Sage Asia vice president and managing director Arlene Wherrett shares her thoughts on sugar tax, SME and technology initiatives announced by Finance Minister Lim Guan Eng during the tabling of Budget 2019.

The Government intends to introduce excise duty from 1 April 2019 at 40 cents per liter on two categories of sugary drinks manufactured in the form of ready-to-drink packaging.

This is a policy intervention which has been pitched at influencing healthy behaviors, rather than a measure for the government to collect taxes.

“Such a law may also help the government as savings in healthcare would directly help reduce expenditure, helping the government to better use the monies saved elsewhere.

“Advocates of sugar taxes do make references to the success of tobacco taxes when justifying why they think a sugar tax will work to lower soda consumption.

“Where the main concern with tobacco is cancer, the main concerns with soda are diabetes and obesity, a major disease and condition,” says Wherrett.

She also points out that this tax will impact the beverage industry as businesses that sell these drinks may fear lower revenue from sales of these items as the prices may be raised to keep margins at the same levels whilst some businesses may choose to absorb the tax.

“It is however an opportunity for drink manufacturers to be encouraged to reduce the amount of sugar in their drinks to a certain level, after which they could be exempted from such taxes.

“This could also be an opportunity for these businesses to consider to diversify their business by adding healthier options.

“In addition, Businesses such as supermarkets and restaurants may see this as an opportunity to sell healthier options as revenue could still be streamed from these healthier options, replacing potential loss of revenue acquired from the sugary drinks as well as moving in trend towards global consumer health awareness.”

Where consumers are concerned, she adds, the sugar tax encourages consumers to both adopt a healthier lifestyle and reap savings on these taxes.

“Our team at Sage will be proactive to adopt the changes into our accounting software, making the transition easy for businesses affected and will take a proactive approach with customers to ensure a seamless adoption of this new tax.”

“However, to be successful in implementing the new taxes, businesses need to invest time to put in place measures that will eventually automate and ease the tax computations. To save time and effort, businesses can take advantage of software and technologies that can ease such operational burdens which reduces operational costs as the transaction can be automated.”

Moving on to SME and business initiatives, Wherrett believes that the Government’s multiple programs consisting of hundreds of millions to support SMEs in Malaysia demonstrates the government’s focus on ensuring SMEs have what they need to be successful.

It shows the government commitment towards SMEs that consists of 97 per cent  of business establishments in Malaysia, having contributed 37 per cent to the country’s GDP, 65 per cent to employment, and nearly 18 per cent to exports.

“SME financing funds by commercial financial institutions of RM4.5 billion with 60 per cent guarantee of Business Financing Guarantee Scheme (SJPP) and the RM100 million allocated for TEKUN to finance small entrepreneurs is an encouraging boost for SME’s who account for more than are the backbone of the Malaysian economy.

“Permodalan Usahawan Nasional Berhad allocation of RM200 million for the wholesale and retail industry is definitely a good call towards building these segments of businesses.

“Additionally, the reduction of income tax to 17% for companies with taxable revenue under 500k does offer companies the ability to apply more resources towards technology adoption,” she adds.  

Wherrett also believes the RM210 million allocated towards the promotion of Malaysia’s transition towards Industry 4.0 between 2019-2021 is timely and in line with developments around the world, and a resounding call of support to Malaysian businesses to be on the frontline of technology adoption.

“This will enable businesses to maximise their productivity, allowing for resources to be redeployed to revenue-generating activities. In fact, automation and AI have been proven to also ease the manpower crunch around the world, which Malaysia also faces.

“The implementation of the National Optics and Connectivity Fiber Plan (NFCP) with an allocation of RM1 billion and the Industry Digitalisation Transformation Fund worth RM3 billion boosts this demonstrates the government's urgency and focus in raising the standards of technology adoption and implementation in the nation.”

She stresses that in this new hyper-connected world, it is becoming abundantly clear that artificial intelligence will be an important game changer in the Fourth Industrial Revolution.

The Government's measure to enforce Mandatory Standards of Access Price (MSAP) which is expected to lower fixed line broadband prices at least 25% by the end of 2018, should directly and positively impact the levels of internet connectivity in Malaysia.

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