(Kuala Lumpur, 17th) Malaysia's six major business and retail groups jointly issued a statement strongly opposing the government's plan to expand the scope of Sales and Service Tax (SST) collection starting from July 1, 2025, especially the move to impose an 8% service tax on commercial leases and rentals. They urge the government to immediately postpone the related measures and lower the tax rate to alleviate the heavy burden on businesses and the public.
The statement was jointly issued by the following six groups:
(1) SME Association of Malaysia
(2) Malaysia Retail Chain Association (MRCA)
(3) Malaysia Retailers Association (MRA)
(4) Federation of Malaysian Business Associations (FMBA)
(5) Bumiputra Retailers Organization (BRO)
(6) Malaysia Shopping Malls Association (PPKM)
The six chambers pointed out that although they understand the necessity of financial consolidation by the government, the current economy is still in a recovery phase. Hastily implementing tax hikes will only exacerbate inflation, overwhelm SMEs, undermine investment confidence, and ultimately weaken consumer spending.
"If this policy is implemented as scheduled, it will surely ruin the hard-earned economic recovery achievements of the past two years."
The statement listed a series of cost pressures currently faced by businesses, including:
· Minimum wage raised to RM1,700;
· Diesel price increased by nearly 56%;
· Increase in electricity and utilities costs;
· Reduction in natural gas subsidies;
· Higher stamp duty and transaction fees;
· Mandatory implementation of electronic invoicing system;
· Additional 2% EPF contribution for foreign workers;
· Depreciation of the ringgit, increase in raw materials, and higher financing costs.
These challenges make it increasingly difficult for businesses to maintain competitiveness, and the additional SST, especially on SMEs leasing commercial space, will worsen the situation and eventually transfer costs to consumers, triggering a new round of inflation.
The six chambers also criticized the current SST system for being inefficient, lacking an input tax deduction mechanism, leading to repeated taxation in the supply chain and increasing operating costs for businesses.
They emphasized that although GST had flaws, its structure was more efficient by comparison, allowing businesses to claim input tax credit, which aids in overall tax transparency and system sustainability. Many in the business community support restoring GST on a reformed basis rather than continuing with the regressive SST.
The chamber representatives put forward five urgent appeals for the government to consider:
1. Postpone the SST expansion until the economy is more stable.
2. Reduce the SST rate on leasing and rental services from 8% to a more reasonable level.
3. Set exemption thresholds for micro and small enterprises.
4. Provide targeted assistance to key industries such as retail, services, and logistics.
5. Engage in organized stakeholder consultations before any widespread reforms.
"We are not against government taxation but oppose the hasty implementation of policies that undermine business confidence and people's livelihoods without adequate consultation and when economic recovery is not yet solidified."
The six chambers emphasized that the government should promote fiscal reforms in a fair, pragmatic, and inclusive manner to ensure that the foundation of national development is not undermined.
They call on the government to re-evaluate the SST expansion policy, especially the taxation on leasing, to avoid triggering waves of closures, unemployment, and weakening domestic demand and long-term economic growth.
The statement was jointly issued by the following six groups:
(1) SME Association of Malaysia
(2) Malaysia Retail Chain Association (MRCA)
(3) Malaysia Retailers Association (MRA)
(4) Federation of Malaysian Business Associations (FMBA)
(5) Bumiputra Retailers Organization (BRO)
(6) Malaysia Shopping Malls Association (PPKM)
The six chambers pointed out that although they understand the necessity of financial consolidation by the government, the current economy is still in a recovery phase. Hastily implementing tax hikes will only exacerbate inflation, overwhelm SMEs, undermine investment confidence, and ultimately weaken consumer spending.
"If this policy is implemented as scheduled, it will surely ruin the hard-earned economic recovery achievements of the past two years."
The statement listed a series of cost pressures currently faced by businesses, including:
· Minimum wage raised to RM1,700;
· Diesel price increased by nearly 56%;
· Increase in electricity and utilities costs;
· Reduction in natural gas subsidies;
· Higher stamp duty and transaction fees;
· Mandatory implementation of electronic invoicing system;
· Additional 2% EPF contribution for foreign workers;
· Depreciation of the ringgit, increase in raw materials, and higher financing costs.
These challenges make it increasingly difficult for businesses to maintain competitiveness, and the additional SST, especially on SMEs leasing commercial space, will worsen the situation and eventually transfer costs to consumers, triggering a new round of inflation.
The six chambers also criticized the current SST system for being inefficient, lacking an input tax deduction mechanism, leading to repeated taxation in the supply chain and increasing operating costs for businesses.
They emphasized that although GST had flaws, its structure was more efficient by comparison, allowing businesses to claim input tax credit, which aids in overall tax transparency and system sustainability. Many in the business community support restoring GST on a reformed basis rather than continuing with the regressive SST.
The chamber representatives put forward five urgent appeals for the government to consider:
1. Postpone the SST expansion until the economy is more stable.
2. Reduce the SST rate on leasing and rental services from 8% to a more reasonable level.
3. Set exemption thresholds for micro and small enterprises.
4. Provide targeted assistance to key industries such as retail, services, and logistics.
5. Engage in organized stakeholder consultations before any widespread reforms.
"We are not against government taxation but oppose the hasty implementation of policies that undermine business confidence and people's livelihoods without adequate consultation and when economic recovery is not yet solidified."
The six chambers emphasized that the government should promote fiscal reforms in a fair, pragmatic, and inclusive manner to ensure that the foundation of national development is not undermined.
They call on the government to re-evaluate the SST expansion policy, especially the taxation on leasing, to avoid triggering waves of closures, unemployment, and weakening domestic demand and long-term economic growth.