In view of the upcoming Budget 2017, the National ICT Association of Malaysia (PIKOM) as the ‘Voice of the ICT Industry’ proposes the following recommendations to the Malaysian government for inclusion in the budgetary plans for the coming year.
Specifically, given the current economic challenges and rising living costs, PIKOM urges the government to improve the affordability and availability of ICT goods and services as a means to benefit the man-on-the-street. Given the prevalent usage and consumption of ICT today on a daily basis, the following measures recommended below will have a cascading effect not just on spurring the ICT industry but to also benefit almost every Malaysian. In addition, given the government’s welcomed move to introduce coding in schools, it is all the more imperative to ensure that ICT goods and services are affordable for Malaysia’s over 5 million schoolchildren not forgetting their families.
1.) GST Zero-Rated for ICT Products and Services
The impact of GST coupled with the weakening of the Ringgit has resulted in a slowdown for the local ICT retail sector. While it has impacted the retail sector, the most affected are the SME companies who contribute some 31% to National GDP employing about 56% of the local workforce. Prior to the implementation of GST, prices of ICT products did not attract any sales tax which has changed from 1 April 2015. This has resulted in consumer demand for ICT goods and services decreasing as prices became more expensive.
PIKOM recommends that ICT products and services be Zero-Rated. As ICT is used by almost all Malaysians, the will have a direct impact students, families, professionals, most notably on the lower and middle income groups. The 6% is a tremendous saving that will directly boost ICT demand but also encourage the continued development of a connected and knowledge based community.
2.) Increase Demand for Local ICT Training
Malaysia’s ICT sector continues to face a brain drain challenge as revealed under the PIKOM ICT Job Market Outlook in Malaysia 2016 report. It is imperative that more talent be upskilled and trained accordingly to fill the gaps.
PIKOM recommends allowing double tax deduction on cost incurred (up to a capped amount) for individuals pursuing ICT-related certification programs. Companies should also be allowed to claim double tax deduction if companies are bearing the cost of the training.
3.) Providing Greater Incentives for Ownership of ICT Goods & Services
In addition to zero-rated GST for ICT goods and services, PIKOM recommends the following to further encourage ICT adoption:
- Allow income tax deductions of RM3000 once every two years for PCs and smartphones instead of the current three years.
The primary source of connecting to the internet has evolved from the PC to a mobile device with an increasing number of connected people, on the go. Smartphone penetration has reached the 140%-150% level and the usage of mobile phones to access the internet is around 63%.
PIKOM recommends that policies be brought in sync with present trends and the incentive be extended to smartphones given the rise of mobile devices as the ICT device of choice. In addition, the income tax deduction be made exercisable once every two years in tandem with current device replacement cycles, which on average is every two years for PCs and smartphones.
- EPF Withdrawal Scheme for ICT Products, Services and Broadband:
To increase household disposable income, PIKOM recommends reintroducing the EPF withdrawal scheme to purchase computing products, peripherals and consumables (i.e. PCs, laptops, smart phones and tablets including broadband subscription) with a clear list of items / services to prevent abuse. Mechanisms can be put in place to ensure that only trusted parties are involved in the scheme.
While PIKOM lauds the government’s continual efforts to make broadband more affordable, more effort is needed to bring the cost of Internet connectivity in Malaysia on par with other regional peers. Given the importance of high-speed broadband to the nation and its people, this area requires further and timely action.