Question

How the Malaysian Government and the Inland Revenue Board of Malaysia assisted both businesses and taxpayers during the Covid-19 crisis.
1. What type of assistance was given to the taxpayers?
2. In your opinion, did the government act swiftly enough?
3. In your opinion, was the assistance good enough or could the government have provided more?
4. Who benefited the most from the assistance provided and who missed out?
5. Overall, do you think the assistance was effective?
write an essay of no more than 2500 words and include references.

Answer 1

*The Prime Minister of Malaysia has proposed the following measures  ​in times of Covid-19:-

Annual allowance for qualifying capital expenditure incurred on machinery and equipment from March 1, 2020 to December 31, 2020 will be increased to 40%
A tax deduction of up to RM 300,000 will be given for expenses incurred on renovation and refurbishment of business premises from March 1, 2020 to December 31, 2020
Double deduction will be given on pre-commencement expenses incurred by International Shipping Companies for setting up regional offices in Malaysia
Tax deduction on expenses incurred by companies for provision pf disposable personal protective equipment
Customs/Import and Other Miscellaneous Taxes:

Service tax exemption for hotel and similar
Import duty and sales tax exemption on equipment and machineries for port operators
Expansion of the value-added activities permitted in the Licensed Manufacturing Warehouse and the Free Industrial Zone.
Filing/Payment Deadline Extension

Deferment of Monthly Tax Installment Payments (CP204):
3 Months from April 2020 through June 2020 for Small and Medium Enterprises (“SMEs”)
6 Months from April 2020 through September 2020 for Companies in the Tourism Industry
Deferment of Monthly Tax Installment Payments (CP500)
CP500 payment for March 2020 and May 2020 tax installments can be deferred starting from April 2020 to June 2020; and
There is no requirement to pay the deferred tax installment payments and tax penalties will not be imposed. The balance of tax (if any) has to be settled upon the submission of the income tax return
Extension of time until 31 May 2020 is allowed for submitting documents for tax audit or investigation
Payments of WHT can be made between 29 April 2020 and 31 May 2020
Extension to 31 May 2020 for the submission of the irrevocable election form (Form LE3) for Labuan entities, where the due date falls within the period 18 March 2020 and 28 April 2020.

Due to COVID-19, with many international assignees in Malaysia performing duties in respect of their overseas employment/assignments and their employers concerns about the impact that their temporary presence – and additional unplanned days spent – in Malaysia may have on their Malaysia tax residency status, cross-border employment income, and the permanent establishment issues, the Malaysian Inland Revenue Board (“MIRB”) has provided guidance.

# Malaysia has often been a poster child for Southeast Asia's booms and busts. The nation is again at the confluence of powerful trends. Its experience in the pandemic illustrates conditions around the region, and the choices that it now makes may be instructive. In times of tumult, the country has usually been a source of stability. Malaysia tends to avoid the sudden swerves in policy and coups that have characterized many of its neighbors. The route that Malaysia takes to recovery will be closely watched. A crash-and-burn here would bode poorly for the region.

Prime Minister Muhyiddin Yassin has declared that nearly all curtailed activities can resume, rightly fearing a deep recession will be exacerbated every day the country is mothballed. But some powerful provincial administrations are balking. State leaders fret about a spike in infections. Should life return too quickly to a semblance of normality, there's a legitimate concern that the lid keeping cases under control will be quickly blown. But should a nation wait to reopen for business until there is little or no chance of a renewed viral spread? That could take years.

Malaysia's thankless equation is part of a global conundrum. Goldman Sachs Group Inc. and Morgan Stanley economists said in recent days that there's evidence that worldwide activity has bottomed and is starting to recover. But the rebound from a shockingly poor first-half is predicated, at least in part, on lockdowns easing. A jump in new cases from folks getting together again would prompt new closures.

Policy makers are contending with this great circularity. Vietnam called off its stay-at-home order last week. Singapore plans to gradually lift a few restrictions imposed during its “circuit-breaker” period. Indonesia, which for months denied the pandemic could penetrate its borders, has more Covid-19 deaths than anywhere in Asia outside China and India. Jakarta is taking a big hit to growth and may be running out of time to get ahead of the downturn.

For Malaysia, there are also homegrown political challenges. Just as the pandemic was rippling through the region, coalition intrigue felled Mahathir Mohamad’s government, the first led by a long-suffering opposition since independence. The new cabinet restores much of the old power structure but has yet to face a session of parliament; its claims of having majority-backing have yet to be tested on the floor. These are consequential times for a team that lacks the stable mandate of a general election.

In a nod to the dire circumstances, Malaysia's central bank axed its benchmark interest rate by half a percentage point Tuesday, the biggest reduction since the Great Recession. Bloomberg Economics foresees the economy shrinking 6.7% this year. The bank said conditions will be “particularly challenging.” Together with fiscal stimulus, officials aim to “offer some support to the economy.’’ Bank Negara has monetary space — the main rate stands at 2% after the cut — so why not use it? This isn’t the time to fret about the approach of zero. Across the world, borrowing costs are being pushed to rock-bottom levels.

The bank doesn't just have to worry about growth vanishing; consumer prices fell in March for the first time in a year. Malaysia could be heading for its first annual deflation since 1969, according to economists at United Overseas Bank Ltd. Presenting Bank Negara’s annual report last year, Governor Shamsiah Yunus told journalists to put deflation out of their minds. It shows how the unlikely has become entirely plausible in the Covid-19 era.

The year 1969 was a defining moment in Malaysia's history. Communal violence devastated Kuala Lumpur and gave birth to policies that became a bedrock: The majority Malays would receive an array of preferences, especially in the public sector and education, over ethnic Chinese, who long controlled the bulk of private wealth. The framework has persisted, though critics contend it fosters rent-seeking and saps aspiration.

It hasn’t been tested by economic circumstances like these. As in other countries, Malaysia’s pre-existing conditions look more serious under Covid-19 pressure. A lot rides on how they’re handled. This government wasn’t voted into office, but it’s the one Malaysia has. Reaching across the aisle to create a national unity team — Mahathir’s cabinet, for all its shortcomings, did have physicians in its top two slots — would show seriousness. Few things matter now more than judgment and experience.

Huge forces are reshaping the global economy in which Malaysia has mostly prospered the past few decades. At the least, the pandemic will accelerate trends already in place. Long reliant on manufacturing exports, oil and tourism, the country needs to retool, all the while managing an ethnically and geographically diverse populace. Does China, Asia’s most recent commercial patron, become emboldened or retreat? How does Malaysia handle that shift?

If the right choices are made, Malaysia lives to fight another day. If not, Southeast Asia loses another piece of stability in a world that needs it.

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