Deloitte: Stimulus Package seeks to address immediate concerns, long term sustainability

The measures announced in the COVID-19 stimulus package announced yesterday seeks to address the immediate concerns associated with the virus’ outbreak as well as the long term economic sustainability of the country.

Deloitte Malaysia country tax leader, Sim Kwang Gek said the economic aid focused on the sectors’ hardest hit by the disease is to ensure the Malaysian economy remains on a strong footing and based on three-pronged strategies.

The strategies are mitigating the impact of COVID-19, spurring rakyat-centric economic growth and promoting quality investments.

“As countries scramble to contain the virus, we have seen its impact on the country’s 2020 economic growth, especially in the gross domestic product (GDP), tourism, airlines, travel companies and tourism-dependent retail industry,” she told Bernama today.
 

Immediate relief in tax instalments

The postponement of monthly tax instalment payments for businesses in the tourism sector she said, is a welcomed move as this relieves cash flow constraints faced by these companies. 

“However, this flexibility should be extended to businesses in other sectors such as retail, transportation and entertainment as they are equally affected by the COVID-19 outbreak.

“We expect the authorities to provide details on the postponement of monthly tax instalment payments,” according to Sim.

However, she said, it is unclear now whether the revision of tax estimates refers to the tax estimate for the financial year 2020 or tax estimate for the period April to September 2020.

Interim Prime Minister Tun Dr Mahathir Mohamad announced RM20 billion Economic Stimulus Package to ensure risks to the economy due to COVID-19 can be addressed effectively.

Several plans have also been lined up for implementation to ensure Malaysia’s economy will continue to be on the right track to sustainable growth.
 

Local tourism gets a boost

One of the measures announced in the package was to stimulate domestic tourism such as six per cent service tax exemption for hotels from March 2020 to August 2020, personal income tax relief up to RM1,000 on expenditure related to domestic tourism and digital vouchers of RM100 per person for all Malaysians.

Sim said, all are well within expectations and should incentivise Malaysians to go on a local holiday and spur the local economy.

Lower Employees Provident Fund (EPF) contribution by the employee by four per cent from April 1, 2020 to Dec 31, 2020

Lowering the Employees Provident Fund (EPF) rate according to her, will also have an immediate increase in the people’s disposable income.

This according to her, would bring a positive impact on domestic spending as the rate cut is expected to unlock RM10 billion worth of private consumption.

“It is heartening to note that this is not made mandatory and Malaysian workers can still choose to opt-out from the scheme. The limited time frame allowed for the EPF cut is a good measure to preserve retirement savings,” she said.
 

Promoting high value-added private sector investments

To promote investment in early-stage and growth-stage Malaysian companies, a Co-Investment Fund of RM500 million to be co-invested and matched by private investors will be set up. 

“We expect more details to be shared to provide clarity on the qualifying conditions for such facility,” said Sim.
 

What’s in store for the B40 group?

The B40 group has more to cheer as they will get their cash payout earlier in March 2020 instead of May 2020. 

An additional RM100 will also be credited into their bank accounts in May 2020, with RM50 channelled in the form of e-Tunai.
 

Financial assistance

The Special Relief Fund of RM2 billion by Bank Negara Malaysia (BNM) and RM200 million in microcredit facility by Bank Simpanan Nasional will help to ensure affected companies can stay afloat and ride through the current challenging environment. 

BNM is tasked to ensure that all financial institutions will assist all companies in need without exception.
 

Shared responsibility

In the spirit of shared responsibility, Malaysia Airport Holdings Bhd (MAHB) walks the talk by agreeing to provide rebates on rental for premises at the airport as well as landing and parking charges. 

“Industry players such as hotel operators and owners of shopping malls are called to play their part in helping affected businesses overcome current challenges.

“I’m hopeful that the stimulus package will help sustain the strong foundations of the Malaysian economy,” said Sim.