Thailand
Malaysia: Glove makers to pay higher taxes
PETALING JAYA: Glove manufacturers are expected to continue reaping huge profits into next year with the amount of corporate income tax paid by the industry projected to reach RM4.7bil in 2021 after forking out RM2.8bil in 2020.
According to Maybank Investment Bank Research following its dialogue with Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz, the government decided it would not impose a windfall tax on glove manufacturers to avoid potential “opportunity costs/losses” such as glove manufacturing companies investing overseas instead of in Malaysia, and sending the wrong signal to existing and potential investors in other industries.
The RM400mil contribution by glove manufacturers as announced in Budget 2021 was voluntary and on top of their record corporate income taxes.
These were among the key points discussed during a post-Budget 2021 dialogue with the Finance Minister last Friday, Maybank Research said.
Glove companies have been bullish over demand for gloves next year even with a vaccine seemingly entering the final straight of trails. Orders for gloves have reportedly been secured well into next year and prices are also projected to remain on an uptrend.
Tengku Zafrul said there was also no plan to reinstate an automatic blanket loan moratorium, as the government has adopted a balanced approach between helping those in need and ensuring healthy credit culture so that financial institutions remained on strong footing and are resilient.
On the Covid-19 vaccine, Budget 2021 allocated RM3bil to acquire vaccines through Malaysia’s participation in WHO’s Covax programme and negotiations with the pharmaceutical companies undertaking the stage three clinical trials of vaccines are conducted with the aim of obtaining the vaccines in the first quarter of 2021.
Over the medium term, the government was committed to cut its budget deficit to 4% of GDP by 2023. A key strategy would be on revenue enhancing given the limited scope of cut spending as, for example, 95% of operating expenditure are “locked-in” obligations such as emoluments, debt service charges and retirement charges.
According to the report, the Finance Ministry has set up a committee to study various revenue enhancing measures. These include the possibility of re-introducing the goods and services tax (GST), analysing weaknesses in the tax regime and the impact of a new taxation on the economy, studying options for new taxes such as carbon tax and digital tax, rationalising tax incentives, improving tax administration and enhancing tax audit (for example, implementing tax identification numbers and enhancing data analytics).
Timing was also important on the introduction of any new taxes so as not to disrupt the economic recovery process as 2021 is a transition year from crisis to recovery.
Meanwhile, Parliament will vote on Budget 2021 on Thursday and if it is not approved, only a certain part of the budget can be spent – charged expenditure, which is essentially pensions and debt servicing that represents only 20% of the overall budget.
The remaining 80%, including operations of public services like healthcare, education, law and order, must be approved by Parliament.
The use of Section 102(a) of the Federal Constitution to pass a partial budget was allowed when there was insufficient time to approve a budget before the start of the new financial year.
This happened in 1999 when Parliament was dissolved as general election was called after the tabling of Budget 2000, and there was a special Parliament session before the end of 1999 after the general election to approve a partial budget for year 2000.
However, there is no precedent to approve a partial budget after the rejection of a budget.
Therefore, in the event of the Budget 2021 was not passed by the Parliament, a revised or new Budget 2021 needs be tabled and approved before the end of this year to avoid any delay into next year.
Source: https://www.thestar.com.my/business/business-news/2020/11/24/glove-makers-to-pay-higher-taxes