WHILE small and medium enterprise (SME) stakeholders have welcomed the Budget 2023 “goodies” for the industry as it provides some relief to them, some questioned why more “meaningful” reforms were not proposed instead.
Among the announcements made yesterday (Oct 9) that would benefit SMEs include a one-off grant of RM1,000 for all SMEs, a reduced tax rate from 17% to 15% for the first RM100,000 taxable income and financing facilities to be made available via SemarakNiaga 2023.
The Small and Medium Enterprises Association (SAMENTA) said it welcomed the announcements, even though “it is clear” that much of the initiatives are with the upcoming election and micro enterprises in mind.
This as the overall liquidity to be injected and focus on automation and digitisation would help support the industry’s recovery post-COVID-19 pandemic, said SAMENTA chairman Datuk William Ng.
But “it would have been more effective to allow a double deduction for investments into research and development (R&D), digitalisation, automation and environmental, social and governance (ESG) compliance, on top of financing facilities.”
“Most SMEs are reluctant to invest substantially in plant and process upgrades due to the current political and economic uncertainty,” Ng explained in a statement.
“As such, targeted financing facilities such as those announced will not make as much difference as a more complete package of budgetary intervention.”
Ng added that SMEs continue to be besieged with low productivity, which results in low-profit margins.
Similarly, Deloitte Malaysia tax leader Sim Kwang Gek said while the 2% reduction on annual chargeable income of up to RM100,000 for SMEs should bring some cheer to these groups, it appears that SMEs would be subject to three progressive tax rates depending on the level of annual chargeable income.
Annual chargeable income of RM100,001 to RM600,000 would be subject to a corporate income tax rate of 17% while the amount in excess of RM600,000 would be subject to 24%.
“Not significant”
“While the rate cut provides some relief to SMEs, the tax savings of RM2,000 may not be significant in view of current challenges faced by SMEs,” she said. “A 2% cut on annual chargeable income up to RM600,000 would be more meaningful.
“Having a two-tier tax rate is also simpler for SMEs to administer,” she added.
Economist and Centre for Market Education CEO Dr Carmelo Ferlito said there is a “lack of a strategy” for rationalising operational expenditures in Budget 2023 and still too many “ad hoc” goodies.
“On the bright side, I welcome tax cuts, SMEs grants and SMEs loan schemes (and the announced special scheme for foreign direct investments or FDIs): these moves are necessary and welcome,” he said.
“But, in order to not further compromise the fiscal position of the Government and inflationary pressures, they should be accompanied by rationalisation of operation expenditures and better tax collection enforcement (and here I do not see an adequate vision).”
Meanwhile, the Federation of Malaysian Manufacturers (FMM) welcomed the RM1 bil allocation for the Low Carbon Transition Facility to assist SMEs to adopt low carbon practices and the RM10 mil matching grant to assist SMEs to conduct carbon assessment, saying this was a good start for SMEs to kick-start their ESG journey.
“This is a very good move by the Government and it will be helpful for SMEs if the interest rate is less than 3%; moving forward, more funding would be required in the ensuing years to help SMEs sustain and continue with their ESG journey,” said FMM president Tan Sri Soh Thian Lai.
However, Soh said FMM is disappointed that Budget 2023 had no specific allocations to support SMEs that have invested or are going to invest in ESG initiatives in their operations.
Other groups, such as SME digital platform Funding Societies Malaysia, were more positive in their feedback, with the group’s country head Chai Kien Poon saying Budget 2023 provides “sound support” to SMEs and continues future-proofing and enables wider access to capital for SMEs.
Recruitment company PERSOLKELLY Malaysia, on the other hand, welcomed the additional funding and guidance for local entrepreneurs, saying it would help SMEs grow their businesses and build resilience for the nation’s digital economy. – Oct 8, 2022
Main photo credit: Shutterstock
