KUALA LUMPUR, July 16 — Digital transformation is essential for small and medium enterprises (SMES) to offset the increased costs from the hike in the service tax, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
Adopting technologies such as data analytics and artificial intelligence can offer valuable insights into market trends and consumer behaviour, helping SMEs make more informed decisions, said Joon Teoh, who is finance consulting firm AGOS Asia CEO, in a joint statement by several ICAEW members today.
With the service tax raised to 8 per cent from 6 per cent effective March 1, Teoh said SMEs should focus on revenue generation rather than getting bogged down by administrative processes.
“Support mechanisms from the government will be crucial in ensuring SMEs continue to contribute significantly to Malaysia’s economic growth,” she said, adding that they should be prioritising delivering value even if it means adjusting their prices.
Beetle Knight Advisory manager Chia Yee Shin said industries heavily reliant on taxable services and goods such as hospitality, retail, construction, telecommunications, healthcare, and professional services will face heightened operational costs.
Exploring new markets or products and services less affected by the tax increase can also provide new revenue streams.
Chia said businesses should understand tax implications and ensure their software and hardware are updated while educating staff to collaborate effectively in producing necessary compliance documentation is also essential.
Embracing Industry 4.0 (IR4.0) technologies is also a key strategy, though Teoh cautioned technology alone is not a panacea.
“People play an equally important role in enabling technological changes, and a shift in mindset is paramount for fully embracing IR4.0,” she said.
Steven Chong, Morison LC managing partner, said while the service tax is meant to be a “pass-through” cost from the service provider to the consumer, some businesses may choose to absorb the hike to remain price competitive, which could be detrimental, especially for those with thin profit margins.
Chong also suggested businesses review their service tax position to understand if their services are entitled to exemptions, which could lower their costs.
— Bernama
