‘Govt should consider more avenues for tax generation’

PETALING JAYA: Initiatives to widen the government’s scope of tax revenue along with a review of the implementation of generalised subsidies should be considered in the retabling of Budget 2023, say business groups.

They say automation and digitisation measures for small and medium enterprises (SMEs) also warrant inclusion in the budget, which will be tabled on Feb 24.

Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) treasurer-general Koong Lin Loong said the government should broaden its parameters when it came to generating tax revenue.

“The existing taxation system needs to be reformed to increase government revenue and ensure its sustainability.

“This is especially true since a large majority of tax revenue comes from direct taxes, such as corporate and personal income taxes, as well as indirect taxes, which are too narrow,” he said.

Koong added that the government should also find ways to increase their revenue while keeping a lower tax rate in order to attract investors and retain talent.

He said foreign companies incorporated in Malaysia would have to pay the corporate income tax, which becomes another source of income for the government.

“This can attract higher-value foreign direct investments to Malaysia, which not only leads to another tax income for the government but also creates job opportunities and generates a higher income for Malaysians.

“These companies also bring in foreign talent, which opens up room for collecting non-resident income tax,” he said.

However, Koong, who also serves as the chairman of the ACCCIM SMEs committee, believes that the importance of domestic direct investments should not be overlooked, and that incentives should be provided for high-technology and value-added industries in recognition of their contributions.

“Along with regulatory stability, there should be certainty and consistency about the landscape of existing policies and contracts.”

“No policies should be changed overnight without a proper consultation with stakeholders as well as a proper evaluation,” he said.

On the measure where SMEs would be taxed 15% for their first RM100,000, as mentioned during the previous first reading of Budget 2023 prior to Parliament’s dissolution, Koong said the amount should instead be raised to RM1mil.

“This will encourage SMEs to make more profits, which also raises tax collections,” he said.

He said existing subsidies should be reviewed, noting that targeted ones should be adopted.

Citing the RON 95 petrol subsidies, Koong said although the measure was targeted for lower-income groups, the M40 and T20 groups could have benefited more from it.

“The hardcore poor may not even have money to buy petrol, as some do not even own vehicles, given that many of them are living from hand to mouth,” he said.

Koong said that better targeting of subsidies would only be possible through a database that contained the complete details of Malaysians.

“This allows better measures to be formulated for a specific group. Not only does this help the poor, but it also prevents leakages within the entire mechanism,” he said.

SME Association of Malaysia national president Ding Hong Sing expressed hope that automation and digitisation efforts would be included in Budget 2023.

“This allows production and exports to increase, resulting in higher income and a boost to our national economy,” he said.

He also urged the government to retain the reduction of SMEs’ income tax from 17% to 15% for their first RM100,000 earned, as planned in Budget 2023, which was tabled in October last year.

“The 2% reduction will also allow us to pay better salaries to workers,” he said.

Ding said that smart farming measures should also be introduced to help farmers as well as ensure a sufficient food supply nationwide.

“Apart from smart farming, which allows farmers to increase their produce, state governments should also play their part in providing lands to increase planting measures.

“This way, the country can be more self-sustainable in the long run and not depend on foreign imports,” he said.