The Federation of Malaysian Manufacturers is concerned about the country’s debt level which is expected to increase further to hit 66% of Gross Domestic Product (GDP) by end-2022, up from 61% in 2021 and 60.7% in 2020. This situation is worrying as the debt servicing burden is significant at 17.2% of total projected revenues for the year with no stable inflow but high outflows of government expenditure due to higher allocation for Budget 2022 stimulus and recovery initiatives to support the country recover from the impact of COVID-19 and the Movement Control Order.
Given the weak domestic and external environments brought about by the COVID-19 pandemic, FMM believes that priority should be given to strengthening the economy and restoring more favourable business conditions. In order to stabilise the situation, FMM has welcomed the Finance Minister’s statement on the possibility of reinstating the Goods and Services Tax (GST).
President Tan Sri Dato’ Soh Thian Lai says FMM has been a strong supporter of the GST regime as it is on the opinion that it is a more transparent and effective tax regime compared to the Sales and Services Tax (SST). Dato Soh added that over 160 countries have implemented the GST regime due to its fair tax structure. More importantly, he feels prices of Malaysian exports will become more competitive on the global stage as no GST is imposed on exported goods and services, while GST incurred on inputs can be recovered along the supply chain.
Based on a survey carried out by FMM on the reintroduction of GST where 499 companies that responded strongly supported for the GST to replace the current SST 2.0. Manufacturers have also proposed improvements to GST V1.0 to be more consumer- and business-friendly.
Some of the suggestions include reducing GST rate to 3% to 4% to help boost business conditions which would lead to higher investments and employment opportunities. Zero-rate all essential goods and services and maintain GST registration threshold at RM500,000
Income Tax Departments to minimise delay in refunds especially for exporters and businesses with zero-rated supplies as the long refund period between six to eight months has rendered the GST into an accumulating tax burden. Include the provision of interest on late payments and refunds in the GST legislation to ensure strict compliance to the Client Charter and integrity of the system.
Create more efficient schemes to replace Approved Trader Scheme (ATS) and the Approved Toll Manufacturing Scheme (ATMS) as they are complicated and difficult to implement. Also to ensure a proper mechanism is in place to monitor price control and anti-profiteering in the market when the tax system is reintroduced.
Change and transition can be a challenge and therefore FMM has called for the Government to consult all stakeholders throughout this review process.
