MIA supports Budget measures to transform SMEs

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KUCHING: Budget 2017 announced last Friday is supportive of Small and Medium Enterprises (SMEs), with year 2017 declared as the Start-up and SME Promotion Year. A total of RM6.7 billion has been allocated for SME development to be implemented by the various Ministries and agencies.

Datuk Mohammad Faiz Azmi, president of the Malaysian Institute of Accountants (MIA) yesterday welcomed the numerous incentives focused on the development of SMEs.

The MIA suggests that Small and Medium Accounting Practices (SMPs) that play an important role in advising and nurturing SMEs be also eligible for some incentives and special deductions. The accountancy public practice landscape in Malaysia is dominated by SMPs, of which 79 per cent are sole proprietorships.

“Similar to other SMEs’ set-up, they also face challenges in terms of human capital, market access, legal and regulatory environment due to the constraints of their firm size. Hence, the MIA hopes that the SMPs will not be left out,” added Faiz in a statement.

Among the incentives for SMEs is a reduction in the tax rate from 19 per cent to 18 per cent for chargeable income up to RM500,000. In addition, there is also a new scheme for companies specifically for the years of assessment 2017 and 2018 which offers a reduction in tax rate to be applied to the increase in chargeable income compared to the previous year of assessment.

“We trust that this potential reduction in effective income tax rate would motivate businesses to increase their chargeable income. However, we would have preferred the lower tax rate be applied to the entire chargeable income to enhance the competitiveness of Malaysia as a business hub in the Asean region,” he said, noting that the Malaysian corporate income tax rate is still overall not as attractive as other Asean countries.

As innovation, creativity and entrepreneurship are of the essence to every start-up, the MIA proposes for tax compliance obligations to be relaxed to allow such entrepreneurs to focus on their business first and to keep compliance cost low and that the tax framework be simplified by waiving the requirement to file tax estimates as well as introducing simpler tax compliance obligations for the first 3 years.

It is also proposed that pre-commencement revenue expenditure such as cost of feasibility study, registration and licensing fees, legal fees, office rental and salaries be allowed in the year of assessment in which the business commences.

The MIA believes that the above proposal may assist in meeting the SME Masterplan’s objective.

The MIA also appreciates the Government’s initiatives to further invigorate the capital market by introducing the Small and Mid-Cap PLC Research Scheme with the aim of conducting research on 300 small and medium-cap companies with potential to lift interest in this segment of the market. This is aided by special funding of up to RM3 billion from Government-linked investment companies.

It also applauded the government on the establishment of the Capital Market Research Institute with initial funding of RM75 million, provided through the Capital Market Development Fund.

“We welcome the Government’s efforts to spur the country towards achieving the status of a high-income nation and we are committed to steer and support the accountancy profession in its contribution towards sustainable economic growth and societal well-being in Malaysia,” Faiz concluded.