KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) has urged the government not to introduce or raise any taxes this year, stressing that the domestic manufacturing industry is already at a choking point.
“Don’t increase any tax on micro, small and medium industries again. There are nine taxes introduced this year. We have enough taxes already. The government needs to find a better way for revenue generation.
“And the government must also find ways to stop the leakages,” FMM president Tan Sri Soh Thian Lai told reporters when presenting the FMM Business Conditions Survey for the Second Half of 2024 today.
Soh pointed out that the private sector contributed RM94.4 billion in corporate tax and RM30.8 billion in income tax to the government. A further RM51.24 billion came from private sector indirect tax.
“And if you add in sales and service tax, which mostly involved industries, it is about RM44.7 billion. All in all, the private sector had contributed RM221 billion in tax out of our total government revenue of RM322 billion.
“So it means the private sector had contributed 68.6% of government tax revenue. We are the taxpayers. We hope the government understands us. We are the ones who pay the most tax.
“If the government keeps on adding tax on us, additional tax on us (domestic manufacturing sector), we face tremendous pressure. How to generate better revenue and better profits?” he said.
Soh nioted that the government is working to expand its tax base. “We fully understand that. However, our industry is already the largest tax contributor,” he said.
Soh said Malaysia has about 1.3 million business entities, of which 98.5% are micro, small, and medium enterprises. Only 1.5% consist of mid-tier, large and multinational companies.
Within the 1.5%, mid-tier companies make up around 1%, or about 8,000 to 10,000 businesses, while large companies account for just 0.5%. Despite being a small segment, these mid-tier and large companies contribute the most in taxes.
The FMM president said the government claims that 85% of businesses are unaffected by new tax measures and that only the remaining 15% will be taxed.
“However, if we break down the numbers, the 15% includes the 1.5% of mid-tier and large companies – meaning the remaining 13.5% consists of SMEs. These SMEs, which are being taxed, are not wealthy conglomerates. They are hardworking businesses that significantly contribute to the country’s tax revenue.
“Moreover, SMEs are the backbone of the Malaysian economy. They account for over 38% of GDP (gross domestic product) and employ nearly 7.8 million people. Mid-tier companies also play a crucial role within this segment.
“The impact of taxation on these businesses will directly affect economic stability and employment,” Soh said.
The 26th edition of the FMM Business Conditions Survey revealed that Malaysian manufacturing sector in the second half of 2024 demonstrated steady momentum, with business conditions, sales and production strengthening amid high costs.
Sustained capital investment and steady employment levels underscore a strategic, long-term confidence as manufacturers navigate an evolving economic landscape with a balanced approach to growth and risk management.
Looking ahead to first-half 2025, the FMM survey showed domestic manufacturers are expected to prioritise efficiency over aggressive growth, focusing on stability amid global economic uncertainties. While employment remains stable and investment sentiment is steady, rising costs and external risks may temper business expansion.
The sector is moving towards gradual recovery, but caution remains a defining factor in strategic planning.
The survey also showed that manufacturers’ expectations for higher production volume fell from 32% previously to 30%.
Meanwhile, stable production expectations grew to 48% (favourable responses), reflecting greater predictability.
Manufacturers also anticipate rising production costs, with 72% expecting higher costs in the first half of 2025, up from 66% previously.
Further, domestic manufacturers remain cautiously optimistic about revenue prospects in 2025, with 56% expecting
growth, 24% anticipating stability, and almost 19% foreseeing declines.
Most respondents predict moderate revenue increases (1%-10%), while only 8% expect strong growth (>25%), reflecting measured confidence rather than aggressive expansion.
A majority of respondents (91%) expect the increase in minimum wage and mandatory Employee Provident Fund contribution to impact their operational expenses, while 9% believe there will be no significant effect.
Among those anticipating higher costs, 48% expect a moderate increase (5% to 10%), while 26% foresee a smaller rise (less than 5%), and another 26% anticipate a more substantial cost surge (more than 10%).
In 2025, manufacturers are bracing intensified cost pressures and slightly heightened competition, with 55% citing
rising input costs (up from 49% in 2024) and 48% noting increased competition versus 47% previously.
Additionally, 2025 introduces new issues such as regulatory burdens, labour shortages and sustainability compliance, suggesting that although some traditional challenges have moderated, the overall operating environment remains complex and demands a strategic focus on cost efficiency and market differentiation.
