The Asia Pacific Investment Bank (APIB), has suggested that a reduction in corporate tax rate would help to lift the financial burden for SMEs that have been through, or are currently facing severe financial distress due to business suspensions as a result of the resumption of the Conditional Movement Control Order (CMCO).
The CMCO was implemented earlier this year following the more extreme Movement Control Order (MCO), as an effort to slowly ease restrictions on work and travel as Covid-19 cases began to fall. However, the recent spike in confirmed cases within Malaysia has led to the government reintroducing the partial lockdown in order to curb the spread of the infection.
Institute for Democracy and Economic Affairs senior fellow and Centre for Market Education CEO Dr Carmelo Ferlito concurred that the suggestion made by the bank is practical and viable, considering the strong impact of the Covid-19 pandemic.
He added that the resurgence in Covid-19 cases comes at a bad time, as businesses, especially smaller SMEs, have only just begun recovering from the hard blow as a result of the first MCO.
“A general thought on corporate and income tax reductions is a must in the current scenario. The survival of the economic system, which is the survival of individuals and families, is at stake here,” he told the Malaysian Review in an interview over the phone.
However, Ferlito said the tax cut needs to be accompanied by the commitment to avoid extensive CMCO like the one recently involved in Selangor.
He also noted that it would help greatly if there was further clarity on the guidelines and standard operating procedures for the current CMCO, as well as an Asean strategy on international borders.
Recently, APIB CEO Chris Wang said the Covid-19 pandemic had taken a toll on 900,000 SMEs nationwide, especially those that operated in the tourism, manufacturing, catering and retail sectors.
He added that SMEs are faced with huge financial challenges, especially with regards to shortage in working capital and cashflow. Wang added that businesses in Selangor, Kuala Lumpur, Putrajaya and Sabah are especially hard-hit following the announcement of the CMCO by the government recently to contain the third wave of the Covid-19 outbreak.
One suggestion that Wang has made involves requesting that Bank Negara extend the six-month loan moratorium period which had previously ended on 30 September. This initiative would provide SMEs with a little more breathing room by increasing cashflow and offering more room to manoeuvre and survive the pandemic.