KUALA LUMPUR: The New Investment Incentive Framework (NIIF) will balance complying with the Global Minimum Tax (GMT) while still keeping Malaysia competitive as an investment destination, said Datuk Johan Mahmood Merican, Secretary-General of Treasury, Ministry of Finance.
He said the government needs time to develop the NIIF because it wants to improve the current sector-based incentive system to a performance-based approach.
“And for the reason why we need that extra time … the Global Minimum Tax is a classic thing where developed countries bully developing countries to prevent us from introducing tax incentives, but at the same time we need to ensure that we have a framework of incentives that still makes us competitive as an investment destination so there are some areas that we are looking at to ensure that we remain competitive,” he said in a panel session at the 50th Deloitte TaxMax event today.
The NIIF is set to be implemented in the third quarter of 2025. The government has allocated RM1 billion for the initiative.
Johan stressed that real intention of NIIF is to show how the country ensures it transitions from the quality of investments rather than just quantity.
Under the new framework, incentives will no longer be automatically be granted to investors just because they operate in a promoted sector. “(Previously) in a promoted sector, and a large investor, they tend to get incentives,” he stated.
Johan suggested that the past approach may have contributed to Malaysia’s low tax-to-gross domestic product ratio as past incentives were too broad based.
“For example, one of the big debates today is we have very high FDR, there’s a lot of interest from data centres, but if we’re not careful, we might end up having a big investment in terms of value, but at the end of the day, a lot of data centres consume a lot of electricity and water, without necessarily creating jobs,” he said.
Johan stressed that the government wants investments that create high-income jobs as part of the transition and value-added. He said the government wants investments that not only bring high-income jobs but also support local businesses, especially small and medium-sized enterprises.
Additionally, the government plans to encourage investments in less-developed areas such as Kelantan.
Johan said the NIIF is also focusing on environmental, social and governance factors as part of the country’s long-term sustainability goals.
The 50th TaxMax, themed “Fostering Economic Growth the Madani Way, saw Deloitte tax professionals and guest speakers providing commentary on Budget 2025, focusing on Malaysia’s growth that is holistic, resilient and inclusive, while also uplifting the rakyat.
