By Yvonne Khoo, Executive Director
After all the merriment in celebrating the nation's half-century mark, it is hoped there's more cheer to come when Prime Minister and Finance Minister Datuk Seri Abdullah Ahmad Badawi presents his "bag of goodies" for Budget 2008 this Friday.
The Ninth Malaysia Plan road map will take this nation to 2010 and beyond towards realising its aspirations to be a developed nation by 2020. Any bag of goodies therefore must have the five thrusts of the 9MP in mind. To recap, these thrusts are:
- To move the economy up the value chain;
- To raise the capacity for knowledge and innovation and to nurture "first-class mentality";
- To address persistent socioeconomic equalities constructively and productively;
- To improve the standard and sustainability of the quality of life; and
- To strengthen the institutional and implementation capacity.
The value chain
To move the economy up the value chain, we would need to be able to up-scale our manufacturing and related services industry. Over the past few years, various research and development incentives, including grants, have been initiated with this objective in view.
Companies need to be encouraged and "incentivised" to invest more monies into activities along the entire value chain - from supply management to product development to marketing and delivery systems. Incentives such as pioneer and investment tax allowances allow us to look only at the production aspects of a business.
The time has come for an enterprise-wide incentive system where the total incentive is granted for efficiency and development each step along the value chain. This could include rebates for companies sourcing raw materials from Malaysian small and medium enterprises (SMEs) to R&D grants. Fees paid to local professional chain management consultants, which result in increased productivity within the organisation, should be granted double deduction. Marketing expenses, linked to increased sales, should also be granted double deduction. Such incentives should not be limited to the manufacturing sector but also to the agricultural and service sectors.
Upgrading SMEs
While efforts are being undertaken to help the major players in the industry, the continual skills upgrade of SMEs should be enhanced. To encourage greater partnerships between big corporations and SMEs, double deduction should be granted to corporations willing to devote a team towards the enhancement of SMEs. A special deduction should be granted to corporations willing to transfer technology to SMEs and the royalty payments, if any, by such SMEs to these corporations should be tax exempt in the hands of the recipient. Again, to ensure the development of all sectors of the economy, such incentives should not be limited to the manufacturing sector, but also extend to the agricultural and service sectors.
Knowledge seeking
To ensure that the first thrust of the 9MP is met, there is an urgent need to raise the capacity of all Malaysians for knowledge and innovation. While incentives in the form of a relief up to RM5,000 is available for individuals pursuing courses in acquiring technical, vocational, industrial, scientific or technological skills or qualifications, knowledge is not limited to these areas. To create a first-class mentality, employees and all Malaysians must be encouraged to have an inquisitive mind and a hunger for knowledge - all forms of knowledge. Hence, a full or partial allowance for course fees for personal development should be granted irrespective of the field of studies. Furthermore, to encourage companies to send staff for professional courses, a double deduction should be granted to companies sending its employees to courses approved by the relevant professional bodies and institutes rather than go through the seemingly cumbersome process under the Human Resource Development Fund (HRDF) for reimbursement of the approved courses. The function of the HRDF could be realigned to approving such courses rather than managing the funds
Women's role
Women have been partners in the development of Malaysia, making up more than 48 % of the current workforce. As we juggle between our commitments towards our families and our careers, we are constantly pulled from every angle. I applaud the attempts at making the workplace more women-friendly but it is just not enough. Better and more workable incentives would have to let their women employers to let their women employees have a more flexible working environment. To this end, incentives should be granted to employers who finance the operating costs of women employees working from home.
Additional incentives, such as double deduction should be allowed for employers paying for child care centre is established within the organization. Consideration should also be granted to a tax exemption of a portion of income of women working part-time in a professional environment, as these women would have had to take a pay cut to work part time and thereafter devote the rest of their time to their families.
Going green
As the nation develops, the strain on our natural resources increases. In order to promote renewable energy, more needs to be done. Companies had previously been granted accelerated depreciation in respect of qualifying plant expenditure incurred on the equipment as certified by the Ministry of Energy, Communications and Multimedia as a plant or machinery used exclusively for the conservation of energy of its business. It is now time to extend these incentives to the Malaysian household. Households implementing solar energy devices, whether for heating or cooling, should be granted a tax rebate in respect of the energy-saving devices. Individuals and companies buying energy-saving vehicles should be granted capital allowances in respect of the full costs of these vehicles, without the RM50,000 or RM100,000 restriction currently imposed on non-commercial vehicles. Solar-powered vehicles brought into the country should be free of import duty and sales and road tax for such vehicles should be kept to a minimum.
Apart from energy, water is the nation's next most valuable resource but let us not take it for granted. Incentives in the form of R&D into water conversation programmes as well as the development of water conservation devices such as half-flush systems and home water-recycling systems should be introduced and enhanced.
Incentives for forest replanting and conservation efforts have been doubled to ensure that our rain forests are protected. Let us not compromise on nature in the name of ecotourism but work together towards creating a sustainable eco-friendly environment for the next generation. Incentives such as double deduction for the cost of land set aside by property development companies within their development as "green-lung" areas, such as parks and nature trails, should be considered.
To reduce further strains on the environment and to promote the use of public transport, a rebate should be granted to individuals taking public transport, similar to the book rebates currently given to promote the reading culture. This allows us to look at the rewards for taking public transport as opposed to the "stick" for not using it, such as the imposition of the SOV (single occupancy vehicle) levy
Corporate governance
Above all, good corporate governance must prevail. As such, while the industry develops, watch-dog groups, including external auditors should be given the ability to carry out their work without fear or favour. To this end, tax deductions should be granted in respect of fees paid to tax consultants, external auditors and other professionals, where the fees are not prescribed by the management but rather, determined by either a statutory body or shareholders of the corporations. This will align our tax treatment with that of other countries.
It is hoped that Budget 2008 and the "goodies" that come along with it would bring us to a higher level of economic and social development as we strive towards Vision 2020. Let the "goodies" be practical and workable. Let the implementation process be simple and not be buried by the red tape of bureaucracy. Let Malaysians work together towards excellence, glory and distinction.
This article was first published in the September 3-9 issue of The Edge.
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