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Malay Mail
11 hours ago
- Business
- Malay Mail
Business groups urge delay of SST expansion, warn 8pc rental tax from July 1 could derail Malaysia's recovery
KUALA LUMPUR, June 16 – Six major business associations have jointly called on the government to defer the upcoming expansion of the Sales and Service Tax (SST), warning that the move could severely harm Malaysia's economic recovery. In a joint statement, the groups warned that the imposition of 8 per cent SST on commercial rental and leasing services from July 1 could exacerbate inflation, hinder investments, and weaken consumer confidence. 'We recognise the need for fiscal consolidation, but the timing, scope and magnitude of this tax measure are gravely misguided,' the groups said in a statement here. The statement was jointly released by the SME Association of Malaysia, Malaysia Retail Chain Association, Malaysia Retailers Association, Bumiputra Retailers Organisation Malaysia, Malaysia Shopping Malls Association, and the Federation of Malaysia Business Associations. They said businesses are already under immense cost pressure from recent policies, including the hike in minimum wage, rationalisation of fuel and utility subsidies, and mandatory e-Invoicing — amid broader economic challenges like the weak ringgit and global trade uncertainty. 'Our members from sectors such as retail, logistics, manufacturing, and healthcare are struggling to cope with rising costs,' they said. The associations warned that the SST expansion would increase operating expenses for small and medium enterprises (SMEs) that lease premises, and these costs would likely be passed on to consumers, fuelling inflation and shrinking purchasing power. They said unlike the Goods and Services Tax (GST), the current SST regime does not allow input tax credits, causing tax cascading and double cost exposure along the supply chain, which they said is particularly harmful for SMEs operating on slim profit margins. 'We are not against tax reform, but it must be implemented with empathy and realism,' they said, adding that a more consultative and inclusive approach is needed. The six groups presented five demands to the government: deferment of the SST expansion, reduction of the SST rate on rentals, exemptions for micro and small businesses, targeted relief for key sectors, and structured consultation with the business community. They stressed that while businesses support fiscal responsibility, it should not come at the cost of economic stability or the survival of small enterprises. On Sunday, Prime Minister Datuk Seri Anwar Ibrahim said the government is retaining the SST, which is more targeted in nature, particularly on imported luxury items such as avocados and cod, products typically consumed by high-income earners.
New Straits Times
11 hours ago
- Business
- New Straits Times
Business groups warn SST hike risks derailing economic recovery
KUALA LUMPUR: Malaysia's leading business and retail associations are calling on the government to defer the upcoming expansion of the Sales and Service Tax (SST), set to take effect on July 1, 2025, citing serious concerns about its potential impact on the country's still-recovering economy. In a joint statement, six major associations urged the government to reconsider the proposed 8 per cent SST on commercial rental and leasing services, which they warn could trigger inflation, harm small and medium enterprises (SMEs), deter investment, and dampen consumer confidence. "As the collective voice of Malaysia's business and retail sectors, we recognise the importance of fiscal consolidation; the timing, magnitude, and scope of this tax measure are gravely misguided. The policy, in its current form, threatens to undo the very economic progress we have painstakingly rebuilt over the past two years. "Worse still, this move sends the wrong signal to domestic and foreign investors, raising doubts about policy consistency and the government's commitment to fostering a business-friendly environment." The statement was issued by the SME Association of Malaysia, the Malaysia Retail Chain Association (MRCA), the Malaysia Retailers Association (MRA), the Bumiputra Retailers Organisation Malaysia (BRO), the Malaysia Shopping Malls Association (PPKM), and the Federation of Malaysia Business Associations (FMBA). "Collectively, our six associations represent tens of thousands of businesses and millions of workers across Malaysia. We strongly urge the government to pause and reassess the current path of the SST expansion, particularly the rental and leasing component, which is poised to unleash inflationary pressure, disrupt business sustainability, and strain the rakyat. "The business community stands ready to support national fiscal goals, but such goals must be achieved through fair, practical, and inclusive policymaking. We call on the government to act decisively, responsibly, and in the national interest before irreversible damage is done to the economic ecosystem that supports jobs, innovation, and long-term growth.' The statement highlighted that many businesses across key sectors, including retail, F&B, logistics, manufacturing, healthcare, and education, are already grappling with a sharp rise in operating costs, including a minimum wage increase from RM1,500 to RM1,700, diesel subsidy rationalisation that caused a 55.8 per cent jump in fuel prices, higher electricity and gas tariffs, and new stamp duties and levies. Additional burdens such as mandatory e-Invoicing, an extra 2 per cent EPF contribution for foreign workers, rising raw material prices, a weaker ringgit, and elevated interest rates are also straining business sustainability, particularly for SMEs that lease their premises. Adding an 8 per cent SST on rental and leasing services will significantly raise operational costs for SMEs and retailers, particularly those who lease their premises. Ultimately, this burden will be passed on to consumers, fuelling inflation and weakening household spending power, the associations warned. They also cautioned that the rising cost pressures may force many small businesses to downsize or shut down, triggering a wave of closures, job losses, and a deeper slowdown in domestic economic activity. "Such volatility could directly impact Malaysian exporters, especially SMEs that are part of global value chains, and further erode export competitiveness, placing additional strain on revenue and jobs." On the global front, the groups pointed to growing trade uncertainty, particularly the potential return of US tariffs, which could further undermine Malaysia's export competitiveness, especially for SMEs integrated into global value chains. The associations argued that the current SST framework lacks the transparency and efficiency of the previous Goods and Services Tax (GST) system, which allowed for input tax credits and avoided cascading taxation across supply chains. Under SST, costs pile up at every stage, leading to higher prices for goods and services. For SMEs operating on thin margins, this model is unsustainable and discourages reinvestment, expansion, and job creation, they said. While acknowledging the flaws of the former GST, the associations reiterated their support for a reformed version, which many in the business community view as a more equitable and growth-friendly tax system. GST enabled businesses to claim input tax credits and enhanced overall tax administration efficiency, they said. Many local and international businesses have since advocated for the reinstatement of a reformed GST, rather than continued reliance on the regressive SST model, which they say hampers competitiveness and economic growth, the association said. "We strongly urge the government to take into serious consideration the genuine hardships currently faced by businesses, especially in these challenging economic times. It is imperative that any tax policy or adjustment be approached with empathy and practicality, with the aim of ensuring that it does not become an added burden on already struggling enterprises," the statement concluded. The associations called for a more consultative approach to tax reform that prioritises business sustainability, national competitiveness, and long-term growth.
The Star
12 hours ago
- Business
- The Star
Business groups urge government to defer and reduce SST hike
KUALA LUMPUR: Six major business associations have strongly urged the government to defer the expansion of the Sales and Service Tax (SST), particularly the 8% levy on commercial rental and leasing services set to take effect on Tuesday (July 1). In a joint statement, the SME Association of Malaysia, Malaysia Retail Chain Association, Malaysia Retailers Association, Federation of Malaysia Business Associations, Bumiputra Retailers Organization Malaysia, and Malaysia Shopping Malls Association warned that the tax could severely cripple businesses already facing escalating costs. They described the timing and scale of the new tax as "gravely misguided" and warned it would trigger inflation, shrink consumer spending, discourage investment, and threaten the survival of many small and medium enterprises (SMEs). The associations added in a statement on Tuesday (June 17) that businesses are already under pressure from higher minimum wages, diesel and electricity prices, reduced subsidies, mandatory e-invoicing, foreign worker EPF costs, and a weakening ringgit. "SST is a regressive tax without input credits, unlike the former GST system, and it is inefficient, anti-business, and harmful to growth and investment." They proposed the government consider reinstating GST with reforms instead of expanding the current SST. Among their five key considerations for the government are to firstly postpone the SST expansion until economic recovery is stronger. They then added that the proposed 8% SST rate on rentals is reduced and micro and small enterprises be exempted along with targeted relief being offered to critical sectors. 'Engage in consultation before implementing tax reforms,' they added. The associations said they were not opposed to tax reforms, but stressed the need for fair, inclusive policies that do not endanger business sustainability or economic recovery. "The business community stands ready to support national fiscal goals, but such goals must be achieved through fair, practical, and inclusive policymaking. "We call on the government to act decisively, responsibly, and in the national interest before irreversible damage is done to the economic ecosystem that supports jobs, innovation, and long-term growth," added the associations.
