KUALA LUMPUR (Oct 7): The government should focus on measures to support growth of business by enhancing the current tax administration system with greater clarity, consistency and transparency, says Ernst & Young Tax Consultants Sdn Bhd (EY).  

In a statement today on its expectations for Budget 2020, EY said it expects the government to provide a tax framework that will continue to provide a simplified and enhanced tax administration that is progressive and equitable. 

"We look forward to well-formulated and sustainable pro-growth tax reforms, in addition to improvements to tax administration, particularly in terms of clarity, consistency and transparency," the company said.

In terms of attracting foreign direct investments, EY said the government should identify specific priority sectors for future development and the types and sources of investments it intends to attract.  

This is especially so since Malaysia is currently competing with countries such as Thailand and Indonesia, which are already introducing competitive tax packages, rates and benefits to foreign investors seeking to relocate their production facilities. 

On the Sales and Service Tax (SST), EY said aside from the many legislative updates that need to be tracked, the ambiguity surrounding certain categories of taxable services — consultancy, management, and information technology services, and even the coverage of digital services — does persist.  

"Tax-on-tax scenarios drive up costs of doing business," it said.  

As such, EY called for the government to set up an advisory panel of industry experts for consultation with Customs on SST matters. EY also suggested the reintroduction of an input tax mechanism or a credit system into the Service Tax regime to counter the effects of tax-on-tax. 

Meanwhile, from a personal income tax perspective, EY said the government should consider broadening and reducing the number of income tax bands.  

"Broader income tax bands would encourage individuals to improve their earning capability through increased productivity and self-development, as they would be able to enjoy the fruits of their labour, thereby improving our efforts to become a high-income nation. 

"The additional take-home income would also allow for the increase in consumption of goods and services, some of which are subject to SST," it added.  

To address the issue of housing affordability, EY suggested the government to introduce some measures targeting the young M40 group to provide further traction to the housing market.  

These measures are extending the period of stamp duty exemption on the purchase of a residential property under the National Home Ownership Campaign without a cap on property price, reintroducing the personal relief on housing loan interest for a period of three consecutive years to encourage the younger generation to own a home in Malaysia, and providing double tax deduction on housing loan interest subsidized by employers to encourage private sector participation and increase property demand. 

"Besides the fiscal stimulus, the Government should also consider market intervention in the unprecedented issue of over-supply and over-pricing of residential properties," it added.