Reduce corporate tax rate for the sake of SMEs – APIB

ASIA Pacific Investment Bank (APIB) suggests the Malaysian government to further reduce corporate tax to help SMEs survive the ongoing pandemic.

APIB CEO Chris Wang said that the COVID-19 pandemic is taking a toll on the 900,000 SMEs across the nation, especially those that operate in the tourism, manufacturing, catering and retail sectors.

Businesses in Selangor, Kuala Lumpur, Putrajaya and Sabah are especially hard-hit following the announcement of the conditional movement control order (CMCO) by the government recently to contain the third wave of the COVID-19 outbreak, he adds.

“Malaysia faces a sharp slowdown in economic activity and SMEs are the most affected,” said Wang.

Citing a survey done by the SME Association of Malaysia, Wang noted that 51.2% of Malaysia’s SMEs have suffered losses of more than RM500,000 in business from March to September.

Another survey conducted by the Associated Chinese Chambers of Commerce and Industry of Malaysia shows that 25% of the local SMEs could face bankruptcy if the second round of Movement Control Order is implemented.

APIB has been keeping a close eye on the situations and needs of the SMEs, he said.

“The COVID-19 pandemic is causing a sudden drop in business. And SMEs are facing significant financial challenges, including a shortage in working capital and cash flow crunch,” he says.

Wang suggests the Malaysian government to reduce corporate tax to help SMEs survive amid such a challenging time.

“The Malaysia corporate tax rate is 24%, which is way higher than some of its ASEAN neighbours including Singapore (17%), Thailand (20%) and Vietnam (20%).

“Reduction in corporate tax will not only lighten the financial burden of the SMEs, it will also attract foreign investments and stimulate the country’s economic growth,” he says.

Wang also suggests to Bank Negara Malaysia (BNM) to extend the six-month loan moratorium period that ended on Sept 30. Such an initiative will significantly improve the cash flow of the SMEs and give them space to survive the pandemic.

“The six-month loan moratorium programme implemented in March was beneficial to the SMEs as it had lightened their burden. An extension of the period of the programme is one of the best ways to further support businesses,” he says.

Last week, FocusM reported that TA Securities Research is also calling for the government to reduce corporate tax. (read that here)

The research house’s lead economist Shazma Juliana Abu Bakar suggested that the government cut corporate tax from the current 24% to 20%, or lower.

“We agree that the government may lose some revenue during this tough time. However, the move will be countered by higher investments later,” she said. – Oct 23, 2020

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