| 7-minute read |
Kicking off into 2019, the tabled Budget 2019 is expected to gradually kick into gear. All eyes are on the PH government’s inaugural attempt to revamp Malaysia’s economic growth and progress. The main focus of this fiscal year’s planning is none other than multiple measures to expeditiously cut down on our national debt.
Despite being received with varying responses, Budget 2019 is, in fact, one to look forward to for SMEs and business owners alike. Key highlights in Budget 2019 such as taxation reviewal, introduction to digital tax, adoption of Industry 4.0, and efforts to strengthen SMEs, are just some that we will look into further in this article.
Here are the 4 major ways Budget 2019 can benefit SME business owners out there.
1. Reviewing Taxation
Starting from 1 June 2018, the nation is re-introduced to the Sales and Services Tax (SST) in place of GST. With 10 times the number of exempted items as compared to GST, SST’s biggest impact is surely on businesses.
In contrast to 472,000 companies registered under GST, only 100,000 companies are required to collect SST. Therefore, this greatly relieves the burden of multiple small and medium enterprises.
According to initial research conducted by the Ministry of Domestic Trade and Consumer Affairs, 70% out of 417 inspected goods and services were found to experience price reductions under SST. Ultimately, this translates to the increase of purchasing capacity for both businesses and end consumers.
2. Introduction To Digital Tax
The digital tax falls under a new tax reform to be implemented by the government. This system is crafted specifically to level the digital space playing ground for local businesses against foreign competitors within the industry. (Read our previous article on Digital Tax here)
Additionally, a Tax Reform Committee was also established to oversee the execution and implementation of the tax reform in these two main areas:
- Imported services will be subjected to Digital Tax to ensure our local service providers such as architecture, graphic design, Information Technologies (IT) and engineering design services are not unfairly disadvantaged against their foreign competitors starting 1 January 2019.
- For online services imported by consumers, the foreign service providers will be required to be registered with the Royal Malaysian Customs, and are required to remit the relevant Digital Tax on the transactions with effect from 1 January 2020. Examples of these services will include, but are not limited to downloaded software, music, video or digital advertising.
Other measures are also under way in order to neutralise the cost disadvantages faced by physical retailers against virtual storefront counterparts, especially those operated by foreign entities.
3. Accelerating the Adoption of Industry 4.0
In line with the 11th Malaysia Plan, the adoption of Industry 4.0 will be pushed into acceleration in 2019. In essence, Industry 4.0 refers to the trend of automation and data exchange in manufacturing technologies which involves the combination of cyber-physical systems, internet-based operation, cloud computing, cognitive computing and more.
In order to make Malaysia the prime destination for high tech industries, the blueprint of Industry 4.0, named as Industry4WRD, will take on the following measures:
- Allocation of RM210 million from 2019 to 2021 to support the transition and migration to Industry 4.0. The Malaysia Productivity Corporation will carry out Readiness Assessments to assist up to 500 Small Medium Enterprises (SMEs) to migrate to Industry 4.0 technologies.
- To incentivise SMEs to invest in automation and modernisation which forms part of the Industry 4.0, RM2 billion will be provided under the Skim Jaminan Pembiayaan Perniagaan (SJPP) loan guarantee program where the government will provide a guarantee of up to 70% of the amount financed.
- The government will establish a RM3 billion Industry Digitalisation Transformation Fund under Bank Pembangunan Malaysia Berhad (BPMB) offering an interest subsidy of 2%. The purpose of this fund is to accelerate industry adoption of Industry 4.0 related technologies including robotics and artificial intelligence.
- MIDA will continue to provide matching grants through the High Impact Fund (HIF) with a specific emphasis on promoting Industry 4.0 initiatives. This includes activities such as Research & Development, adoption of international certification and standards, modernisation and upgrading of facilities and tools with the latest technology.
4. Strengthening Small Medium Enterprises (SME)
Generally, the primary engine of our nation’s economy at the moment is credited to the SMEs that makes up a whopping 98.5% of the business ecosystem. Hence, no surprises that SMEs are another primary focus in Budget 2019 with measures as follows:
- A RM4.5 billion SME fund will be made available via commercial financial institutions with a 70% guarantee from SJPP, including RM1 billion for Bumiputera SMEs.
- Reduction from 18% to 17% for the corporate income tax rate for SMEs with taxable income up to RM500,000 and paid-up capital of up to RM2.5 million.
- Encouraging exports through financing by the Export-Import Bank of Malaysia Berhad (EXIM) by making available RM2 billion worth of credit and takaful facilities to SME exporters.
- Allocating RM100 million to upgrade the capability of the SMEs in the halal industry through various programmes in order to increase exports and to make Malaysia a global halal hub by 2020.
- A RM1 billion SME Syariah Compliant Financing Scheme made available via Islamic financial institutions to finance exporters of halal products, where the government will provide a profit rate subsidy of 2%.
- Perbadanan Usahawan Nasional Berhad will also make available RM200 million for the wholesale and retail industry, as well as for the purchase of business premises to be rented to Bumiputera SMEs. In addition, RM100 million is allocated to TEKUN to finance small enterprises.
- The government will allocate RM20 million to initiate a ‘Buy Malaysian First’ campaign to support local products and services. The campaign will be focused at grassroots level to provide a platform for local producers, manufacturers and service providers to market their products and services at hypermarkets, shopping centers and trade fairs.
- Commit to reduce our dependence on low-skilled foreign labour. Therefore, the government will implement a new tiered levy system where the levies charged will be higher for employers with a higher proportion of foreign workers.
- The shortage of workers in the agriculture and plantation industries and the decline in prices of agricultural commodities have affected output in these sectors. The government will assist these two sectors by reducing the extension levy for foreign workers who have served for 10 years or more, from RM10,000 to RM3,500 per worker per annum.
Given the proposed measures laid out, all ready in the pipeline, the window of opportunities to acquire funding, assistance, tax reduction and support in terms of workforce, SMEs from different industries will equally enjoy the benefits relatively.
Stay Updated and Grab Your Chances
To sum everything up, Budget 2019 puts on the table an increased amount of incentives and funds, greater support in terms of technology and digital adoption in businesses, strong push towards consumption of local goods and services, and emphasis on growing the halal industry.
Our advice to SME business owners out there, stay updated and do not hesitate to apply for whichever funding that is applicable to your business. Or to make it easier, you can check out Loanstreet’s personal loan tool to compare and select the best type of funding in order to help your business grow.
All sources extracted from The 2019 Budget Speech Text*