(Miri, 12th) DAP Sarawak Socialist Youth Leader Hsu Li Gen issued a statement pointing out that the Ministry of Finance's announcement to expand the scope of the Sales and Services Tax (SST) effective July 1, 2025, to include various service sectors such as private medical, education, financial services, construction, beauty and health care, leasing, and more, has garnered significant attention and concern, especially among young business owners and small and micro-entrepreneurs in East Malaysia, particularly in Sarawak.
As an elected representative representing the youth of Sarawak, he must sternly express that while the goal of tax policy reform is to ensure national fiscal health and equitable resource distribution, it must not come at the expense of the youth and grassroots micro-enterprises.
Youth Entrepreneurs Under Pressure, Sarawak's Path to Recovery May Regress
He noted in the statement that the recent surge in youth entrepreneurship in Sarawak is gradually budding, and during the past year of the Socialist Youth's “Youth Entrepreneurship Touring Workshop” in rural areas, they found: many fledgling small businesses, such as township coffee shops, mobile nail services, and small design and e-commerce operators, are slowly recovering from the impacts of the pandemic and high inflation.
“However, these businesses are already under heavy pressure, including the adjusted electricity tariffs, which have increased operational burdens; depreciation of the Ringgit, increasing costs of imported raw materials and equipment; rising labor costs, with the minimum wage and social security obligations increasing; rising rent; and the rising cost of commercial spaces and vendor stalls. If the SST coverage is arbitrarily expanded at this time, it will undoubtedly cause a ‘double whammy’.”
He added, not only are their profits thin, but they must also cope with complex tax returns, possibly needing to hire accountants, creating a “tax burden + management burden” dual pressure scenario.
Sarawak's Service Industry Ecosystem Yet to be Established, “Copying from West Malaysia” Tax System Not Applicable
He also pointed out, according to the Department of Statistics Malaysia, over 90% of businesses in Sarawak are micro and small enterprises, many still rely on traditional paper-based accounting and cash transactions and have not fully digitized or integrated with the Inland Revenue Board system. Many township businesses are without an electronic invoicing system; the general public is also not accustomed to SST consumption; accounting services in remote areas are expensive and lack resources.
He explained that this shows Sarawak is not yet ready, in terms of institutional and technical foundation, to bear the administrative burden brought about by “tax modernization”. Forced implementation may lead to businesses being fined for misunderstanding the system or being forced to close.
Therefore, the Socialist Youth suggests the Ministry of Finance establish a “regional exemption mechanism” or “delayed implementation mechanism”, allowing West Malaysia to serve as a trial first, while Sarawak is given a certain adaptation period.
Plug Tax Leaks, then Discuss Expanding Downward Taxation
He emphasized that the Socialist Youth understands the urgency of the Ministry of Finance in expanding the tax base and increasing national revenue. But it must be questioned if the issue of tax evasion has been resolved? According to official 2023 data, the tax evasion problem among the high-income group and large enterprises in our country remains severe, causing tens of billions of ringgit in tax revenue loss. Has the issue of resource monopoly been corrected? Several monopoly enterprises have long enjoyed special tax arrangements, which constitutes significant unfairness to small and medium enterprises.
“When these issues remain unresolved, expanding the ‘tax net’ to ordinary citizens and micro-businesses does not align with the principle of fairness and will undermine the ruling coalition's credibility.”
Four Appeals by the Socialist Youth
He stated that the Socialist Youth has put forth four appeals, to roll out the SST expansion in phases, the first phase should exclude micro-enterprises (with an annual income below RM500,000) to buffer the impact on mid-to-low-level operators; establish a tax support mechanism for SMEs, provide transitional grants for SMEs to upgrade accounting systems, and tax training, etc.; a youth entrepreneurship buffer plan, offer tax relief for the first three years for entrepreneurs under 30, simplify the declaration process and support; incorporate East Malaysia into the tax policy-making phase, the Federal Ministry of Finance should establish an “East Malaysia SME Tax Advisory Committee” with local industry representatives from Sarawak and Sabah to participate in system design, ensuring policies are no longer “one-size-fits-all.”
He claimed that the tax system should be a tool for national progress rather than an impediment to upward mobility for the people. Supporting national development should not be the reason for punishing the youth. The group is not opposing reform but calling for prudent, phased, inclusive tax reforms.
“What the youth of Sarawak want is an economic environment where they can freely unleash their potential, start businesses with peace of mind, and grow steadily, not to have their future weighed down by heavy taxes before their dreams even sprout.”