Budget 2011 – Malaysia, a shopping paradise

 

Kuala Lumpur, 15 October 2010
In line with the Government’s mission to achieve Vision 2020 and high income nation, the 2011 Budget has shown emphasis on spending in areas that encourage inclusive and sustainable development. Various changes and measures as can be seen, are set to ease the doing business of the entrepreneurs.

Various exemptions are given on the necessity equipment and instruments to reduce the cost of assets and materials, hence reduce the cost of doing business.

Exemption on sales tax on mobile phones, abolishment of import duty on tourism products and daily used products of approximately 300 items will tend to make the cost of production and trading cheaper. 

Various categories of import duty elimination especially on beauty, attire and related branded products will promote the country as a shopping paradise. Tourists like to shop. Projection of Malaysia as an ideal place for spending is a good move as tourism creates good chain effect on development of heavy to light industries. Airlines, transportations, hotels, tour guides, food outlets, shopping complexes, money changers, and many more. These are all the service lines that the country aims to create more advancements and revenue collections.

This is inter-connected and tweaks just right with the current increase in the 1% service tax from 5% to 6%. The increase not merely brings higher the customs collection that is seen to compensate the deferment in Goods and Services Tax, it also creates an opportunity for the awaited room to tax the FDIs that come in the form of tourists in this manner. This is a situation of earning in both ways. Hence, it is looked properly strategised and encouraging.

To recap, FDIs into Malaysia had dropped from RM22.1 billion in 2009 to RM9.6 billion in the first seven months of this year. Malaysia has good strength, resources, natural environment and stable economic that can attract foreigners. Measures through tourism are much faster and lighter as compared to the attraction through heavy investments, land related projects, etc that normally have more factors to weigh.

Besides the conventional tax measures to encourage development of industries, countries around the world had also introduced forms of green taxes to discourage unfriendly sectors. Green taxes are tax systems that act to reduce environmental damage through altering price signals. There are various forms of green taxes such as the carbon tax, fuel tax, plastic bag levy, landfill tax, tyre and batteries levy, etc. In Malaysia, the specific introduction of green taxes has not come into force. Instead, a more diplomatic way by “encouraging” the use of green technologies are in place.

We see extension of application period for tax incentives for energy conservation in the 2011 budget; extension of tax incentive period for reduction of greenhouse gas emission; and extension and enhancement of tax incentives for hybrid cars. But we do not see a more drastic way of introducing new green taxes.

As compared to what has been highlighted in the framework of 10th Malaysia Plan (2011-2015) that was supposed to give emphasis to the use of renewable energy, what has been announced in the Budget 2011 did not commensurate. If this is the Government’s call to promote greater use of renewable energy and committing to bring down environmental abuse, more effective measures should be considered.

As a whole, despite that there is no immediate and direct goodies being delivered to the hand of the Rakyat, the Budget is a balanced one especially in its allocation of fund that is rather fair and neutral.

 
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For further information please contact:
Ms. Seah Siew Yun
Senior Executive Director, Tax Advisory & Compliance
T +03 2692 4022
D +03 2732 2155
E seah@gt.com.my

 

 Notes to editors:

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