Budget 2014: PIKOM Statement

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Petaling Jaya, 25 October 2013

PIKOM is encouraged by the fiscally responsible Budget for 2014 announced by the Prime Minister cum Finance Minister. It is a comprehensive budget that is cognizant of all the stakeholders in the country. The reduction of the fiscal deficit with the aim to achieve a balance budget by 2020 and ensuring the debt to GDP does not exceed 55% are steps in the right direction. The business community, especially the ICT sector, would view the Budget 2014 positively. This budget addresses the medium and long term needs of the nation.

“We laud the government for the courage in announcing the GST,” said Woon Tai Hai, PIKOM chairman. “It is not an easy decision and the government has shown the resolve in implementing the GST by 1 April 2015. The measures to mitigate the effects of GST implementation were also introduced thereby providing a softer landing for businesses and consumers.”

Whilst the GST may result a dip in consumption in the early stage as evident in countries that have implemented GST, but in the long run, it will smoothen out and even spur growth in the long run.

For the ICT industry, the GST implementation will have an impact wherein some of the ICT components and products were zero tax before and with the 6% GST, it will surely have an impact to the consumers as the cost will be passed down.

With the implementation of GST, a 1% reduction in corporate tax will augur well to the business community. A lower tax regime will help establish Malaysia as an attractive destination for foreign investments which is still relatively high compared to countries such as Hong Kong and Singapore. The overall reduction of personal income tax by 1-3% is certainly timely for the GST implementation.

Overall, GST at 6% would help widen the country’s tax base by generating an estimated RM22 billion. However, the key is in its execution to ensure good results and better understanding. We are delighted that tax incentives have been extended for GST related accounting and ICT training programmes. The extension of accelerated depreciation for ICT will be of great help to corporations.

Secondly, we are happy to note the announcement by the Prime Minister on widening the high-speed broadband coverage in the country is very laudable. This includes investments of RM 1.8 billion for HSBB Phase 2, RM 1.6 billion for rural areas with the building of 1,000 transmission towers. This will promote the digital economy and lifestyle for the community especially the rural areas in Sabah and Sarawak. However, we are still concerned on the overall communications cost as compared to our regional neighbours.

Thirdly, we are happy that the budget also focused on entrepreneurship development which is the lifeline to SMEs and will lead to higher job creation. The budget allocated to MAGIC and the development programmes by 1MET will help spur entrepreneurs forward.

Lastly, PIKOM is appreciative of the government for responding to our call for a single ICT Ministry. “With Multimedia Development Corporation (MDeC) now under the fold of the Ministry of Communications and Multimedia, this will mitigate the risk of overlap of accountability between ministries; and augur well for the industry,” said Woon.

The information and communications technology (ICT) industry has been charting an impressive 10% average growth yearly for the last 5 years. The industry is now worth at RM55 billion and targeted to hit RM100 billion by 2017 and a contribution of 20% to the country’s GDP by the year 2020.