Malaysian MSMEs set to be focus of forthcoming Budget
The interests of Malaysia’s micro, small and medium enterprises (MSMEs) will be forefront in the upcoming Budget 2024, the country’s Ministry of Finance has confirmed.
Deputy Finance Minister Steven Sim said Budget 2024 will focus on the development and employment in the MSME sector. He said: “This is because MSME is one of the main drivers of the economy, with its growth rate and job opportunities. Apart from that, the sector was the most affected by the Covid-19 pandemic.
“Therefore, we need to revive MSMEs. Secondly, we also want to help the sector improve the value chain… raise the ceiling so that our MSMEs can compete, not only in Malaysia, but globally in the new economy,” he said.
“What we want is that this Budget 2024 can reflect the aspirations of all levels of society in Malaysia, regardless of race, religion, gender and state, and we did a tour to all states to get views from all parties,” he said. Through its specially devised portal the Finance Ministry received 11,000 responses to its call for what the Budget priorities should be, and it also held face-to-face meetings with 8,000 other interested parties.
Themed ‘Madani Economy: Empowering the People, Budget 2024 is set to take place on 13 October 2023.
Meanwhile Jalbir Singh Riar, a partner at Ernst & Young Tax Consultants, is predicting Budget 2024 will contain measures to improve the country’s tax collection and proposals to mitigate leakages by improving fiscal governance and transparency.
He told the Star website: “Changes to the current tax system will need to be balanced against the government’s other objectives, including elevating the quality of life of the people, managing the cost of living and positioning Malaysia as a globally competitive investment destination.
“This may not necessarily require an immediate introduction of a new tax. Instead, a well-thought-out progressive tax policy as well as administrative changes can help expand and enhance the current tax system.”
He said the government’s efforts to improve tax collection include the Voluntary Disclosure Programme for both direct and indirect taxes, as well as the introduction the implementation of e-invoicing in the country.
During the recent 12th Malaysia Plan mid-term review, there were discussions on reintroducing the Goods and Services Tax (GST) to replace the current sales and service tax (SST).
Riar said: “While the reintroduction of a multi-stage consumption tax system, such as the GST, may be assessed in the future, there may be other ways for the government to introduce progressive tax policies.
“Specific to indirect tax, this can be done by enhancing the current SST system. One immediate measure could be to expand the scope under the existing SST legislation to cover additional goods and services.
“At present, several goods are exempted from sales tax. The government could consider whether these goods should be subject to sales tax.
“The government may also consider expediting the implementation of the sales tax on low-value goods, which was initially meant to be implemented on 1 January 2023, but was postponed to a later date yet to be announced.”
He added: “It goes without saying that in implementing new tax measures, there must be a balance between increasing tax revenue collections, attracting investments into the country and safeguarding the people’s welfare.
“The government will also need to consider the impact on small and medium enterprises and ensure that these businesses will not be adversely impacted by the change in the tax landscape and that the cost of compliance will not be prohibitive.
“At the end of the day, any manner or form of strategic indirect tax reform to achieve the intended goal – be it a new tax, or an enhancement to the current tax system – should be carefully evaluated, with sufficient prior consultation with the relevant stakeholders to ensure its effectiveness and sustainability, while being viewed positively and being well-received by the public and business community.”
