Wednesday, October 30, 2013

Malaysia 6th Most Business-Friendly Country: World Bank

KUALA LUMPUR (Oct 30, 2013): Malaysia, which moved up six spots to be ranked No. 6 among 189 economies in the latest World Bank's Doing Business Report 2014, reported its weakest performance in dealing with construction permits and resolving insolvency.

The 11th edition of the Doing Business Report measures business regulations for local firms, with a focus on small and medium-size companies operating in the largest business city of an economy or in Malaysia's case, Kuala Lumpur.

The report based its quantitative indicators on 10 areas of business regulation – starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

The Special Task Force to Facilitate Business (Pemudah) said while the two areas remained the weakest link, they have made improvements since the last report.

Malaysia saw improvement in its global ranking for dealing with construction permits in the 2014 report, ranking 43rd from 96th in 2013, while its performance in resolving insolvency improved to 42nd position this year from 49th position in 2013.

Pemudah attributed the improvements to the strengthening of one-stop centres (OSC) and the streamlining of procedures to facilitate the construction process.

On resolving insolvency, a "focus group resolving insolvency team" is continuously holding industry surveys and mapping exercises to determine the preferred mode of resolving insolvency based on the hypothetical case given by the World Bank.

Pemudah also said a thorough review of the regulatory and non-regulatory procedures and processes had led to the introduction of OSC 1 Submission as a gateway for seeking approvals for construction of small-scale non-residential projects, leading to reduced number of procedures from 37 to 15 and time taken from 140 days to 130 days.

"The way forward is to roll out the "dealing with construction permits" framework to all localities, continuously monitor and evaluate its transformation and adapting best practices through international benchmarking," said Pemudah in a booklet entitled "Malaysia in Doing Business 2014" revealed at a press conference here yesterday.

Other improvements made were in the areas of starting a business, which went up 38 places to 16 for 2014, enforcing contracts, up 3 places to 30, and getting electricity, up 7 places to rank 21.

This year, the top three easiest places to do business are Singapore, Hong Kong and New Zealand.

"Overall, Malaysia is well-ahead of its target to be among the top 10 by 2015 by claiming its sixth position in 2014 compared with 12 last year," said International Trade and Industry Minister Datuk Seri Mustapa Mohamed in a statement.

"At sixth position, Malaysia has been placed in the same league as Singapore, Hong Kong, New Zealand, the US and Denmark. This ranking also places Malaysia ahead of economies such as South Korea, Norway, the UK, Australia and Finland," he added.

Malaysia and the UK continued to secure top ranking on ease of getting credit. Malaysia's ranking of first position in this area since 2007 is attributable to the country's strengths in reforms on legal rights of borrowers and lenders. The depth of Malaysia's credit information systems had resulted in enhanced effectiveness of collateral and bankruptcy laws in facilitating lending.

Malaysia has also been consistently ranked fourth in the world in the area of protecting investors since 2009 and in the area of trading across borders, Malaysia made a breakthrough to fifth position compared with 11th position a year ago.

The Doing Business 2014 report is the 11th in a series of annual reports published by the World Bank and the International Financial Corp investigating the regulations that enhance business activity and those that constrain it.


Monday, October 21, 2013

Real Impact Of GST On Cost Of Living

WHEN most people hear of a possible introduction of the goods and services tax (GST) at say 6%, they assume that their cost of living will increase by 6%. This is an understandable assumption, but how true is it?

GST is a broad based consumption tax which will generally be applicable on all goods and services.

This means that we pay tax only on what we consume. To ensure the tax is only imposed once, any registered business charging GST will be allowed to offset the GST it pays against the tax it collects before remitting the balance to the government. This is known as an “input tax credit mechanism” – it generally allows businesses to operate with no tax cost. The final 6% tax is borne by the end consumer.

Recognising that this increased cost may be  a  burden  to  the consumer, the Government  has proposed that certain essential goods such as unprocessed meat, cooking oil, and sugar will not be taxed. Also, education, healthcare, tolls, financial services and life insurance, will be exempt from GST.

So setting all this aside, will the cost of everything else rise by 6%?

Implementing GST

First, let’s consider how the current consumption tax regime works. Most will be familiar with service tax which is charged at 6% on selected services, for example those provided by hotels and restaurants.

A second consumption tax, possibly less familiar to many, is sales tax which is charged on certain manufactured or imported goods and is, in many instances paid before the goods reach the consumer. Sales tax is in some circumstances hidden from the consumer. For example a carbonated drink is subject to a sales tax of 10%, but the tax is not generally itemised to the end user. If the drink costs RM11, RM1 is tax. However, as far as the consumer is aware, he is buying a drink for RM11, not RM10 + tax.

The existence of two consumption tax systems can lead to a tax on tax. Consider for a moment the carbonated drink example. (see table 1)

Not only does the consumer pay an additional RM1.08 in tax under the current system, the hotel’s profit carries a 6% service tax on the sales tax charged by the manufacturer.

The problem of double taxation is addressed in GST through the input tax credit mechanism. The tax paid by the hotelier is recoverable as input tax credit and does not form part of the cost to him.

So did the carbonated drink become 6% more expensive? Under the current system, the drink costs the consumer RM14.58. Under GST, the drink will cost the consumer RM13.25, that is 9% (or RM1.33) less!

The example is a rather simplistic view and ignores the longer supply chain and the potential cascading effect of the embedded sales tax cost. Sales tax is paid once at the manufacturer/ import level, whereas GST will apply on the value added at each stage of the supply chain.

Another impact to be considered is that input tax credit will not be available for exempt supplies (like healthcare or education, in the table below). This means, while the consumer won’t have to pay a GST on these items, the final price they pay may still be higher than before. This is because the actual cost of making these exempt supplies may still increase due to the GST incurred on materials etc. The higher costs may be passed on to the consumer in the form of increased prices, albeit not by as much as 6%.

Therefore, we cannot expect to pay 9% less for drinks in fast food restaurants under GST. So what will we pay?

The Price Control and Anti-Profiteering Act 2010 makes it illegal for businesses to increase prices by 4% across the board with the introduction of GST (assuming GST is introduced at a rate of 4%) and any pricing decisions made by businesses must be justifiable otherwise stiff penalties may apply.

The Tax Review Panel in their presentation to the business community forecast that a 4% GST would potentially show a reduction of 0.10% in the consumer price index. They also provided an assessment of potential price changes on a range of goods and services based on an assumed GST rate of 4%. (see table 2)

As well as excluding specified basic necessities from the GST net, the Government has indicated that direct assistance will be given to lower income groups and changes to personal tax rates are also expected to reduce adverse price impact upon implementation of GST. The introduction of GST won’t automatically make everything more expensive. What it will do is change the way we pay tax and provide a more transparent, streamlined and fairer tax based on our consumption patterns.

Raja Kumaran and Tim Simpson are executive director and consultant of PwC Taxation Services, Malaysia respectively.


Wednesday, October 16, 2013


It has been almost 6 months since my last coverage. No doubt our mart still roller coaster than until now we are seeing more clear picture where we are heading after months of base building and consolidation. Yes, the Bull is here! Budget Rally! UMNO Election Rally! All will become headline and speculation among all the traders. 

This is good sign to me and an opportunity to earn extra! But also be caution on speculative play counters which I been interested recently, GPACKET and CENSOF. Well, I like speculative! Beside this I am also have interest with INSAS as well as my old time lover ALAM currently still holding which I bought it early May around 90 cents. I am planning to exit ALAM and enter GPACKET, CENSOF and INSAS. Hope it all go well for me. :-) How far our KLCI going north this time? I have been targeting 2000 pts since 3 years ago but yet to achieved until now. hahaha... Here is what I plan to do for my 3 new baby this few days.

GPACKET Catch the Knife! I will be buying between 43 and 46. 
Any failure within this point I will exit. 
This entry would be low risk with high return of above RM1. 

CENSOF Anytime now! Entry between 52 and 53 will be safe for upside of RM1. 
Exit if 50 cts support failure.

INSAS Safe buy! Entry between 60 and 62 will be good for RM1 target. 
Exit if 60 cts support failure.

Well, which counter you choose or prefer? This will depend on your risk and appetite level. My style is play safe. Hehehehe. Be patient and follow your instincts and make your own call! Do be cautions all the time and my this plan is merely my prediction. :-) It may and may not achieved but I hope it will fit to my own plan game for me so that I will not panic!!! That's all and hope the best for everyone. 

Cheers and Happy Trading!