KUALA LUMPUR: A review of the current tax incentives as well as introducing new ones in Budget 2011 is crucial to promote domestic and foreign investments to help realise the government’s ambitious economic transformation programme, according to officials of international accounting and advisory firm BDO Malaysia.
TAX EXEMPTIONS: As for the highly capitalised oil and gas industry, both Lai and Lum suggest that there should be considerations on service tax exemptions for services provided in the oil and gas industries. — Google Images photo
David Lai, head of advisory tax, and Pauline Lum, director of tax at BDO Malaysia, told Bernama, “Liberalisation of equity conditions as well as possible extensions of tax holidays could be considered for the identified industries that will be key sectors in the growth of the nation.”
They said this when asked what the budget, to be unveiled today by Prime Minister and Minister of Finance Datuk Seri Najib Tun Razak, should entail in the nation’s transformation towards a high income economy.
The budget comes at a time when the economy is on the upswing after last year’s downturn, raising optimism over Malaysia’s financial ability to put in motion the ETP (Economic Transformation Programme) via the New Economic Model (NEM).
They said that with ETP to be driven by both the authorities and the private sector, it would be important to boost the initiatives that have been presented with some tax incentives, alluding to the fact that a whopping RM4.3 trillion in investments were needed to drive the ETP.
Both Lai and Lim also stressed that the success of ETP would depend largely on the availability of talent pool in Malaysia.
In order to achieve a high-income economy, steps would need to be taken to encourage homegrown talent to be committed to contribute to the initiatives under the ETP.
Besides this, further incentives might be implemented to attract foreign talent to relocate to Malaysia, they said.
As for the promotion of the National Key Economic Areas (NKEAs), the tax officials said liberalisation of existing conditions should undoubtedly be considered.
Citing green technology, they said there should be more guidelines and a broader base with regards to the incentives available.
For instance, stamp duty exemption could also be extended to purchasers of homes/buildings that have green building index (GBI) certificates while other tax breaks could be provided for taxpayers who modify or update their buildings/homes to become more eco-friendly.
“Sales tax and import duty exemptions should also be considered for the purchase of equipment related to green technology,” they said.
Turning to the electrical and electronics sector, another sector under the NKEAs, Lai and Lum said the government should consider some withholding taxes exemptions with respect to technical expertise from non-residents as well as liberalisation of immigration regulations to attract foreign talent to share knowledge.
The existing list of promoted products manufactured in Malaysia, should also be extended to cover this sector, they said.
As for the highly capitalised oil and gas industry, they suggested that there should be considerations on service tax exemptions for services provided in the oil and gas industries.
This would include both upstream and downstream activities while liberalisation of immigration regulations should be instituted with withholding tax and income tax exemptions also considered in efforts to attract foreign talent.
To suggestions that measures should be introduced to cool down what was reportedly an overpriced property sector, the BDO Malaysia officials said that the increase in pricing was specific to location and not a phenomena found across the board.
Generally, property prices in Malaysia are relatively low compared with other cities in the region, they said.
Therefore, there is no immediate need to ‘cool’ the sector down.
The increase in talent and knowledge workers in Malaysia, will naturally boost the rental market in the country, which in turn will support the sector, they said.
Asked whether the deferred Goods and Services Tax (GST) was necessary to Malaysia achieving a high value economy, they said that from GST experience in other developed countries, the new tax system will be beneficial in the long run and assist in the alignment of the revenue collection with the growth of Malaysia’s gross domestic product.
“The implementation of a GST regime would also provide an opportunity for a reduction in income taxes; personal and corporate and therefore, assist Malaysia’s quest to emerge as a high-income economy,” they said. — Bernama