Thursday, January 21, 2010

Wednesday, January 20, 2010

More motor vehicles sales seen in 2010

PETALING JAYA: The Malaysian Automotive Association (MAA) expects Malaysia’s automotive total industry volume (TIV) to grow 2.4% to 550,000 units this year due to an improved global economic outlook and rising consumer sentiment.

President Datuk Aishah Ahmad said the multiplier effects from the Government’s stimulus packages would also boost the economy and create demand for new vehicles.

“It is going to surpass last year’s sales, definitely,” she told a press conference on the automotive outlook for 2010 yesterday. TIV for 2009 was 536,905 units.

Aishah said the Government’s 5% gross domestic product growth target for 2010 (versus an estimated 3% dip for 2009) was also another factor for the better automotive outlook.

If achieved, the 550,000 TIV forecast for 2010 would be the country’s second highest, surpassing 2008’s TIV of 548,115 units. Malaysia recorded its highest TIV in 2005 with 552,316 units sold.

“We expect 2010 to be a record year,” said Aishah, adding however that an increase in interest rates would have a significant impact on vehicle sales.

“Interest rates will have a bearing on vehicle sales. (If rates increase), sales would be impacted as it will affect the purchaser’s monthly payments. But it also depends on the quantum of increase.” Aishah said the MAA did not expect any increase in interest rates any time soon.

“We forecast interest rates to remain stable. At this point in time, we don’t see any indication that it will go up,” she said.

Aishah also said the recently announced petrol subsidy scheme, which requires owners of cars with bigger engine capacities to pay a higher price for petrol, was likely to have a short-term impact on sales.

“Initially there will be some impact but in the longer term people will get used to the price of fuel. If you can afford a bigger car, you can afford not having the fuel subsidy,” she said.

The Government earlier this month said it was planning a fuel pricing mechanism to ensure that only targeted groups, particularly those with lower income, would receive the fuel subsidy.

“However, we would like the Government to be fair and conduct a thorough study because owners of bigger engine sized cars are already paying higher excise duties because excise duties are based on engine capacity.

“At the same time, they are also paying higher road tax. So the Government is collecting a lot of taxes from these vehicle owners,” she added.

Aishah also said that while 2009’s TIV recorded a 2% dip from 2008, it exceeded the MAA’s initial forecast of 500,000 units. She said demand for vehicles improved in the final quarter of 2009.

“The better-than-expected performance was due to the introduction of the Government’s stimulus packages and its decision to liberalise the 27 sub-sectors, the introduction of the auto-scrapping scheme, improved business confidence, increased consumer spending and aggressive sales promotion activities by MAA members.”

In 2009, a total 486,342 passenger vehicles were sold compared with 497,459 units in 2008 while sales of commercial vehicles dipped to 50,563 units from 50,656 previously.

Taken from: http://biz.thestar.com.my/news/story.asp?file=/2010/1/21/business/5510316&sec=business

Understanding GST

By Deborah Loh

deborahloh@thenutgraph.com

MALAYSIA is among the last in the region to impose goods and services tax (GST) but it still shelved its original implementation in 2007. It was only after spending the last two years in consultation with tax professionals and industry players, that the GST bill was tabled in Parliament on 16 Dec 2009. It will likely be passed next year and come into force in mid-2011 at a rate of 4%.

This time, the sense of urgency is greater: Malaysia cannot continue depending on revenue from its depleting petroleum reserves, and must find sustainable ways of funding development. Called value added tax (VAT) in some countries, the GST is considered an equitable and comprehensive system of taxation that minimises evasion and ensures a broader revenue stream.

That is, if enforcement and implementation is top-notch. Much lies on the government to educate businesses and consumers about the GST, and to have a solid information technology framework to implement it. At the moment, the government has shed little information on its impact other than promising not to burden the poor. How should laypeople view the GST?

Price concerns

The immediate outcry is that GST will "feed the rich and starve the poor". There is the view that GST should be accompanied bylower personal and corporate taxes. There are worries that tax imposed at each stage of the supply or manufacturing chain will result inmultiple taxation on local industries and consumers at the retail end.

PricewaterhouseCoopers Taxation Services Sdn Bhd executive director Sitartha Raja Kumaran Rasiah notes that the government has promised not to burden the poor with GST by "zero-rating" certain essential services. These include water and electricity for households, says Sitartha. The government also intends to exempt education, medical and public transportation services.

"The government should also give some kind of assurance that it will not raise GST beyond the introductory 4% for some time. This may help people accept it better," Sitartha tells The Nut Graph in a phone interview.

People should also realise, he adds, that the GST is going to replace the current sales and services tax of 10% and 5% each. Certain goods and services may end up cheaper with GST, depending on whether those items are currently imposed with sales and services tax.

As for fears of multiple taxation, the input tax credit mechanism will allow industries along the supply or production chain to claim credit or get refunds on whatever GST is imposed."There should be no 'cascading' effect of multiple taxation."

The government should start an extensive education and public awareness drive now to explain how the tax works and its impact on prices, says Sitartha. "They should do a list of the prices of goods and services to compare prices pre- and post-GST."

GST implementation should also be accompanied by stringent price monitoring, and the government is on the right track with plans to adopt anti-profiteering laws, Sitartha adds.

Protecting the poor

When it comes to exempting "basic essentials" from GST, however, the government must be careful not to have an overly long list for political popularity. Taxand Malaysia Sdn Bhd managing director Dr Veerinderjeet Singh cautions that too many exemptions can nullify the purpose of GST as a broad revenue base.

The additional RM1billion in revenue that the government expects to earn annually from GST after it replaces the sales and services tax is "rather low", and could be due to the exemptions it plans to give, he suggests.

Ultimately, the list of GST-exempted goods and services may determine how well the poor are shielded. The full and final list has not been announced, but it should be limited to basic necessities for the population's poorer segment. Luxury items should be taxed in keeping with the GST principle that the higher income group pays more for consuming more.

Veerinderjeet notes that some countries adjust implementation of GST for the lower-income group by applying the tax only to businesses that achieve sales turnovers of a certain threshold and beyond. Or, by raising the taxable income threshold.

Cash off-sets can also be given to the poor in the first year of GST implementation, as done by some countries, he adds.

Government revenue and income tax

Lowering personal and corporate tax in tandem with GST are appealing from a consumer perspective. But doing so as soon as GST is introduced would only drive up the national deficit, which for 2010 is expected to be 5.6% of gross domestic product.

"It's more realistic to wait after the first one or two years to see how it's working out. If collection is smooth and revenue is substantial, then there are grounds to lower income tax," Veerinderjeet says.

Malaysia's situation is also different from Singapore's, where GST was introduced as a new tax and not a replacement tax as it is here.

"They had to lower personal and corporate tax to gain public acceptability, whereas we are replacing the sales and services tax," he adds.

Because GST here will be a replacement tax, it is not a given that government must lower income tax immediately, says Sitartha. At 4%, it is revenue neutral in that it is merely recovering a little more than the same amount of revenue earned through the sales and services tax.

"The government could raise the GST rate in the future, but it is important to do it slowly and gradually," Sitartha notes.

Making it work

GST or VAT may not be a perfect system but has worked well as a revenue base for other countries. Malaysia's problem may lie more in public education, implementation and enforcement.

Sitartha stresses that a clear and thorough explanation of the GST is necessary and urgent. "Australia managed to introduce GST with little inflation because the government had a good communications and education programme, especially for small businesses," he notes.

It is not just explaining the tax itself but also promoting the use of information technology, which is what will drive the taxation system, adds Veerinderjeet.

Electronic filing is key to ensuring speedy GST registration and refunds for those who qualify for input tax credits. This is very crucial for importers and supply-chain producers."

Poor registration and enforcement have hampered revenue collection even now, under the present sales and services tax regime, he notes. Some businesses escape remitting taxes yet still charge consumers.

A massive framework for e-filing and enforcement needs to be set up, and is why the government needs 18 months from the passing of the bill in 2010 before the GST can be enforced.

Milking it?

The government will be releasing more information soon on the GST, Finance Minister II Datuk Ahmad Husni Mohamad Hanadzlah tells The Nut Graph when asked for an interview on the tax.

But Pakatan Rakyat has started an anti-GST task force and is likely to make it an electoral issue. Sentiment is that Malaysia is ranked more corrupt than ever and people are cynical that imposing GST will only be another avenue for corruption.

Introducing taxes of any sort is hardly populist, yet the budget deficit and depleting natural resources leave the federal government with little choice. Still, if it wants to convince the public, it must answer tough questions about GST vis-à-vis other means of raising revenue, the huge profits of concession companies, and combating corruption.

Taken from: http://thenutgraph.com/understanding-gst

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Thursday, January 21, 2010

Top Stories Jan 22 2010

Wednesday, January 20, 2010

More motor vehicles sales seen in 2010

PETALING JAYA: The Malaysian Automotive Association (MAA) expects Malaysia’s automotive total industry volume (TIV) to grow 2.4% to 550,000 units this year due to an improved global economic outlook and rising consumer sentiment.

Understanding GST

By Deborah Loh

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