Report of 2010 SMEs Survey
Background of The Survey
Our Government has postponed the second reading of Goods and Services Tax (GST) bill, originally scheduled at the months March/April 2010, to gain more feedback from the public after its first reading in December 2009. Meanwhile, Finance Ministry tax review panel chairman Datuk Kamariah Hussain said the postponement of the second reading of the GST Bill did not mean the tabling of the bill would be halted as GST would eventually be implemented. Henceforth, ACCCIM hope that by conducting this survey, it will help to comprehend how ready are the Malaysian SMEs to face this new broad based consumption tax system.
Do the Malaysian SMEs understand the fundamentals and mechanisms of GST? Are they ready to prepare for changes and comply with the GST rulings? This survey aims to gauge the taxation matters of SMEs, with a special focus on SMEs’ readiness for GST, identification of their potential problems and feedback on their needs.
Survey Objectives
1. To gather the information on the problems faced by the Malaysian SMEs prior to the implementation of GST and gauge their degree of readiness for it.
2. To study the SMEs understanding of other taxation issues.
3. The survey results provide the basis for ACCCIM to submit relevant memorandum to the Government and its related agencies for dialogues with them. It will also be used as a reference to plan for seminars and formulate action plans by the association.
Conclusion Foreword
1. In view of the national importance of the proposed GST, ACCCIM developed ‘The 2010 SMEs “Pre GST” survey’ to engage with SMEs entities to seek views from them and gauge their reactions relating to the proposed GST model and understand their expectations to in order to communicate them to the Government and the policy maker for their consideration.
2. Some 2,000 questionnaire based survey forms contained multiple questions covering various taxation aspects from “general” to “pre-GST” and “tax audit” topics were sent to the selected members of the ACCCIM. The survey is opened for the whole month of June 2010. ACCCIM has received an encouraging response of 62.5%.
3. Since the survey was administered to various business entities across multiple industries, geography, age and size, the survey result is truly representative of the opinions of the Malaysian business community and comprehensively covers the views of the SMEs by large.
4. The results of the survey reveal the expectations, apprehensions and concerns of the SMEs and provide an insight to the policymakers to address the same for a successful implementation of the GST. Clearly there is a message to the Government where the implementation efforts should be aimed at.
CONCLUSION
1. Only less than half of the respondents (45%) agree that the introduction of GST will help the Government to raise more tax revenue. Hence the Government must address this apprehensive psychology of the SMEs community, failing which they will not support what they think will be futile.
2. Notwithstanding their belief about the benefits of GST to the Malaysian economy, 82% of the entities surveyed still believe that the proposed GST will certainly burden the poor since it is inflationary. This means that the Government’s campaigns on this aspect have not achieved what they desired.
3. The proposed GST rate of 4% by the Government is only supported by 3% of the respondents. Most of the respondents believe that 2% to 3% is the most suitable rate for the proposed GST.
4. There are 47% of the respondents which wholly comprised of the “Sdn Bhd” opined that a threshold of RM5 million and above is most reasonable. Whereas most of the sole proprietors (32% respondents) indicated that the most suitable threshold for the proposed GST is RM 1 million and above. This is a food for thought and maybe the policy maker should seriously rethink to start at a lower rate and scale up slowly to prevent resistant from the business community.
5. Based on the general taxation survey, almost half of the respondents (46%) indicate that they internally hired accountant to handle their tax affairs whereas 29% externally hired tax professionals to manage their tax matters. Hence a total 75% engage professionals to assist them in tax matters, this is an encouraging trend for a better administration of GST in the future.
6. There is an alarming finding that 71% respondents indicated that they will not use the electronic filing this year, even those in the Information Communication & Technology (ICT) industry, only a mere 40% of the entities have used e-filing. Even more alarming is that although Central Region is more advance in information and communication, nevertheless 79% & 73% of the business entities in the Klang Valley respectively have indicated their preference of conventional manual filing of annual tax return method. Thus, further efforts should be taken to encourage electronic filing in wake of the proposed GST implementation.
7. Some 35% respondents revealed that they are most stressful of learning about existing and/or new tax law. Hence, the Government and the policy maker must make sure that the mechanism and administration of GST is as simple as possible so that the public is receptive of it.
8. The Government should make full use of the media to educate to Rakyat as the SMEs voiced that their pro active approach to GST is to read GST articles in the media. Further, one third of them have voiced their dissatisfaction over the lack of GST public information. Training is also very important because 31% is willing to send their staff to attend external training on GST by the professionals whilst 25% will wait for the Government to provide training.
9. What concerns the most is as high as 80% of the respondents indicated that their computer systems are not ready to cater for the administration of GST. This is most obvious in the Eastern Region since as high as 92% and 86% of the entities from Sabah and Sarawak voiced that their computers are not yet ready for GST implementation. In this connection, the Government should consider giving free GST software in order to kick-start its implementation.
10. The survey results clearly point toward the lack of preparedness on the part of the business entities as 38% of the respondents said that their businesses have not yet prepared for the implementation of GST at all. On the other hand, 33% said their degree of preparation is between 1% to 25%. Only 4% thinks that their readiness for GST is above 75%. This can be interpreted that a longer grace period is required before the GST comes into force. 86% of the respondents felt that 12 months grace period to get the entities ready for GST is too short. The majority of the businesses (67%) felt that they should be given at least 24 months.
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