As we approach the end of 2023, a year that many people would consider to be less than satisfactory, we look forward to a better 2024. This is especially important in Malaysia, where the country is still feeling the effects of the pandemic shutdown. Although some sectors of the economy, such as cargo and shipping, have shown a robust turnaround, other sectors, such as small and micro businesses, are struggling with digitalisation and ESG.
Now, the new government is supposedly to implement pro-business and pro-people policies, it is unlikely that a “one solution fits all” strategy will achieve its intended goals. Malaysia has a reputation for changing its programs frequently, but this must come to an end. The country needs decisive, long-term, encompassing, and politically-motivation-free initiatives that will benefit the nation as a whole. There have been announcement made in this 1 year under the new Anwar Ibrahim administration, while we agree some have hit the mark (low hanging fruit) some have been contentious and with mix reviews. BusinessToday will try to compile the top 10 that we feel will shape 2024’s economic and corporate landscape.
In no particular order of their significance or impact, here they are:
Luxury Goods Tax- announced during Budget 2024, the Luxury Goods Tax has been received with a mix bag of comments, while the tax will add revenue to the government, there are sectors who are calling it a tourism repellant. The ripple effect of this policy could be a deterrent to tourism and could drive locals to shop outside Malaysia. Details on the tax is still not clear but the Finance Ministry has announced a possible 5%- 10%. According to accounting firm Crowe the implementation of the can impact the competitiveness of domestic luxury goods producers, making their products more expensive compared to goods produced overseas. This could lead consumers to purchase luxury goods from other countries or underground markets, resulting in a decrease in overall sales and potentially reduced tax revenue for the government
Service Sales Tax- another taxation matter that will impact businesses nationwide is the hike in SST from 6% to 8%. The 2% while seems as minimal but the impact can be quite substantial. The pass on cost will certainly be felt by the consumer as most often than not, its the consumers who end up taking on the impact.
EY says the government will pocket an additional RM3 billion from this exercise, The proposed increase in service tax rate to 8% with effect from 1 March 2024, however will not apply to food and beverages, telecommunication services, vehicle parking space services, and logistics services which are considered essential services.
Fuel Subsidy Removal- The Economic Ministry has clearly reminded automobile owners on the removal of subsidy for those who belong to the ‘affordable’ category and will be subsidised for those in the lower income. Cars that have higher engine capacity and deemed luxury will have to pour their RON95 and RON97 petrol at floated prices.
The mechanism on how the Ministry will be implementing this policy has not been stipulated, but it will have to ensure there is no leeway for abuse or manipulation.
e-Invoicing- According to EY, it was announced that the full implementation target date for e-invoicing will be brought forward by 18 months to 1 July 2025. For taxpayers with annual turnover or revenue exceeding RM100 million, the implementation date will be extended from 1 June 2024 to 1 August 2024. Businesses should take immediate action on implementation, as this is a ‘whole-of-organisation’ effort that would involve changes to processes, systems and data governance protocols.
e-Invoicing will enhance tax compliance and reduce leakages, but more importantly, the vast amount of data it collects will enable the Government to craft targeted tax policies and more precisely direct the allocation of benefits such as subsidies and grants
Capital Gains Tax- It is proposed that companies will be subject to CGT at a rate of 10% on net gains from the disposal of unlisted shares, from 1 March 2024. If the shares were acquired before 1 March 2024, the taxpayer can instead elect to pay CGT on 2% of the gross sale value. Exemptions will be available for disposals in connection with initial public offerings (IPO) or internal group restructuring. Technically, the capital gains will likely be deemed as income, and taxed under the Income Tax Act 1967, and we understand capital losses can be carried forward for utilisation against future capital gains, albeit with a 10-year restriction. Where CGT is imposed, Real Property Gains Tax (RPGT) will no longer apply.
New Electricity Tariff– From Jan 1 2024, Tenaga Nasional Berhad will roll out a new energy use tariff with subsidy being slowly removed for households that use higher electricity. Industries who saw the tariff increase in the middle of the year by 17 sen are upset that it was not reduced despite pleas from various association.
Progressive Wage Policy- Economic Minister, Rafizi Ramli has announced that under the voluntary program, the Federal government will offer employers who adopt the progressive wage policy up to RM200 as a monthly cash incentive for entry-level workers they hire and RM300 for non-entry level for 12 months.
Economy Minister Rafizi Ramli said the policy, which will be implemented starting in the middle of next year, will target workers earning more than Malaysia’s current minimum wage but under RM5,000 a month.
Interest Rates– the current interest rates are expected to remain elevated in 2024, most analysts expect Bank Negara to keep the rates at current level even though strong indications of the Federal Reserve cutting its rates as early as Q1 is evident. However geopolitical circumstances continue to weigh economic sentiment for 2024, with Palestine, Red Sea, Ukraine, Taiwan, China will continue to dominate headlines.
CPTPP, RCEP– on the bright side, two large trade agreement should kick in full force in 2024 with more countries joining including United Kingdom which joined this year. The agreements will open new doors for Malaysian businesses to venture into, already industries are seeing potentials in these new markets.
Trade Minister Tengku Zafrul said in terms of trade facilitation, the CPTPP has enabled Malaysian exporters and producers to enjoy preferential tariff treatment via the CPTPP Certificate of Origin (CO), whose utilisation had reached 4,482 COs valued at approximately RM1.58 billion, for the period 29 November 2022 – 31 October 2023. The top export destination is Japan, followed by Mexico, Canada and Peru. Compared to the same period in 2022, Malaysia’s total exports to the CPTPP countries for the period January – September 2023 shows a 2% increase for iron and steel products, and also for textiles; while petroleum product exports grew by 15%.
Green Tax- The Green Investment Tax Allowance and Green Income Tax Exemption is extended for applications received by MIDA or MGTC from 1 January 2024 until 31 December 2026. The tax deduction of up to RM300,000 on Electric Vehicle (EV) rental cost will be extended for two years, up to YA2027.
The Green Technology Tax Incentive was introduced in 2014. The programme aims to provide the industry with an option of two available incentives. Companies seeking to acquire qualifying green technology assets listed under the MyHIJAU Directory or those undertaking qualifying green technology projects for business or own consumption may apply to the Green Investment Tax Allowance (GITA). The Green Income Tax Exemption (GITE) is available for qualifying green technology service provider companies listed under the MyHIJAU Directory.
