PETALING JAYA: Small and medium enterprises (SMEs) want the government to make good on its promise that it will extend a helping hand to support their recovery.
“Among the challenges faced by SMEs are the high cost of raw materials and labour constraints (which are) driving profit margins down,” Small and Medium Enterprises Association of Malaysia (Samenta) chairman William Ng told FMT Business.
“We are hoping to see tax incentives and financing opportunities to support business recovery.”
At the opening of the budget consultation session on Jan 17, Prime Minister Anwar Ibrahim, who is also the finance minister, had announced that digital advancement, SMEs and the green economy would be the focus of the revised Budget 2023.
Samenta wants the income tax rate to be lowered to 15% for the first RM500,000 in taxable income in addition to a 50% deduction on taxes for incremental profits from abroad.
For SMEs with paid-up capital of not more than RM2.5 million, the tax rate was reduced from 18% to 17% for the first RM500,000 of chargeable income from the 2019 year of assessment. For chargeable income above RM500,000, the tax rate is 24%.
Samenta also agreed with a Federation of Malaysian Manufacturers (FMM) proposal that full tax exemption be extended to businesses that introduce innovations that meet the fourth industrial revolution (IR4.0) standards.
Ng said such measures would encourage local businesses to rejoin the global supply chain and adopt digitalisation to avoid falling further behind.
To level the playing field for SMEs in the local markets, he said, Samenta would like to see all government-linked companies (GLCs) present an annual report card containing details of their activities that involve SMEs.
“The report should provide details on the number of existing and new (SME) suppliers that currently serve GLCs as well as new ones that will be taking that role,” he said.
“Over and above that, the report should outline a GLC’s efforts to help SMEs upgrade their skills and readiness.”
Don’t keep SMEs waiting
Cash flow is another problem, according to the SME Association of Malaysia president Ding Hong Sing, and it is strangling their operations.
“Businesses need cash fast, and they lose precious time waiting for their grants or loans to be approved,” he pointed out.
Ding said the funding schemes for SMEs must be efficient enough to enable the timely release of funds to businesses.
“How can SMEs do business if they have to wait for months for money? How long should they have to wait for government grants? It’s almost as good as never (applying for loans),” he told FMT Business.
He said loans from private banks are often not the first choice because of the higher interest rates they charge.
Part of the reason SMEs face cash flow problems is the long credit terms they are expected to extend to their customers.
FMM has proposed that a statutory period for payment of 45 days be introduced, similar to Thailand’s Trade Competition Act.
Deciphering the ESG enigma
Ding said meeting the increasingly complex environmental, social and governance (ESG) standards is another problem that SMEs face.
He said SMEs have limited knowledge on ESG and its implementation and they would have to pay a consultation fee if they wish to implement the framework.
A way out, he said, is for the government to introduce a training scheme on ESG for SMEs.
In line with this, Ding said, the government should establish an agency to advise SMEs before they embark on sustainability-related projects. It has to be a practical and easy to understand guide.
FMM has proposed that a RM2 million fund be set up to support SMEs that wish to kick-start their ESG initiatives.
Ding added that tax relief for SMEs that introduce ESG programmes could make the initial investment less daunting but would be of no use if they failed in the short term.
Source: https://www.freemalaysiatoday.com/category/highlight/2023/02/21/smes-counting-on-budget-2023-for-relief/