US businesses already hurt by tariffs, says Fed chair Powell

WASHINGTON: US businesses already are being hurt by the exchange of tariffs on key products, Federal Reserve Chairman Jerome Powell said. However, he repeated that if President Donald Trump’s trade policy resulted in lower tariffs, that would be good for the US economy. “We hear from our extensive network of business contacts a rising chorus […]

GST refund delays to blame too for higher prices as businesses passed on costs to consumers: Lim

PETALING JAYA: Delays in refunding claims for the Goods and Services Tax (GST) to businesses led them to passing on the costs to consumers, resulting in higher prices of goods, according to Finance Minister Lim Guan Eng.

The GST is a multi-layer tax that goes through several stages of the supply chain , whereas the yet-to-be implemented Sales and Services Tax (SST) is a single-stage tax imposed on the manufacturer.

Lim said today the multi-layer nature of the GST saw each supplier factoring in the delay in reimbursement at every level, resulting in an increase in the final price. The longer the supply chain led the higher price increase.

“Technically, each supplier can claim back GST as an input tax from the government. Nonetheless, this still causes a huge problem with operating cash flow for many businesses as the (former) government has been notoriously slow in refunding GST claims,” he explained at a press briefing at Parliament.

Lim said he will reveal the real reason for the previous government’s failure to make refunds promptly on a later date.

The Customs Department yesterday released its list of proposed goods for exemption under the SST regime, of which about 98% is expected to be adopted.
K-Konsult Taxation Sdn Bhd managing partner Koong Lin Loong explained that the key items for business include the standardisation of the threshold for registration under SST which is set at RM500,000 annual income, compared to the GST which had varying thresholds for different industries.

Professional services for example previously had no threshold. Now it has been standardised at RM500,000.

Small services will also no longer be charged service tax.

Koong also opined that the cost of doing business under the GST was higher due to software and compliance expenses.

On the transitional period to the new tax system for businesses, Lim said there are bound to be problems and issues related to adjustments, urging software providers to not take advantage of the situation and charge exorbitantly. He has enlisted the Customs Department to assist in the transition period.

Lim noted that the government is still on track to achieving the fiscal deficit target of 2.8%, despite a narrowed revenue base, by curbing government spending.
On making the SST more efficient and transparent than the GST, he said there is a need for the Customs Department and regulators to ensure compliance to prevent tax evasion.

Consumer confidence in Q2 hits 21-year high: MIER

KUALA LUMPUR: Malaysian consumer confidence jumped to its highest level in 21 years in the second quarter of 2018 (Q2 2018), as households were upbeat about the labour market and their future incomes, according to Malaysian Institute of Economic Research (MIER).

The think-tank said its Consumer Sentiments Index (CSI) survey, which involved 1,020 households in Peninsular Malaysia, rebounded above the 100-point optimism threshold to soar to 132.9 points in the second quarter, the highest level since Q2 1997.

MIER said this is likely due to the recent change in the political landscape, abolition of the Goods and Services Tax (GST) and the consumers’ expectations of an improvement in the economic welfare.

Speaking at MIER’s 33rd National Economic Briefing today, its executive director Dr Zakariah Abdul Rashid said the survey also revealed that the consumers are having ambitious spending plans in the coming months, especially for consumer durables.

“This is underpinned by the improved consumers’ current incomes as well as future incomes and favourable employment outlook as shown by the survey results,” he added.

MIER said based on the CSI survey results, 21% of the households interviewed enjoyed better finances in Q2 2018, the highest proportion received since Q1 2014, while majority (65%) of them saw no change in their incomes recently.

“Only 13% of the respondents this time lamented being worse off financially then before, the smallest proportion tabulated since Q4 2004,” it noted.

Consistent with its CSI survey, MIER said that businesses are also upbeat on the economy, as its Q2 2018 Business Conditions Index (BCI) rebounded strongly recording the highest level over the last 13 quarters, surpassing the demarcation level of 100-point threshold of optimism.

Meanwhile, Zakariah said the government’s decision to abolish the GST and reinstate the Sales and Services Tax (SST) would not significantly impact the country’s economic growth.

“The brief period of the tax holiday and the shift to SST in September won’t have much impact on GDP as the (GST and SST) elements play a very small or insignificant role in (contributing to) GDP. I think other factors (such as domestic demand, private and public consumptions) are more important,” he added.

MIER maintained its GDP (gross domestic product) growth forecast at 5.5% this year. GDP growth is expected to moderate to between 4.8% and 5.3% next year.

Additionally, Zakariah said growth prospects for 2018 and 2019 would depend heavily on resilient growth in domestic demand and good performances of major developed economies.
Meanwhile, he said, the ringgit is expected to trade between RM4.18 and RM4.20 against the US dollar by year-end due to capital flows amid global interest rate differentials.

Ringgit closes lower against greenback

KUALA LUMPUR: The ringgit ended lower against the US dollar today on lack of buying interest and in line with regional currencies amid worries over escalating trade war tensions between the US and China, said a dealer.

At 6pm, the ringgit stood at 4.0620/0650 against the greenback from 4.0570/0610 on Wednesday.

OANDA head of trading in Asia-Pacific, Stephen Innes said the ringgit would continue to struggle in the near term on lack of boost.

“With the US dollar on a solid footing and wobbly oil prices, the tame inflation print reinforced Bank Negara Malaysia’s policy neutrality well into 2019 but does not open the door to a possible rate cut if inflation continues to run at these shallow levels,” he added.

Malaysia’s inflation rate slowed sharply in June 2018 to 0.8% year-on-year compared to 1.8% in May 2018 as the zero-rating of the Goods and Services Tax resulted in slower increases or declines in prices of the Consumer Price Index basket of goods and services, except transport.

Meanwhile, the local unit was traded mostly higher against a basket of major currencies.

It rose against the Singapore dollar to 2.9622/9648 from 2.9656/9690 on Wednesday, and appreciated against the euro to 4.7144/7187 against 4.7155/7217 yesterday.

The ringgit strengthened against the British pound to 5.2806/2849 from Wednesday’s 5.2863/2931, but eased against the yen to 3.5937/5970 from 3.5909/5957. — Bernama