DELOITTE Malaysia expects bold measures to be taken by the government, specifically the easing of tax payments and providing incentives to support businesses in their digital transformation efforts.
Such measures are believed to contribute in the revival of the country’s economy during the COVID-19 pandemic.
Deloitte Malaysia tax leader Sim Kwang Gek said Bank Negara Malaysia (BNM) is projecting a full-year contraction of 3.5% to 5.5% before a rebound of 5.5% to 8% growth next year, while the fiscal deficit for this year is expected to go up to 6%.
Sim expects that the Budget 2021 will focus on formulating policies to address challenges caused by the pandemic while also considering medium- and long-term strategies for the country.
“Investment in technology such as digital and mobile payments, cloud computing, and robotics is now essential for businesses to adapt to the new normal,” she told Bernama on the firm’s Budget 2021 views.
Currently, under the Penjana stimulus package, an accelerated capital allowance (ACA) is given to qualifying capital expenditure incurred on machinery and equipment, with an allocation of RM500 mil.
However, this may not be attractive enough to spur digital investments as the ACA only provides for a higher capital allowance claim in the first year but the overall total capital allowance claim is equivalent to the amount spent.
“The ACA can be enhanced by increasing the capital allowance claim to two-times of the capital expenditure incurred within a certain period of time and double tax deduction on professional fees incurred in implementing such projects capped to a certain limit,” Sim suggested.
She also proposed a relaxation of group relief provisions to allow all companies, including small and medium sized enterprises (SMEs) to access the group relief facility and removal of the 70% restriction.
Apart from that, she also welcomes extensions of various existing measures such as the deferment of tax instalment payments, revision of tax estimates in the third instalment and an extended deadline for tax filing.
However, to alleviate the cash flow constraints faced by businesses, consideration can be made to allow for the balance of tax payable following the filing of the company’s tax return to be made via instalments without any imposition of late payment penalties.
To ease administrative work, she said an automatic approval may be given for up to six months instalments without any imposition of late payment penalties.
“It may be timely to incentivise voluntary disclosures by reducing the penalties to 5% and no penalties if the voluntary disclosure is because of genuine errors or differences in technical interpretations made by taxpayers,” she said.
Additionally, as the Penjana stimulus package has provided a tax deduction for landlords who reduce or waive at least 30% of gross rental to SME tenants, Sim proposes for this initiative to be extended for another six months.
It is believed that doing so will encourage landlords to continue giving rental reductions. – Oct 30, 2020
