to business to workers in the virtuous cycle of supply and demand, ” said Soh.

He also asked that the bank loan moratoriums be extended until year end.

Soh also proposed the government create business for SMEs through government and GLCs procurement under the Buy Made-in-Malaysia campaign.

“Sales in many economic sectors are adversely affected. There should be flexibility in the definition of company size based on sales turnover to assist all companies which have suffered significant declines to the extent that they can fall within the ambit of the national SME definition.

“These companies will likely be the mid-tier companies, which also have the potential to create a strong multiplier effect, ” added Soh.

He explained that mid-tier (companies with annual revenues between RM50mil and RM500mil in the manufacturing sector and between RM20mil and RM500mil in other sectors) have the capacity to create wider and stronger multiplier effect up and down stream of the supply chain.

“Tax relief and assistance accorded to SMEs should also be accessible to mid-tier companies for at least the next two years to help in their recovery. This will benefit the entire supply chain, including SMEs and micro-businesses, ” Soh said in a statement.

The Malaysia Singapore Coffeeshop Proprietors’ General Association, which has about 20,000 Malaysian coffeeshop owners under its umbrella, said for micro business owners, the main worries were paying suppliers’ bills and rental.

Its president Datuk Ho Su Mong said he expected the budget to be more micro business-friendly.

“Taxes should not be levied and if possible reduced on raw materials like coffee beans and sugar.

“Electricity and water bills should be given discounts for micro businesses.

“Cash flow is lacking, so we expect the budget to give allowance for very low interest or no-interest loan for at least the next 12 months.

“Personal taxes should be reduced as well as for most micro businesses which had no income coming in for the last three or four months.

“We also expect the budget to give us special relief in paying rent, ” added Ho.

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