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Good support for GST comeback

FMM In The News: THE STAR, KUALA LUMPUR, Wednesday, September 7, 2022 -  The Federation of Malaysian Manufacturers’ (FMM) latest survey of business conditions in the manufacturing sector showed that a majority of respondents favoured the reintroduction of the goods and services tax (GST) at a lower rate of 4%.

FMM president Tan Sri Soh Thian Lai said survey respondents felt that the GST is a “good broad-based tax and a majority of the industries (in the survey) would prefer its reintroduction.”

The 21st edition of the semi-annual FMM-MIER (Malaysian Institute of Economic Research) Business Conditions survey polled 794 respondents from July 9 till August 12, 2022.

About 74% of the survey respondents supported the reintroduction of the GST.

“Those who did not support the reintroduction of the GST said they felt there would be a cost impact on consumers and would result in burdensome paperwork, documentation and claims process,” Soh told a media briefing.

He noted that 49.1% of the survey respondents said a six-month period would be needed for a transition back to GST.

On the business activity outlook for the second half, Soh said more respondents (compared with the previous survey) are expecting a slowdown in local and export sales.

“Production and capacity utilisation are expected to slow down in the coming months as well,” he said.

Soh pointed out that there are signs of manufacturers taking a cautious stance, as uncertainties in the global economy and tighter monetary conditions are expected to slow trade and the economy, going forward.

About 57% of the respondents said they would increase selling prices due to rising costs of raw materials, wages and logistics.

However, Soh noted that recruitment in the manufacturing sector is expected to remain active in the second half.

About 33% of the respondents will likely employ more workers soon while 16% are planning to downsize their workforce.

Regarding the business recovery compared with pre-Covid levels, about 39% of the respondents said they had recovered while 32% said they had not, and the remaining 29% said they are doing better than pre-Covid levels.

Soh also pointed out that in the second half, respondents would likely face the same obstacles as they did in the first half, with rising cost of raw materials and labour expected to remain the top two issues.

“Third on the list, in terms of responses, is labour shortage, followed by logistics cost (freight and domestic transport cost) and, once again, the challenges in the foreign worker recruitment process (delays and changes in quota rules),” he said.

As for the interest rate hikes this year, nearly half of the survey respondents said this would increase their cost of production as well as impact their cashflow and business operations.

Close to 22% believed the interest rate hikes would impact their ability to service their current debts, while 20% foresee a delay or scale-down in their business expansion plans.

On a positive note, 28% of the respondents said the interest rate hikes would have no impact as they will still be able to service their debts and their cashflow will be healthy enough to support their operations and business expansion plans.

Regarding Budget 2023 wishlist, Soh said the top three proposals were for a reduction in both corporate and personal taxes, moderation in energy cost (electricity and natural gas) and reintroduction of the GST, with many calling for a lower rate.

“Many respondents have also called for a strengthening of the ringgit.

“Other proposals include addressing the current labour shortage issues, especially in expediting the processing and approvals for foreign workers; control inflation, especially for raw materials; and provide tax incentives and grants, in particular to support the small and medium-sized enterprises, export activities, automation, Industry 4.0 and digitalisation.”

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