Exercise tax efficiency without distorting equitability, Samenta urges govt

PETALING JAYA: Small and Medium Enterprises Association (Samenta) has urged the government to exercise tax efficiency without distorting equitability and to consider introducing value-added tax (VAT) or bringing back goods and services tax (GST) in 2024.

According to its national secretary Yeoh Seng Hooi (pic), the association shared similar sentiments voiced by the Federation of Malaysian Manufacturers last Thursday.

Yeoh said that with VAT or GST, certain measures should be adopted such as the initial rate should be no more than 4%, allowing a contra or net-off of the input tax credit against the tax to be remitted to Customs.

He also suggested that refund of excess tax to small and medium enterprises (SME) should not take more than 30 days, which otherwise, the government should pay interest on late refund.

“Zero-rating for basic essentials to ease the burden of the B40. This list should not be too long and should be based on socio-economic considerations only (not political), reduction of corporate income tax for small and medium enterprises to not more than 20%. The first RM500,000 of chargeable income should be capped at 15%,” he told SunBiz.

Additionally, he suggested taxes on promoted activities to be reduced so that investments in such areas are encouraged. He believed that there is no divergence in policies and intended outcomes.

“Take the case of entertainment tax, which is levied on concerts, cinemas and leisure businesses such as theme parks. It is archaic. It was introduced during colonial times when such activities were considered unwholesome.

“The present scenario has changed as entertainment and leisure activities such be encouraged and not stifled with taxes. Eventually, the consumer ends up paying a higher price for such activities as the tax is passed through to them,” Yeoh said.

He said the 25% tax levied by some states will dampen the growth of healthy entertainment and lifestyle industries. Local artistes will bear the brunt and consumers will be deprived of affordable entertainment and healthy activities in theme parks and concerts.

Yeoh questioned the reasoning behind the entertainment tax levied at a high rate of 25%, in comparison with duties on casinos and gaming machines at 35% and 30%, respectively. He said healthy activities such as local concerts and theme parks should not be lumped together with casinos and gaming machines.

Instead, Yeoh suggested that the entertainment tax imposed in 2024 to be not be more than 10%, to prevent burdening consumers while also allowing the government to generate a modicum of revenue.

Meanwhile, he lauded the Selangor state government’s decision to extend the exemption of entertainment tax of 25% until the end of 2023 as a reprieve for recovering SME and urged other states in the unity government to do likewise and grant the exemption until Dec 31, 2023.