KUALA LUMUR: Pikom, the National Tech Association of Malaysia, said the second Prihatin Rakyat Stimulus Package does not go far enough to help SMEs and business owners survive these trying times.
Its chairman Danny Lee said Malaysia is highly vulnerable to the global economic slowdown, and several major trading partners of the country have been severely affected by Covid-19.
“We must start thinking about the next coming months during the recovery period. It would take a minimum of six months before things return to a semblance of normalcy,” he said.
“Even then, Pikom foresees many SMEs will continue to struggle to get back on their feet. If businesses start to fail, the economy will stall and the unemployment rate will go up,” he added.
Representing over 1,000 tech companies, Pikom expresses some concerns relating to the current pandemic.
As an industry that employs over a million people, the technology sector is concerned that not enough is being done to ensure that employers and employees alike are assisted during this trying period.
The body said the RM600 subsidy for those earning RM4,000 or less and deferment of loans by financial institutions will no doubt help some, but a major proportion of the employees in the technology industry would not be able to enjoy that coverage.
In the tech industry, human resource costs can make up 70 to 80 percent of overall expenses of a company with many in the M40 category.
Pikom said the government should have used more in its arsenal to help combat the situation to prevent an economic meltdown. A direct cash aid to companies that require it the most is needed to prevent a collapse and ensure the business can remain sustainable.
“The exemption on HRDF contributions may not be sufficient. Restructuring EPF contributions would help but the government should have allowed for an automatic suspension of EPF contribution by both employer and employee for at least 6 months. This will free up at least another 24 percent into the economy during this vital time,” said Lee.
Pikom has also laid down some immediate steps that the government can take to assist employers and employees alike to ride through the storm:
a) Corporation tax for income earned should be looked into. In a tough operating environment, businesses are struggling to survive and cash flow is tight. Reducing tax would help free up additional capital to businesses to invest and hire additional employees. The tax reduction should be for years of assessment 2019 and 2020.
b) For professionals who are mostly paying income tax, a reduction in the contribution to the monthly PCB will free up some cash flow. In addition, some additional rebate and relief should be introduced for the taxpayer. This can be in the form of reduction in overall tax rate or increase in personal relief.
c) There is a need to address the issue of unpaid leave during the MCO period and beyond as business activity would continue to be depressed. Rather than lay off staff, providing the staff the opportunity to return to work when the situation improves is a better option. There can be a cap on the maximum amount of days rather than indefinitely placing an employee on unpaid leave.
d) Another major cost that impacts the company is rent and utilities over and above the earlier announcement. While the government may not be involved in the provision of such services, it may play a role in helping alleviate the situation such encouraging deferment of rental through a tax incentive.
e) The waiver of sales and service tax will also be able to provide an additional boost to the companies and reduce overall cost of doing business. This will have a catalytic effect and encourage more consumption.