Malaysia must do more to protect essential economic contributors

WITH industries like alcohol, tobacco and gaming remain as essential contributors to the Malaysian economy, the Government must do more to ensure that these industries are not severely disrupted by the COVID-19 pandemic.

Such is the view of financial and economic analyst Pankaj Kumar following the recent controversies surrounding the manufacturing and sale of essential and non-essential products during the full movement control order (FMCO) period that began on June 1.

According to Pankaj, the FMCO is necessary to limit the movement of people and flatten the curve to mitigate the spread of the COVID-19 virus.

Pankaj Kumar

Soaring cases and limited supply of intensive care unit (ICU) beds have given the Government no choice but to put the FMCO in place.”

“Nevertheless, uncertainties and confusion on what is essential and non-essential goods as well as unclear SOPs (standard operating procedures) are bad for business,” he pointed out. “Moreover, industries like alcohol, tobacco and gaming often bear the brunt of these unclear policies due to politicisation and impractical rhetoric.”

According to Pankaj, excise duties that are mainly imposed on these “sin industries” are significant revenue contributors to the Government. In 2020, the Government collected almost RM10 bil in excise duties which was about 23.5% of the total indirect taxes of RM41.9 bil collected in 2020.

“Additionally, these industries generate many employment opportunities for Malaysians, with total direct and indirect employment of hundreds of thousands of Malaysians. It also creates a positive multiplier effect on the economy and generates FDIs (foreign direct investments),” he asserted.

Pankaj reiterated that the Government must do all it can to protect its revenue stream in order to fund economic recovery, invest in vaccines and re-energise the country’s competitiveness to attract FDIs.

“I am not talking about giving these industries incentives or special financing, but to ensure that these industries continue to provide revenue to the Government in the form of taxes, both direct and indirect,” he clarified.

For these industries to recover and continue contributing significantly to the national coffers, Pankaj said Malaysia needs clear and practical policies that minimise operational disruptions.

“Fiscal stability is also very important to these industries and it goes without saying that raising excise taxes for alcohol, tobacco and gaming now will be akin to killing the goose that lays the golden egg,” he added.

On its part, the Government can enhance its enforcement measures by fully enforcing the bold Budget 2021 controls that were intended to tackle illegal tobacco by putting in place laws that can effectively counter it.

“Smuggling of contraband alcohol and cigarettes continues to weigh down the performance of legal manufacturers while illegal internet gambling is a bane to licensed operators,” observed Pankaj.

“Understandably, the Government is currently in an extremely tight monetary situation. It is now more critical than ever to protect and not punish legal industries that are already contributing towards post-COVID-19 recovery.” – June 10, 2021

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