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Fiscal Measures

The following were FMM proposals to the Ministry of Finance for the 2012 Budget:

  1. Address budget deficit by ensuring value for money in government projects, not through rolling back reinvestment allowance and export promotion incentives. Implement pre and post audit on project implementation, especially those using public funds. Government procurement must be more transparent and open to all using margins of preferences. The current public procurement system “promotes” the purchase of foreign made products instead of Buy Malaysian.

  2. Improve R&D incentives especially double deduction to be automatic to increase R&D activities and innovation.

  3. Enhance and widen the scope of the automation soft loan scheme to all industries as long as it is for mechanization and automation to increase productivity and move up the value chain and to reduce dependency on foreign workers. Currently, the RM300 million fund (launched in February 2007) is only open to the automotive; electrical and electronics; iron and steel; wood products and furniture; textile and apparel and plastics and chemical products.

  4. Remove import duties on parts and components for robotics and automation machinery. The high import duty and sales tax is a major challenge, especially as almost all major components used in the automation technology industry are fully imported. Even if there is a local manufacturer for any of the automation components, the scope of supply is usually limited due to the diversity of components and specifications used in the industry.

    In addition, companies are able to import complete machinery and equipment (M&E) without paying import duty and sales tax. This has put local M&E makers at a disadvantage as most of the automation components they purchased are taxable when they supply to local manufacturers.

    The industry’s recommendations could assist in promoting Malaysia as a regional system integration hub. With a lower cost arising from the lower import duty, local manufacturers especially the SMEs could afford to adopt the latest automation technology to be more efficient, to raise productivity and improve on quality.

  5. Lower tax regime, including broadening tax bracket for individuals as additional incentive to knowledge workers.  The Government should extend to Malaysians working in the country the benefit of personal income tax rate at 15%, which had been offered by the Talent Corporation under the Returning Experts Programme (REP) to attract Malaysians working abroad to return home. Locals are also Malaysian citizens and should not be discriminated against. Personal income tax at RM100,000 income should attract a marginal rate of 15% instead of the present 26% to equalise the tax treatment and have a more competitive personal tax regime for knowledge workers. The subsequent tax rates should be 20% for taxable income at RM200,000 and 26% at RM300,000. Please refer to the chart attached as Appendix 1.

  6. Tax incentives to accelerate energy efficiency initiatives in building insulation. Building insulation as been identified as one of the Entry Point Project (EPP) under the Economic Transformation Programme (ETP) under EPP9. FMM calls on the Government to provide sufficient funding/incentive to ensure smooth implementation of the EPP9 especially on building insulation. Encourage the public to be energy efficient by offering a personal tax deduction of up to RM3,000 per residential building for installing insulation materials. Grant Investment Tax Allowance of 100% for venturing into New Equipment/Technology which reduces energy consumption or to improve EE. Extend the import duty and sales tax exemption on EE products such as high efficiency motors and insulation materials approved by the Energy Commission. To ensure that EE products benefit users, have all EE products to be certified by the Energy Commission

Submitted on April 29, 2011

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