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KUALA LUMPUR, Feb 26 — The economic stimulus package should contain incentives and effective policies to attract foreign companies, boost domestic tourism, introduce tax exemption and provide utility rebates to help businesses deal with the impact of Covid-19, according to tax experts.
Deloitte Malaysia country tax leader Sim Kwang Gek said the outbreak has disrupted some supply chains of a number of sectors in the region and this presents an opportunity for Malaysia to showcase itself as a viable option to house their productions or operations.
“Malaysia is ranked No.18 globally ahead of Singapore, Vietnam, Indonesia and China on the Global Health Security index, which measures how well a country is prepared to handle a major epidemic or pandemic.
“This should bode well with foreign investors and it is timely for Malaysia to act now to capture the potential upside,” she told Bernama today.
Sim said a special task force should be formed to identify and court the potential targets and facilitate the entire process of businesses setting up their operations in Malaysia.
The process, which should be done within the shortest time possible, entails location sourcing, manufacturing licence, work permits, regulatory approvals, as well as tax incentives and indirect tax exemptions.
She said the stimulus package must also emphasise on stimulating domestic tourism industry.
“Come up with attractive and innovative local tour packages to encourage Malaysians to spend their holidays in the country,” she said.
In terms of tax, Sim said lifestyle tax relief should be raised to RM3,000 to increase the disposable income of the rakyat and relax certain tax compliance requirements for the sectors that are hard hit by COVID-19, namely the tourism, transportation and retail sectors.
A sales tax and duty exemption should also be considered for certain groups of manufacturers, while rebates or discount in electricity and gas will be welcomed to alleviate cash flow concerns.
She said a temporary suspension in contribution to the Human Resources Development Fund and loans with special interest rates for affected companies to fund their working capital are solutions so that companies don not have to resort to retrenchment to stay afloat.
“Perhaps increasing the payout under the e-Tunai Rakyat Programme can be considered to spur domestic spending,” Sim said.
On the question whether the slated stimulus package may impact government’s budget, she said: “A wider budget deficit that is compensated by growth in domestic consumption and economic activities should not be a major cause for concern as long as money is well spent and contributes to economic growth for the country.”
Meanwhile, global indirect tax clients and industries leader for Deloitte Senthuran Elalingam believed that the repayment of outstanding Goods and Services Tax (GST) refunds or at least targeted payment of refunds to most impacted sectors would alleviate cash flow concerns for businesses.
Asked whether there would be an amendment to the current Sales and Service Tax (SST) structure to boost domestic consumption, Elalingam said he did not anticipate a reduction in the current rates.
“However, we anticipate that the government could grant exemptions from tax on the sectors that have been most impacted.
“For example, providing an interim exemption (three-six months) from Service Tax on domestic flights and domestic hotel stays or removing or reducing Tourism Tax on hotels,” he said. — Bernama