This article first appeared in The Edge Malaysia Weekly on October 16, 2023 - October 22, 2023

Chairman, Khazanah Research Institute

Boost to the existing social protection framework is timely. This includes measures to raise government contribution to Socso’s Self-Employment Social Security Scheme and matching contribution limit for the EPF’s i-Saraan and i-Suri schemes. The increased allocation for Sumbangan Tunai Rahmah (STR) as well as the expansion of the Sumbangan Asas Rahmah (SARA) programme are timely as well.

KRI applauds the reformist nature of the 2024 budget in the context of the nation’s development strategy. We are confident that Budget 2024 will set Malaysia on a growth trajectory that will safeguard the rakyat’s well-being while advancing the nation’s economic and industrial transformation agenda as well as its resilience.

Managing director and CEO, Public Bank Bhd

While Budget 2024 will see a total expenditure bill of RM393.8 billion, the government’s resolve to continue to champion fiscal prudence is to be applauded.

For those in need, various social assistance frameworks have been strengthened through wealth reallocation from subsidy rationalisation. With an estimated 20% of the M40 group having fallen into the B40 category due to the Covid-19 pandemic, it is imperative that social safety nets are widened. On this note, allocation to the Sumbangan Tunai Rahmah (STR) initiative will be increased to RM10 billion from RM8 billion, benefiting nine million recipients. For 2024, a total of RM58.1 billion will be set aside for the purpose of financing various aid to the rakyat, encompassing subsidies, incentives and financial aid.

We welcome the continued support extended to the MSMEs. Some RM1.5 billion will be set aside by government-linked corporations (GLCs) and government-linked investment corporations (GLICs) to encourage start-ups, including bumiputera MSMEs to venture into high-growth high-value industries.

Group president & CEO, Malayan Banking Bhd

The allocation of an additional RM10 million to enhance the effectiveness of the National Scam Response Centre (NSRC) is highly important. The banking industry is committed to working closely with Bank Negara Malaysia on the setting up of a national fraud portal by mid-2024, where key data collected can be used to detect patterns and connections between the accounts used by scammers.

The initiative to develop the National Digital Identity will spur digital economic activities in the country and will certainly boost financial transactions and payment activities, apart from promoting greater efficiency and enhanced security for digital transactions. Banks are committed to participating actively in this initiative.

Group CEO of CIMB Group

We are pleased to see the government’s continued focus on driving sustainable economic growth through the second Madani budget.

In accelerating economic growth, we are encouraged to see measures to support micro, small, and medium enterprises (MSMEs) as well as the start-up ecosystem. These include, among others, RM2.2 billion in total funding support for MSMEs to automate business processes, digitalise their operations and increase their international footprint. In addition, we laud the focus on environmental sustainability and food security with specific allocation for MSMEs that operate within these two crucial areas. This will help support their growth and resilience and subsequently future-proof the socioeconomic well-being of all Malaysians.

Group MD and group CEO, RHB Banking Group

The government’s steadfast dedication to strike a balance between economic development and fiscal sustainability is noteworthy. This approach will ensure that the nation prospers while safeguarding financial stability.

The goal of transforming the nation into an Islamic investment hub is a commendable move as it will attract investments to stimulate economic growth and is very well aligned with the theme of “Economic Reformation, People Empowerment”.

We will support government aspirations under the National Energy Transition Roadmap (NETR) towards net carbon zero emissions by 2050 and will continue to play a significant role in elevating the nation’s economic growth and development, particularly the growth of SMEs, and driving financial inclusivity among the underserved segments by providing access to financial services that are digital secure and nimble.

President and group CEO, Affin Bank Bhd

We welcome the RM350 million allocation for the promotion and marketing of our tourism industry, including Visit Malaysia 2026, [and] relaxation of the Malaysia My Second Home (MM2H) programme conditions.

We also support the government’s initiative to facilitate the growth and development of MSMEs and SMEs through loan and financing facilities. Tax exemption for those involved in Islamic securities selling and buying must also be lauded.

Additionally, the high-tech industrial area in the northern region for the electrical and electronics (E&E) cluster will be one of the key drivers of economic growth and technological advancement.

The implementation of tiered reinvestment tax incentives, offering investment tax allowances ranging from 70% to 100%, will be a strategic move to empower the high-growth and high-value sector.

Group managing director and CEO, Hong Leong Bank

We are very encouraged to see the follow-through announcement of additional details and actionable plans outlined in Budget 2024, covering not only the welfare of the rakyat but also enhancing the MSME ecosystem, strengthening the Islamic banking positioning, combating financial scams and fraud and providing welcoming policies to attract FDI.

As a community bank, we are also pleased to see the government’s dedicated commitment to fortify the SME ecosystem through an array of ongoing tax and non-tax incentives, coupled with financing grants that are poised to significantly bolster the competitiveness of SMEs within the global value chain. This will pave the way towards doubling the share of export-oriented SMEs to 25% of vendor development by 2030, and lifting the share of domestic value-added in manufacturing to 65% by the same time frame.

CEO, OCBC Bank (Malaysia) Bhd

Being part of a financial institution with strong reach in the Asean-Greater China region, we can see the wisdom behind the big picture of fostering greater economic integration with our neighbouring countries, nurturing more competitive companies to penetrate the Asean market and facilitating trading activities.

Budget 2024 also ensures that the nation’s economic backbone — MSMEs — continues to grow through the RM44 billion allocation in loans and guarantees, including grants for digitalisation.

The move to improve efforts to encourage the adoption of sustainable practices such as installing solar panels is on the right track and OCBC Bank will lend its utmost support to this. And we are excited about the government’s proposal to extend support and tax benefits to those involved in sustainable and responsible investments.

Group CEO, AMMB Holdings Bhd

The RM2.4 billion earmarked for micro-entrepreneurs and small traders through agencies such as Bank Negara Malaysia, Bank Simpanan Nasional and Tekun Nasional is expected to spur greater opportunities and ease the financial burden of SMEs, which is certainly timely amid the current economic volatility.

Supporting this, the allocation of additional funds of up to RM25 million in matching grants with financial institutions under the existing i-Tekad social finance programme is set to benefit more entrepreneurs. Alongside this, the RM900 million loan fund available under Bank Negara will unlock potential for SMEs to move up the global value chain and increase productivity through automation and digitalisation.

CEO, UOB Malaysia

We welcome the measures to improve Malaysia’s competitiveness and ease the cost of doing business, which will spur high-impact investments in targeted sectors. These will help elevate foreign direct investment, broaden domestic linkages, spur industrial development and reinforce Malaysia’s diversified economic structure.

The RM2 billion fund under Dana Mudah Cara Peralihan Tenaga Negara [and] additional tax cuts of up to RM300,000 for measurement, reporting and verification (MRV) expenses relating to the development of carbon projects are positive moves to build a green economy for a sustainable future. Further efforts to boost the development of electric vehicles and installation of solar panels in the budget are also in line with UOB’s focus on encouraging a low-carbon lifestyle.

CEO, Standard Chartered Malaysia

We believe that tax reformation measures such as raising the sales and service tax to 8%, with the exception of the food and beverage and telecommunications industries, as well as introducing the luxury goods tax, will positively contribute to Malaysia’s revenue efficiently and effectively.

We support the government’s commitment to move the country towards a digital economy via the allocation of RM900 million to encourage SMEs to increase business productivity through automation and digitisation, among other initiatives.

We laud the government’s benchmark of increasing the participation rate of women in the labour force to 60%, as well as the tax incentive (extended until December 2027) to encourage women to return to work. We also welcome the government’s allocation of RM720 million for women and youths to start their own businesses under Tekun Nasional to lift and drive greater economic participation from this segment.

Head of Tax, KPMG in Malaysia

A clear approach to expanding the tax revenue base with the introduction of the capital gains tax, which will be imposed at the rate of 10% on the net profit arising from the disposal of unlisted shares by local companies from March 1, 2024, and the high value goods tax at a rate of between 5% and 10% on selected high value goods such as jewellery and watches based on the threshold value of the goods. It is hoped that clear regulations and guidelines with a reasonable transition plan will accompany these tax reforms to facilitate successful implementation.

Based on the fiscal outlook and federal government revenue estimates 2024, the estimated service tax revenue for 2023 is RM16.6 billion. Taking a simple and direct mathematical extrapolation, a 2% increase could result in about RM5.5 billion more — however, this 2% increase does not cover all taxable services. Food and beverage and telecommunications, which are significant contributors to the service tax collection, will still be subject to 6% service tax.

Tax Leader, PwC Malaysia

The announced phasing out of diesel subsidies (except for selected groups such as freight companies) may be the start of a wider subsidy reform. However, a more comprehensive strategy for subsidy reforms is needed to reduce the burden on government finances. This can then be used to fund a greater level of development expenditure to help build world-class infrastructure and progress towards a developed nation.

Meanwhile, is e-invoicing really a go in 2024? Yes. Although the finance minister announced the deferment of the first phase implementation (for businesses with annual revenue exceeding RM100 million) from June 1, 2024 to Aug 1, 2024, the fact that this extension is for two months reaffirms the government’s commitment to ensure the implementation of e-invoicing in 2024. With a runway of less than 10 months, it is important for businesses to start evaluating their e-invoicing implementation strategy.

Country tax leader, Deloitte Malaysia

As expected, more details on the introduction of the capital gains tax (CGT) were revealed in Budget 2024.With this, it is expected that the current real property gains tax (RPGT) Act 1976 will be amended to remove RPGT on the disposal of real property company shares to avoid double taxation.

The introduction of CGT on gains arising from the disposal of unlisted shares may have a short-term impact on mergers and acquisitions (M&A) as it will increase the tax costs but over time, the market would have taken such tax costs into consideration.

A challenge for the implementation of CGT is how the cost base of the unlisted shares will be valued as the proposed 10% CGT is applied to the net gain. In situations where the shares were acquired years ago, or a company that was incorporated years ago with a low capital base, the net gain would be substantial. It does not seem equitable to whack 10% on the difference between the sale proceeds and the costs.

President, Federation of Malaysian Manufacturers

The digital transformation of SMEs is vital to grow our economy as it will help SMEs boost productivity and competitiveness.

The interest rate should be low enough, for example 2% or lower, to assist SMEs to ease their current cost burden in an environment of slow economic growth. However, FMM is disappointed that our call for the establishment of the National Automation Fund with an initial allocation of RM500 million which would subsequently be topped up with the channelling of foreign worker levy collection was not considered.

FMM would also like to suggest that the government consider a new tax incentive for the establishment of manufacturing AI & robotic systems on the production floor, by providing an accelerated capital allowance of up to a qualifying expenditure of RM5 million for SMEs that implement manufacturing AI and robotic systems from Jan 1, 2024.

President, Chartered Tax Institute Malaysia

The benchmark set in Budget 2024 indicates the determination and seriousness of the government to raise the economic level of the country and the rakyat despite current global challenges.

E-invoicing will be mandatory for taxpayers with an annual income or sales of more than RM100 million from Aug 1, 2024 instead of June 1, 2024 as previously announced.

However, it appears from the announcement that it is mandatory for all taxpayers to implement e-invoicing by July 1, 2025 instead of the previously announced Jan 1, 2027.

Clarification from the tax authorities is needed on this as it would mean an earlier implementation of e-invoicing across the board by 18 months.

Malaysia Tax Leader, Ernst & Young Tax Consultants Sdn Bhd

With the new CGT proposed, mechanisms should be put in place to prevent double taxation. Similarly, no specific details on the LGT regime have been made available. It is hoped that further details will be shared as soon as possible to allow businesses to understand the impact and make the necessary preparations.

The proposal to allow tax deduction for ESG-related expenses for years of assessment 2024 to 2027, such as those relating to sustainability reporting framework, climate risk management and scenario analysis, tax corporate governance framework programme under the purview of the Inland Revenue Board of Malaysia and ESG compliance reporting requirements is also welcomed. However, it is noted that the proposed deduction is capped at RM50,000 per year of assessment. Given the range of expenses covered, it is hoped that the cap can be increased or removed to provide more meaningful relief to taxpayers.

President, Associated Chinese Chambers of Commerce and Industry of Malaysia

Subsidies may be popular but they have drawbacks such as encouraging over-consumption, hence, we support better targeted and better alternatives for protecting the low-income households.

The chamber would like to see the government doing more to address the fundamental issues related to building back a sustainable revenue base via the reintroduction of the goods and services tax when the time is considered appropriate; ensuring better governance and efficiency of public spending; shifting to a defined contribution of public pension given the bloated pension bill averaging RM30.5 billion per year in 2019 to Budget 2024.

Where the implementation of a luxury tax and capital gains tax (CGT) on non-listed corporations is concerned, coping measures done elsewhere does not mean they will apply to Malaysia’s current economic and capital market development in the same way. We are concerned that the luxury tax will create a black market and dampen the domestic high-end product retail market while the CGT will stifle entrepreneurship, private equity and corporate M&A activities. 

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