The 2022 Budget was short on outlining any initiatives to enable Malaysia to build a more sustainable tax revenue base. The review of the tax incentives regime has yet to be finalised and hopefully, some progress will be announced in the coming Budget.
We expect the 2023 Budget to outline a more structured mid to long term reform of the tax system, so that we can have a more sustainable tax system. Malaysia needs to, in the medium term, broaden the scope of the existing Sales and Service Tax (SST), and ultimately make it a broad-based consumption tax with added features such as tax invoicing similar to a Value-Added Tax.
We should also have a more inclusive capital gains tax and move quickly on an efficient integrated national tax agency, in order to have a more sustainable tax.
Tax Treatments To Review
Currently, fees paid to tax advisers and company secretaries for the various services rendered on tax and corporate compliance matters are subject to restriction. Furthermore, the Inland Revenue Board of Malaysia (IRBM) recently issued the Corporate Tax Governance Framework (Framework) to enhance companies’ processes and governance on income tax matters.
The Framework expects the involvement from the board of directors, audit committee and senior management to set up appropriate checks and balances on tax reporting.
However, the IRBM states that costs incurred for advice and assistance to develop the Framework are considered to be capital in nature and therefore not tax deductible. This further irks businesses as such expenses are incurred to encourage corporate governance.
For a more sustainable tax, another area to review is the exclusion of Intangible Assets from the definition of the term “Plant” in the 2021 Budget. This has resulted in cost incurred such as computer software, licences, trademarks, patents, films, copyrights etc are no longer eligible for capital allowances or tax depreciation, despite these being assets utilised in the production of taxable income.
This is truly surprising, given the Government is leading the push from brick-and-mortar businesses to a digitalised and knowledge-intensive economy. Engagements have been held among various parties and it is hoped that in the upcoming Budget, the IRBM would review those tax treatments.
A More Sustainable Tax Structure
As a country, we cannot keep on borrowing and servicing debt. We should remove unnecessary exemptions and deductions, and simplify things to enable all to be part of the tax net. There is a need to push on towards a reliance on consumption taxes, in order to achieve a more sustainable tax.
The Ministry of Finance (MOF) has stated in the Pre-Budget Statement in June that tax reform initiatives with the objective of broadening the tax base, as proposed by Tax Reform Committee, will continue to be implemented.
The initiatives include:
a) Undertaking a review of broad-based incentives, reliefs and deductions
b) Improving tax administration through comprehensive registration of taxpayers
c) Better training of tax personnel
d) Improved registration of cross-border trade
e) Strengthening the tax audit and investigation
f) Enhancing legal certainty for taxpayers
Necessary details on the aforementioned will need to be spelt out in the 2023 Budget.
On the international front, Malaysia has committed to implement several agreed upon tax standards to create a competitive business environment for investors and to counteract cross-border tax evasion activities. To date, we have implemented four minimum standards of the Base Erosion and Profit Shifting (BEPS) Action Plans, while continuing to review the rest of the Action Plans under our domestic tax law.
Domestically, the tax net can be widened by tracking down those who should be within the tax net. That means curtailing tax evasion, curtailing smuggling, registering those who should be registered as taxpayers, and devising strategies using the tonnes of data that various agencies accumulate to ensure that all who should be taxable are indeed taxed.
In the Budget 2022, several initiatives were introduced to manage revenue leakages, including:
a) Removal of tax exemption on foreign-sourced income received in Malaysia by a Malaysian tax resident
b) Introduction of the Tax Compliance Certificate as a precondition for tenderers to participate in Government procurement
c) Implementation of a Tax Identification Number (TIN)
It was a surprise when a five-year exemption of the tax on foreign income was announced subsequently. Even Singapore and Hong Kong, which have similar tax systems to Malaysia do not have such a time-based exemption period.
However, the implementation of Tax Compliance Certificate and the TIN are very good compliance initiatives to reduce leakages, but more details are needed.
In line with the 12th Malaysia Plan to strengthen digital services infrastructure, the digitalisation of the tax function will be implemented with e-Invoicing to be done in stages. This will enhance the efficiency of the country’s tax administration, reduce compliance costs to taxpayers, and increase the efficiency of business operations. E-Invoicing will also support the use of TIN as a measure to expand the income tax net.
The Auditor General’s report has stated time and time again about losses and waste in the public sector. Greater accountability on where our tax ringgit goes and how it is utilised is essential to further narrow the trust deficit that exists, which is a factor why some are reluctant to pay their taxes.
A more sustainable tax structure for the future is probably in the pipeline. But such matters can be excruciatingly slow in coming into fruition, due to the lack of political will and vested interests.
All said, the 2023 Budget may turn out to be an election budget, with a slew of populist measures to score brownie points that may damage the country’s rather fragile fiscal momentum. Against this backdrop, debt and inevitably debt service charges, will rise.
Given that Malaysia’s narrow tax base means high concentration revenue risk to the overall economy, its fiscal vulnerability could increasingly become a trigger factor for sovereign rating downgrades by international credit rating agencies. Here’s to a more sustainable tax structure for a better Malaysia.
About the Author
Dr Veerinderjeet Singh is a tax observer who is the Non-Executive Chairman of Tricor Malaysia. He is the Immediate Past President of the MIA and MICPA, and a Past President of CTIM. He is a strong advocate of tax reforms and sits on the boards of a few public entities. He is also an Adjunct Professor at Monash University Malaysia, as well as a Vice Chair of the Global Tax Commission at the International Chamber of Commerce based in Paris.
In the midst of recovery, many sectors that were battered by the COVID-19 lockdowns, are looking to the government for further aid to strengthen and iron out obstacles in their path – more specifically for some help to be included in the pre-budget 2023 wishlists.
Small and medium-sized enterprises (SMEs), which had been the backbone of the economy but suffered greatly in the last two years, are looking for a stronger future in the new, digitalised economy.
The high incidence of death and loss of jobs during the earlier phase of the pandemic had also highlighted the importance of financial protection and planning. The current economic recovery had been boosted by, among other things, pent-up demand and a severely impacted base in the last two years of COVID-19 lockdowns.
Industries are now finding ways to sustain that recovery, with a much-needed assistance from the government.
Pre-Budget 2023 Wishlist: The SME Sector
In gauging the sentiment of SMEs, a survey was carried out by the Small & Medium Enterprises Association Malaysia (SAMENTA) with Affin Bank. Of the 613 SMEs responses received from the SAMENTA-AFFIN Survey on Business Conditions and Economic Outlook for SMEs 2022-2023, it showed that about 63% have cash reserves of less than four months, and 26% reported a revenue decline of 11%-30%.
The survey which was published in July 2022 noted that about 50% had expected a turnaround to pre-COVID 19 performance from 2023 onwards, around 4% have recovered and achieved pre-COVID 19 results and 2% do not expect to recover.
Almost 50% have moved part of their processes online, while 21% are performing better, while around 10% are fully digitalised.
The re-introduction of the Goods and Services Tax (GST) was favoured by 47% of respondents, while 25% are uncertain. Of those favouring the GST, 85% supported the initial rate of 4% and below, to be implemented beyond the second half of 2023.
In their digital transformation, SMEs subscribing to Software as a Service, which is a service infrastructure platform, are unhappy that they have to bear the costs instead of the foreign providers.
In this regard, they also want the digital tax to be suspended until a solution is found, said SME Association of Malaysia president, H.S. Ding.
SME Association of Malaysia president, H.S. Ding
To expedite the process of digitalisation, the Industry4WRD Intervention Fund should be extended to 2023. The current allocation of RM45 million is insufficient, as there are more than 500,000 SME manufacturing companies and related services sectors looking for a simpler and shorter approval process, informed Ding.
To promote and nurture the 5,000 start-ups and five Malaysian unicorns under the Malaysian Digital Blueprint, a RM10 million funding should be allocated for 2023, said Ding.
A ten-year tax exemption is sought for local manufacturers with a majority share of 70% and planning business expansion. A waiver or discount of 50% is also sought for business permits, licenses and assessments in 2023, as the COVID-19 lockdowns had caused Malaysian businesses to face losses and disruptions.
To assist SMEs and companies with reduced profits, corporate tax should be lowered. Higher tariffs for electricity lead to higher costs of doing business, SMEs are seeking to maintain the status quo in electricity surcharge or reduction in electricity and fuel tariffs in 2023.
The tenor for the SME Recapitalisation Fund of five years, or a repayment of 20% per year, should be lengthened to 10-15 years, as most SMEs do not have the cash flow to support that repayment period.
SAMENTA also proposes double capital allowance for companies that invest in research & development of orchards, as well as food or fruit related downstream activities.
For SMEs involved in domestic tourism, the tourism tax exemption should be extended to 2023. Under sustainable development, the Low Carbon Transition Facility for capital expenditure or working capital is proposed to be increased to a maximum of RM20 million from RM10 million.
The Business Recapitalisation Facility should also be increased to RM2 billion from RM1 billion, to cater for the 1.3 million SMEs in Malaysia. There should be more automation loans, and 120% loans are sought for SMEs to update the standard of factories to Industry 4.0.
For SMEs with profits of up to RM1 million, corporate tax should be lowered to 15%, suggested SAMENTA honorary secretary general, Yeoh Seng Hooi.
SAMENTA honorary secretary general, Yeoh Seng Hooi
Other budget recommendations by SAMENTA to help the SMEs to thrive include grants and workshops on ESG compliance, and double deduction on remuneration for the hiring of skilled workers and professionals (to enable SMEs to pay higher salary to attract talents), reintroduction of pre-shipment funding as per the Export Credit Refinancing and reduction in statutory fees by 50% for the first half of 2023, as post-recovery incentive to alleviate SME cost of doing business.
Pre-Budget 2023 Wishlist: Property Sector
Various measures have been taken to increase home ownership among Malaysians, but more needs to be done to address the problems of the housing and construction industries.
“We must ensure a smooth recovery from the pandemic lockdowns, and that all cylinders of the economy are firing. “It is tempting for stakeholders such as state and local authorities, as well as utility companies, to impose additional requirements on these industries. “But these temptations must be resisted,’’ said Real Estate and Housing Developers Association (REHDA) president Datuk N.K. Tong.
From right to left: Real Estate and Housing Developers Association (REHDA) president Datuk N.K. Tong, REHDA deputy president Datuk Ho Hon Sang
To mitigate the rising prices of building materials, REHDA proposes a waiver or reduction of duties on certain construction materials until prices normalise or become more manageable. Lifting of taxes and levies imposed on import materials as well as review and/or reduction of unnecessary charges will also help the industries.
To assist first-time homebuyers on properties priced up to RM500,000, REHDA proposes among others, a tax deduction on interest incurred during construction, personal tax relief (of RM20,000) and a one-off grant (of RM30,000) as well as a rent-to-own scheme to be considered.
The cooling measure since 2010, under Loan-to-Value, which compares the amount of the mortgage to the appraised value of the property, should be removed. REHDA also urged the government to review or relax the new and stricter conditions for participants of Malaysia My Second Home.
“A strong secondary market is crucial, as there will be more interest to invest in the primary market when buyers see property prices or rentals going up,” said Malaysian Institute of Real Estate Agents (MIEA) president, Chan Ai Cheng.
Malaysian Institute of Real Estate Agents (MIEA) president, Chan Ai Cheng
Stamp duty exemption for buyers in the secondary market and Real Property Gains Tax (RPGT) relief for sellers are proposed. Under a Home Ownership Campaign for Secondary Properties, MIEA proposes that buyers service the interest portion of the loan instalment for a certain period, instead of principal plus interest.
Pre-Budget 2023 Wishlist: Hotel, Tourism And Retail Sectors
As long as international leisure tourism is still restricted, the hotel industry will suffer a direct loss in revenue. Based on the Tourism Malaysia annual report 2019, receipts for accommodation from international arrivals had hit RM20 billion but currently, many are still on the road to recovery.
With the re-opening of interstate travel and domestic tourism, the Malaysian Association of Hotels (MAH) is asking for a lower wage subsidy, than previously requested, of 30% for employees with wages up to RM4,000, and 15% for those with wages up to RM8,000.
A minimum wage mechanism across the board does not encourage productivity or efficiency, instead, MAH proposes for an industry-based wage mechanism that is based on productivity, skills and tasks performed.
For reliable supply and demand of tourism-related data, a live on-demand, centralised tourism platform should be set up, to plan for the sustainable growth of the hotel and tourism industry.
In terms of tourism industry support as well as integrity and delivery of tourism data, the data should be released in a timely manner, in consultation with the industry.
In view of the massive upgrading and reinvestment required, the investment and reinvestment tax incentives for tourism and hotels should be extended for all categories up to 2025.
After suffering losses for two years, MAH is also seeking tourism recovery funding via soft loans that are interest-free or with low interest for reinvestment, upgrading, repair and maintenance of hotel properties as well as for operating expenses.
To drive domestic tourism, individual tax relief for travel and hotel expenditure within the country is proposed at RM5,000 per year. Exemption of the sales and service tax for hotels are to be extended till December 2022. The counter-productive tourism tax should be abolished to encourage high yield and long stay international arrivals.
To help address Malaysia’s weakness in international business events, a special budget should be allocated to the Malaysia Convention & Exhibition Bureau and Tourism Malaysia to pitch for international events. As the tourism industry invests heavily into international promotions, a special marketing grant for domestic and international marketing activities is proposed for business-to-business and business-to-consumer trade shows.
With the tourism industry just recovering from the lockdowns, there are very few group tours that hire 40-seater buses, many of which have not even had their road tax renewed. A conversion incentive should be given for normal tour buses to be converted into recreation or luxury vehicles, said Malaysian Inbound Tourists Association (MITA) president, Uzaidi Udanis.
A tourism bank can be set up to help expand the industry which does not just involve the provision of hotels and chalets for tourists, as there is also potential in medical, agriculture, youth and education tourism.
Retail Group Malaysia (RGM) hopes there will not be another movement restriction at the end of 2022, or early 2023.
“Malaysian retailers do not have the resources to deal with this crisis again,’’ said RGM managing director, Tan Hai Hsin.
RGM managing director, Tan Hai Hsin
The government has to resolve the problem of rising prices and its impact especially on the B40 and M40, and not allow these price shocks to linger until 2023.
Shortage of staff along the entire retail chain, and especially in Johor which faces competition from Singapore employers, also needs to be addressed soon, as this problem will slow down the economic recovery.
Against the threat of a looming recession, the government needs to take swift action to cushion the negative impact of a possible reduction in take-home pay and consumer spending.
Malaysia needs to attract more foreign tourists for the next one year, as foreign tourist arrivals of more than two million as of June, 2022 (with a target of 4.5 million by year-end, set by the Ministry of Tourism, Arts & Culture), is way below that of 26.1 million in 2019.
Pre-Budget 2023 Wishlist: Insurance And Financial Planning Sectors
The COVID-19 pandemic is a wake-up call, reminding us of how uncertain life can be. To encourage take-up of life insurance, the personal tax relief for life insurance premium should be increased from RM3,000 to RM5,000, said Life Insurance Association of Malaysia (LIAM) president, Loh Guat Lan.
Life Insurance Association of Malaysia (LIAM) president, Loh Guat Lan
Currently, there is a RM3,000 tax relief on insurance premium paid for medical and education insurance policies combined.
The tax relief for education, medical and health insurance (MHI) as well as MHI plans with co-share benefits should be raised from RM3,000 to RM6,000.
In Budget 2021, the tax relief limit on medical expenses for self, spouse and children for serious diseases, was increased from RM6,000 to RM8,000. This tax relief should be extended to include medical insurance premiums for self, spouse and children, said Loh.
LIAM informed that in 2021, RM11.9 billion in benefit payouts were made in the life insurance industry while RM4.6 billion were paid out for medical insurance.
The RM50 Perlindungan Tenang Voucher program for the B40 Bantuan Prihatin Rakyat group, which received encouraging responses but will end in December 2022, should continue for at least another year.
Many in this category do not have any form of insurance or takaful coverage. Having a second premium that is subsidised will be necessary in the midst of an uncertain recovery from COVID-19.
Data shows that less than half of employees, especially B40 workers, are being covered by some form of group insurance which is a cheaper form of insurance. LIAM therefore seeks a waiver of the 6% service tax for group insurance schemes.
The COVID-19 pandemic had caused many people to lose their jobs and also eroded their savings. Thus, to help Malaysians better manage their personal finances, Financial Planning Association of Malaysia (FPAM) proposed that a new tax relief of RM3,000 be given to Malaysians who engage licensed financial planners, said FPAM vice president, Rafiq Hidayat.
FPAM vice president, Rafiq Hidayat
As many Malaysians no longer have enough savings when they reach retirement age, tax relief on the private retirement scheme should be increased from RM3,000 to RM10,000 to attract more people to put aside their money for retirement.
With medical insurance premiums rising regularly due to the high inflation of medical expenses, FPAM also agrees with LIAM that this tax relief should be raised from RM3,000 to RM5,000.
Now that we’ve seen the Pre-Budget 2023 wishlist by the industries, let’s hope that their voices are heard.
I have over the last couple of years worked with entrepreneurs in start-up businesses. The one thing that continually stands out is that most of my clients do not consider the “legal aspects” as an important facet to their business. If they do seek advice, it may sometimes appear as if the advice expected is a quick solution to a long-term problem, which is never good for any type of business. That’s why it is important to know some of the legal tips, especially for start-ups.
Most start-up entrepreneurs use the reason that legal advice is costly and as such, it is an expenditure they do not want to invest in. I can assure you that once legal proceedings are initiated against you either personally or against your company, the cost you would incur in getting good legal counsel would be a lot more than what you may be incurring now.
In the long run, the fees will be higher, and the process a lot more time-consuming and protracted. It will be a detrimental lesson to learn. My advice is to always be aware of your legal rights and duties under the Companies Act 2016 if you wish to be in business.
I have always said that laying the foundation right from the beginning is key to any successful business. Here are legal tips, where you have to yourself these questions if you are in the start-up business or wish to start one:
1. Do I Have Partnership And/Or Founder Agreement In Place?
Oftentimes, people get so excited about a business plan that they forget to discuss the nitty-gritty. It is important to have regular meetings with your co-founders or investors about the terms of your partnership.
Some questions you may wish to ask and set out clearly in your partnership and/or founder agreement are:
What are your specific roles and responsibilities as founders?
What if one founder wishes to exit? What happens to his shares?
What is the agreed percentage that each founder will get?
What are the overall goals and expectations for the business?
What are the consequences if the founders do not hit their specific KPIs?
What are the pay-outs for allowances, dividends or salaries for co-founders?
2. Will The Start-up Be Registered As A Private Limited Company, Enterprise Or A Limited Liability Partnership?
This question is pivotal as there are tax implications as well as other accounting and auditing requirements that the start-up will need to comply with. Over and above that, personal liabilities of the partners and founders will also need to be considered.
For example, if an enterprise is set up, then there will be personal liability involved as opposed to a private limited company, where the company will take on that liability as a legal entity.
Do speak to your lawyer and accountant on a structure that would best suit you and your business.
3. Employment Issues
Image of business documents, pen and glasses on workplace during meeting of partners
Having employment contracts in place for the people you hire whether they are freelancers or full-time employees is vital. This will reduce the risk of having a labour court dispute arise in the event you wish to terminate a particular employee who is not performing as expected.
Do ensure that your employment contracts have a confidentiality clause that binds your employees so as to ensure that your client and your confidential information are not divulged or disseminated to any third party.
4. Data Protection Matters
When your start-up business involves managing someone else’s personal data, there are legal standards that you must comply with in managing and handling such personal data. For example, obtaining the consent of the Data Subjects before you obtain their personal data, storing of the said personal data, giving access of the personal data you have in your possession to the Data Subjects when they ask for it.
Recently, the Personal Data Protection Commissioner has indicated her intention to carry out inspection on data users that are not registered or not required to be registered under the Personal Data Protection Act in order to ensure compliance with the general provisions of the Act as well as the minimum security, retention and data integrity standards set out under the Personal Data Protection Standards 2015.
5. Intellectual Property Matters
It is important to check with the Intellectual Property Corporation of Malaysia (“MyIPO”) whether some other company or person has already trademarked your startup business name. Please do the necessary searches to ensure that you are not using someone else’s business name or logo. This will ultimately relieve you of any hassle of being sued for trademark infringement.
And what a pity that would be if you have already gained traction in your startup business and people are starting to recognise your brand name not to mention the unnecessary legal cost of having to defend a suit for trademark infringement.
What I have set out here are just a few of the areas you may wish to consider in your own startup business. However, each and every business will have different needs or requirements so it would be best to speak to a legal advisor on setting your foundation right.
Even if you are already a successful start-up, I believe it is never too late to do a legal audit to check if everything has been set right, to avoid any unnecessary legal repercussions.
About the author
SHARMILA RAVENDRAN is the founder of the law firm, Messrs Ravindran located in Mont Kiara, Kuala Lumpur. She has more than 14 years of experience in the legal industry servicing clients that include local and foreign companies. She is now actively involved in corporate advisory work and commercial litigation and is a Panel Adjudicator with the Kuala Lumpur Regional Centre for Arbitration. She also sits on the Bar Council Child Rights Committee and is the Legal Director for Lean in Malaysia. She can be contacted at sharm@ravindran.com.my.
Kuala Lumpur-based Fuller Academy is poised to enrol to 30,000 learners across ASEAN through its 12 sustainability short courses, designed and curated by the industry, for the industry, to enhance talents’ knowledge and skills in sustainability.
Chief Executive Officer Wan Imran said all programmes certified by Human Resource Development Corporation (HRDCorp) are part of micro-credential short courses, which aim to provide knowledge solutions for talents, in line with the global demand for talent upskilling in sustainability.
“Based on a recent analysis by Bloomberg, global ESG assets are on track to exceed $53 trillion by 2025, representing more than a third of the $140.5 trillion in projected total assets under management. This is a strong driving force encouraging the industry to shift towards a more sustainable approach. Hence, now is a critical time for organisations to start enabling their talents with knowledge and purpose in the areas of sustainability. This is also aligned with our national agenda of creating 200,000 green jobs by 2030.” he said during the launch of Fuller Academy.
Wan Imran, Co Founder and CEO of Fuller Academy & Michelle, Co Founder and COO of Fuller Academy
To date, more than 1,600 participants from various industries have signed up across various of our programs from within the country and abroad.
“Our learners come from different industries and backgrounds, as we offer a range of courses targeting different skill sets from sustainability communications to the introduction of carbon emissions. We have been getting a lot of learners from ASEAN and other regions, with many learners hailing from Europe. The courses which were curated with our global instructors have set a new standard in sustainability learning, which is effective, practical and engaging.” he added.
Breaking it down further, Imran said the courses are all designed and created by industry experts and practitioners thus providing insights into the practical industry knowledge.
“We have made it accessible geographically and financially. Being an online platform, anyone from across the region and beyond can sign up as a learner. For Malaysia-based companies, they can benefit from the financial support HRDCorp can provide, and for outside of Malaysia, they can also take advantage of our entry-level pricing.”
“The courses are designed to be short and bite-sized, with the flexibility for the learners to complete the course in their own time within the monthly cohorts. This on-demand format is
ideal for busy professionals, allowing them to learn around their working schedule through a structured yet flexible course.”
In conjunction with the launch, Fuller Academy also hosted a series of dialogue sessions on sustainability, attended by experts in the field such as Elina Jani from Malaysian Green Technology And Climate Change Corporation (MGTC), Wan Dazriq from Ethis Malaysia, Karina Cady from Nandina Partners, Yasmin Rasyid from EcoKnights, and Yasir Qureshi from Kantar Malaysia.
About Fuller Academy:
Fuller Academy is the trusted strategic partner in the business sustainability journey, providing industry-driven sustainability education through online courses. Current open enrollment includes Fundamentals of Business Sustainability, Introduction to Carbon Emissions, Internal Communications for Sustainability, and Shaping Consumer-Centric Sustainable Strategy.
An innovative legal tech developed by lawyers is changing the divorce landscape in Malaysia while simultaneously supporting the Malaysian government’s goal of increasing the adaptation and use of technology across as many industries as possible.
Launched early this July, Klik Divorce is the country’s first digital divorce platform and was created with the primary intent to ease the pathway of those seeking legal avenues for the dissolution of marriage.
It was developed by lawyers Dato Fion Wong and Dato Chris Chin, both strong advocates for the adoption of technology in Malaysia’s legal industry and also the founders of Malaysia’s First A.I. legal assistant Askaila, that was launched last year.
Dato Chris Chin and Dato Fion Wong
Through Klik Divorce users can build divorce terms i.e. spouse maintenance, child custody, maintenance and visitation rights as well as the division of matrimonial assets. With just one click, divorce papers are immediately generated for printing and signing. If the divorcing couple mutually agree on the terms, the whole process takes only about 5 minutes. The law firm can then review the papers and prepare them for filing in the Court the next working day.
Meanwhile, those who encounter challenges or need help to facilitate settlement agreements, can engage the service of a lawyer; online or in-person.
That, in a nutshell, is divorce in the digital age.
Klik Divorce offers two key positives amidst the pains of divorce proceedings, namely time and cost savings.
“Many people are unable to afford the legal fees for divorce, especially with today’s increasing costs of living. Additionally it can take anywhere between 6-12 months for terms to be discussed back and forth before the divorce is filed in court,” says Dato Fion.
“Adopting legal technology to execute simple manual tasks can save a lot of time and reduce costs which make legal fees affordable to more people. This also enables lawyers to dedicate more time and effort to develop the law.”
Klik Divorce is especially beneficial for uncontested divorce cases. Not only does it make the process faster and smoother, it also leads to quicker settlements, freeing up judiciary workload and court time. As the first legal online service in Malaysia, it also sets an example and paves the way for more digitalised services.
Dato Fion said that despite receiving encouraging and positive feedback from users, there are unfortunately lawyers who continue to openly resist the adoption of this platform.
“Nevertheless, despite the obstacles that lie ahead, we are determined to drive Malaysia’s legal industry towards adopting technology to offer efficiency and value to the public. We are also confident that in the near future Malaysia’s legal industry can catch up and compete with other nations whose legal technologies are already ahead of us,” added Dato Chris.
Whether we are business owners or in employment oftentimes we neglect our legal well-being. The general notion is ‘what isn’t broken need not be fixed’.
What we fail to recognise is that most of the time, a lot of our legal problems, which may at the material time appear small or insignificant, can with time and neglect, multiply and become costly to rectify.
Most times these legal crises and complications can be averted or reduced if the right steps are taken at the appropriate time.
Why is a Legal Health Check Important?
It is important to remember that if your financial and legal matters are badly managed, you are directly exposing yourself personally as well as your company and clients to various legal implications.
These risks can cause unnecessary cost, loss of business relationships, knowledge and possible statutory or regulatory breaches. The effect of a badly managed business is far- reaching and can in some situations take years to rectify/remedy.
The advice here is to be constantly aware and apply your mind to a couple of key areas when you are performing your own legal health check. Here are some of them:
1. Have You Complied with the Relevant Statutory Regulations & Laws?
Often, as business owners, you may not be aware of the changes in law that may have taken place, and as such need to be advised by your legal advisers on the latest legislation or amendments to any current legislation that concerns the industry you are in and the services you render.
There are currently more than 20 new Acts that have been made and countless new regulations and amendments to the current laws.
If you are not keeping abreast with the changes, you will be exposing yourself and your business to risk. What you do not can hurt you!
2. Partnerships and Shareholding
Make it a yearly affair where you have a formal discussion with your partners/directors on their roles, scope of work, performance and entitlements.
Have these discussions minuted and served on them officially. This makes it easier to address partnership or business issues and enables you to make any necessary changes to your business structure, revising targets, scope of work etc.
It is also of utmost importance to have written partnership and/or shareholders agreement to cover all terms of your partnerships and shareholding.
Ensure that your agreements adequately deal with matters such as buyouts, raising capitals, succession, put & call options and exit clauses. Your partners/directors must also be fully aware of their duties and obligations under the new Companies Act 2016.
3. Trade Creditors and Debtors
By this time of the year, you must know who owes your company money and how you intend to recover those unpaid debts. Have a list of creditors prepared and send out the necessary reminders and letters of demand.
Start the process of recovering monies before the New Year. The longer you wait, the harder it will be to collect these debts.
For those creditors who, for whatever reason cannot pay you in full, it would be advisable to speak to them about an instalment plan and get a settlement agreement drafted to confirm the instalment terms. If possible collect post-dated cheques.
4. Employment Contracts
It is pivotal for you to know what your exposure as a company or business in an employment dispute. It is also important for you to know the processes and procedures that you need to carry out before you terminate a belligerent employee.
It is prudent that you have an Employment Handbook prepared and served on all your employees.
This year alone there have been a lot of discussion on the need for change to our employment laws in particular, to laws covering sexual harassment at work, maternity and paternity leave, data protection and personal information.
5. Intellectual Property
Whatever industry you’re in, it is prudent to consider registering your trademark and tradename. As your business gains popularity and people start recognising your brand and name, it is inevitable that a competitor may want to benefit from your goodwill to gain some traction.
You do not want a competitor to proceed to use your name and logo in a similar industry and reap the benefits and goodwill off your hard work.
Please do consider securing your intellectual property rights. It makes it easier for you to enforce your rights when you have the requisite trademarks being registered.
6. Written Contracts and Agreements
Always have your written contracts and agreements revised and up to date. Review the terms of your Purchase Orders, Invoices, Supplier Contracts, Equipment/ Machinery Leases, Rental Agreements.
It is important that at all material times, you are aware of your key suppliers and key customers. Review these contracts and agreement as there may be renewal clauses in those contracts that may have slipped your mind, which could cause you undue losses.
7. Train Your Staff
Always train your staff to be aware of what type of legal documents to look out for. For example, a Winding up Notice that is served on your registered address needs to be brought to the immediate attention of the Board of Directors, as there are dire repercussions of not responding to the said Notice within the statutory imposed period of time.
Conclusion
There is no such thing as a ‘one size fits all’ when it comes to legal matters. You will need to design your own Legal Health Check which is suitable for your own business or company.
Like a well-tended garden, you will need to constantly prune, remove and regrow your legal structures to ensure that it is in perfect order.
Always remember that a detailed examination of these key areas will help you identify any danger or grey areas which will then enable you to circumvent or reduce any potential risks and liabilities to your business.
About the author
SHARMILA RAVENDRAN is the founder of the law firm, Messrs Ravindran located in Mont Kiara, Kuala Lumpur. She has more than 14 years of experience in the legal industry servicing clients that include local and foreign companies. She is now actively involved in corporate advisory work and commercial litigation and is a Panel Adjudicator with the Kuala Lumpur Regional Centre for Arbitration. She also sits on the Bar Council Child Rights Committee and is the Legal Director for Lean in Malaysia. She can be contacted at sharm@ravindran.com.my.
Investment scams involve promises of big payouts, quick money or guaranteed high returns. In this part of the world where I live and work, investment scams in the forms of Ponzi and pyramid schemes are getting increasingly common.
Ladies and gentlemen, investment scammers are so convincing. You know who they are actually targeting. Have you lost your job because of COVID-19? Are you desperate for money? Are you a victim of one scam and looking to recover your lost money? With so much debt, what are you going to do?
According to Investopedia, with Ponzi schemes, investors give money to a portfolio manager. Then, when they want their money back, they are paid out with the incoming funds contributed by later investors. With a pyramid scheme, the initial schemer recruits other investors who in turn recruit other investors and so on. Late-joining investors pay the person who recruited them for the right to participate or perhaps sell a certain product.
Over the years, even highly intelligent and educated people who do not understand how things work have been ruined by investment schemes that turned out to be fraudulent. Unbelievable?
All investment scams will eventually collapse. There were cases where the company disappeared with investor funds, or scammers claiming to be “fund managers”, advertising in the social media, collecting money from people, without any proper fund structures. This is all very concerning, because it creates a poor image for the industry in general.
Some of these pitches are so convincing that even I take a look from time to time and the entry cost levels are so low. It is time to give myself a slap. What have I been smoking all these years? I must have been one of the biggest idiots in the world not knowing that making money can be that easy.
Sweet! Some people know what they are doing. Over the years, I have come across people who do not mind investing in any investment scams as long as they are giving them high returns. I have heard before of people quitting their proper jobs or businesses to focus on their investment scams. They took the “bait”, got their capital back and recruited others to join the gravy train. There is no feeling of guilt, no responsibility involved whatsoever for them.
They will compromise moral values and ethics for money. They always look for loopholes to overcome the rules and regulations that have been put into place to protect the system. This is how terribly low our modern society has become. Yeah, not everyone can be rich. Why should not everyone be able to earn money so, so, and so easily?
As long as any investment scams which claims to invest or trade in anything from forex to cryptos are expanding at a healthy rate, their “fund managers” are able to keep the fraud going. Once investments begin to contract, then the house of cards collapses.
A fake investment can go on for months or even years as long as it is able to suck in more investors or suckers. You will be able to see the profits you have made on a webpage or an app.
According to Dr. Stephen Greenspan, the University of Connecticut psychology professor who is also an internationally known authority on Ponzi schemes, the basic mechanism explaining the success of Ponzi schemes is the tendency of humans to model their actions (especially when dealing with matters they do not fully understand) on the behavior of other humans.
This mechanism has been termed “irrational exuberance,” a phrase attributed to former Federal Reserve’s chairman Alan Greenspan (no relation), but actually coined by another economist, Robert J. Schiller. Schiller employs a social psychological explanation that he terms the “feedback loop theory of investor bubbles.”
The fact that so many people seem to be making big profits on the investment, and telling others about their good fortune, makes the investment seem safe and too good to pass up. In Schiller’s words, the fact “that others have made a lot of money appears to many people as the most persuasive evidence in support of the investment story associated with the Ponzi scheme.
While social feedback loops are an obvious contributor to understanding the success of Ponzi and other mass financial manias, there are four factors which can be used to understand acts of gullibility and also other forms of what Dr. Stephen terms as “foolish action.” The factors are situation, cognition, personality and emotion. Obviously, individuals differ in the weights affecting any given gullible act.
Situations. Assuming that the decision to proceed would be a very risky and thus foolish act, a gullible behavior is more likely to occur if the social and other situational pressures are strong and less likely to occur if the social and other situational pressures are weak, or balanced by countervailing pressures (such as having wise heads to warn you).
Cognition. Gullibility can be considered as a form of stupidity, so it is safe to assume that deficiencies in knowledge and/or clear thinking often are implicated in a gullible act. By terming this factor “cognition” rather than intelligence, one can have a high IQ and still prove gullible.
Personality. Gullibility is sometimes equated with trust and niceness leading to impulsive decision-making, but the late psychologist Julian Rotter showed that not all highly trusting people are gullible.
Emotion. Emotion enters into virtually every gullible act. In the case of investment in a Ponzi scheme, the emotion that motivates gullible behavior is a strong wish to increase and protect one’s wealth.
About the author
YH Wong has over two decades of experience in the financial services industry. His clients include high net worth investors and boutique institutions such as family offices and investment partnerships in the region. He is currently a senior partner with Satori Consultancy Ltd, a financial services company regulated by the Mauritian Financial Services Commission. He can be reached at yhwong@satoriconsultancy.com.
RFI Global’s 2022 Post-Pandemic Consumer Banking Expectations Report, prepared for FICO, confirmed that the pandemic has aggravated financial hardship for retail banking consumers in Malaysia, with 1 in 2 experiencing a drop in income. It has also revealed that many are motivated to search for better banking offers, and that the inclination to switch lenders has increased year over year.
Disruptive impacts from the pandemic differed across the region
While a considerable 23-30% of Australian and New Zealand respondents experienced a negative impact, 50% of Malaysians, 40% of Singaporeans and 63% of Indonesians saw a decline. Respondents in Thailand suffered the biggest blow, with 70% saying their income had been reduced.
The report uncovered that more than 1 out of 4 consumers across the region (27%) and nearly half (49%) of Malaysian respondents have deferred loan repayments. While nearly 1 in 3 (31%) in India and nearly half in Thailand (47%) deferred loan repayments as a result of COVID-19, this was much less common in Singapore (12%), Australia (9%) and New Zealand (7%).
Despite the uncertain financial climate, the majority of Malaysian retail banking customers plan to maintain or boost their investments (77%). Most are looking to maintain or increase savings (82%), and many will consider changing banking providers this year.
Increase in customers’ intention to switch banking providers
Surprisingly, while the report indicates that most customers were highly satisfied with their main banking providers, up to 20% of APAC banking customers who responded said they plan to change banks in 2021. In contrast, only 10% said they changed banks in 2021.
This increased propensity to switch lenders is highest among the mass affluent (defined as the high end of the mass market or those with at least MYR200,000 total investable asset holdings).
In Malaysia, 5% of retail banking customers and 5% of mass affluent customers switched in 2021. That is set to at least double this year, with 10% of retail customers and 14% of the mass affluent saying they are very likely to switch.
Top reasons cited by Malaysian respondents include a change in personal circumstances (31%), consolidation of accounts to where they now have a deposit account (25%), a desire for access to better investment and wealth management products and services (24%), as well as a change in where payroll is deposited (21%).
Financial impacts felt by even the wealthiest of Malaysians
Amongst mass affluent banking customers in Malaysia, 43% experienced a decrease in income due to the pandemic, with half of overall retail customers negatively impacted. Nearly half of the mass affluent (46%) deferred loan repayments as a result, just 3% lower than the wider retail banking market in Malaysia.
This disruption to income has left 2 in 5 affluent Malaysians saying they intend to reduce spending (40%), just as 39% of Malaysia’s retail banking customers plan to do.
Across APAC, the mass affluent are more likely to step up their borrowing compared to the wider market (16% vs 8% ). In Malaysia, specifically, more of the mass affluent plan to increase borrowing (19%) than retail banking customers (6%).
The report further revealed that 80% of the mass affluent are opting to maintain or boost their investment levels with banks, versus 77% of Malaysia’s overall retail banking market.
Impacts of the Pandemic on banking intentions
Consumers are changing their banking behaviors, in response to the financial impact of the pandemic. More than 4 in 5 of Malaysia’s retail banking customers will either increase or maintain their savings (82%). Across the region, the sentiment to maintain or increase savings was highest in New Zealand (94%) and in Indonesia (87%).
Despite a dip in borrowing plans year over year, the level of borrowing for APAC retail banking customers still remains higher than pre-pandemic times as consumers deal with the lasting effects of the disruption. “The pandemic has clearly exacerbated financial hardship for customers regardless of income class,” said Aashish Sharma, Senior Director of Decision Management Solutions for FICO in Asia Pacific. “As borrowing and spending habits contract, customers will be on the lookout for avenues to grow their wealth and boost their savings. Banks must be able to proactively identify customers’ needs, and pivot their approach to alleviate financial anxieties while ensuring their products suit customers’ affordability and funding requirements.”
Gravitating towards Digital
Many Malaysian respondents (47%) still consider the proximity of branches and ATMs as a top determinant for a main banking provider; however, the report highlighted the importance of providing digital services. As many as 72% of APAC retail banking customers chose a fintech product over the option to use their banks’ main services. This was highest in Malaysia (94%) where customers did so as they wanted ease-of-use, time savings and easier application processes.
Comparing 2021 to 2019, APAC consumers are increasingly gravitating towards digital channels at every stage of their application journey: initial enquiries and research (up 14%), follow-up enquiries (up 15%), and banking applications (up 15%).
How Banks can Ensure the Customer is at the Center of Actions and Decisions
Transform operations and data silos through the use of sophisticated analytics technology and centralized management platforms.
Make data-driven decisions by predicting, analyzing and optimizing customer interactions in real time for an event-based, profile-driven approach to relationship management.
Develop precise insights into optimal interactions and offers that would work best for customers
Create a digital twin (a type of virtual model used for simulation purposes) to leverage this continuous learning and test out radical new approaches and strategies in a low-cost, low-risk environment
Deliver hyper-personalized offers and customer actions in a scalable way
“Banks must understand their customers’ needs on a deeper and more granular level, or risk losing them to competitors and alternative providers,” said Sharma. “Maintaining customer satisfaction alone will no longer suffice; customer experiences must be radically enhanced. Customer-centricity will be key to consistently delivering hyper-personalized experiences and retaining customers.”
Survey Methodology
This survey was conducted in 2021 by an independent research company adhering to research industry standards. 1003 Malaysian adults were surveyed, along with 12,885 consumers in Australia, New Zealand, Singapore, Indonesia, India and Thailand.
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, manufacturing, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 120 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.
As a lawyer who has had the opportunity to represent and defend different types of clientele; from medium to large scale businesses, corporations and high net worth individuals, I am occasionally confronted with the odd client who would retort, “This is a pretty standard contract, right? So why do we need to review it? Just sign!” or “Why do we need to take so long to look into this joint venture agreement? Isn’t this pretty much a standard contract?” or worst still “Can you give me a discount since it’s a standard contract!”
In my 15 years of legal experience, I have never come across two contracts that are exactly the same. I have never given any of my clients “standard” contracts because no such thing exists in my books.
Contracts should be crafted according to the particular and specific requirements, needs and requests of the parties involved.
It is always good to remember that contracts once entered into and signed are binding on the signatories. You can’t plead ignorance nor can you say that you did not understand the terms of the contract or that you did not foresee the consequences of breach or non-compliance.
Unless of course you were coerced, forced or unduly influenced into signing the said contract. However, do take note that the threshold of proof for coercion and undue influence is one that is high and onerous.
Oftentimes clients, in a bid to save on legal cost, use “standard” contract templates that they obtain from the Internet. You are forewarned here that doing so and not reviewing the specific terms can lead to devastating legal repercussions.
Let me give you some examples of matters that are not covered in these template contracts that you find on the Internet.
“Jurisdiction” Clauses
The laws applicable in any other country will not be applicable here in Malaysia. This clause is extremely important if you are contracting with a foreign party.
For example, if you are entering into a contract with a party from Singapore but the subject matter of the contract, for example the sale of a factory in Malaysia and the governing laws are Singapore, you will be faced with difficulty in the event litigation arises.
If you have an incompatible or inconsistent clause in your agreement, it will make the litigation process rather cumbersome and costly for you. The issue of jurisdiction will have to be dealt with before the substantive issues of fact and law can be addressed.
This is an unduly protracted and costly affair.
The Appropriate “Governing Laws”
Oftentimes when you use a standard contract, no one looks at the ‘Governing Laws’ clause.
There is a huge difference between the arbitration process and laws as compared to the Court process. Arbitration is an excellent alternative to litigation but if the value of your contract is small and the subject matter of the dispute is straightforward, then the cost of the arbitration process may exceed the value of your claim in itself.
Do not attempt to deal with governing laws and jurisdiction in the same wording. The two concepts are different and the contract should address them separately.
Conflicting Clauses
Let’s assume two people enter into a contract which contains Clause (1) and Clause (2). Further let’s suppose that the two clauses do not contradict one another yet come into conflict with each other. For example:
This contract shall only be terminated upon mutual agreement by both parties
Clause (1)
This contract may be terminated at any time upon written notice to the other party
Clause (2)
Clearly both these clauses can be in conflict with one another. Conflicting clauses are one of the most commonly litigated contractual disputes in Malaysia.
Once there are conflicting clauses, the Courts will then have to resolve the conflict by interpreting and “making sense” of the contract by reading all of the contractual documents in context and also consider parties’ commercial intentions by way of oral evidence in Court.
It is worthy to remember that not all standard contracts are advantageous. A standard contract may not capture the specific needs and circumstances of your business, and therefore not protect you from risks. On the contrary a badly drafted standard contract that you glean off the internet can cause more damage than benefit to you.
Always remember that there is no such thing as a standard contract. You are entitled to negotiate the terms of a contract you wish to enter into based on your own circumstances and facts. Investing in good legal and professional advice will reduce risk and save you a lot of legal cost in the long run.
Lawyer’s fees may seem expensive when you voluntarily decide to hire them initially but it is wise to remember that lawyers become more expensive when you have no choice but to hire them just because you decided not to in the first place.
The impact of the pandemic on organisations has been uneven, both in Malaysia and elsewhere. While some adapted well and thrived, others were less fortunate, often at no fault of their own, and had to restructure or shut down their business.
Regarding the trend of digitisation, it is not new given the well known benefits of cost savings and increased customer engagement. However due to lockdowns and business disruptions, this trend became less of an option and more a matter of survival.
We recently got in touch with Inter-City MPC (M) Sdn. Bhd, a homegrown company with over 30 years of experience that focuses on clients’ digital transformation. This includes data document processing, record management services, and many more that can help us embrace the changes caused by the pandemic.
How Has The Pandemic Affected Organisations All Over Malaysia?
“As a service provider of physical and digital end consumers statements, Intercity recognized the opportunity and expanded into digital transformation – that being we work with clients to solve the challenging task of transitioning statements and end consumers from print to digital, including data transition, process improvement across all modes (paper or digital), and omnichannel sending (mail or emails)”, said Nick Liew, Chief Executive Officer of Intercity.
What It Requires To Go Digital?
As a business owner, you will need help to go digital because the transition itself is challenging. There are three things that you need to look at:
Data transition: Going from print to digital requires high-quality data. You need to run a series of campaigns to collect end consumers’ data on behalf of clients, from web links to on-ground surveys.
Record transition: From physical records to digital records. You can do this by scanning, digital archiving and secure destruction of physical records for data privacy.
Process transition: From physical forms to online registration. You will need to run processes such as data entry and call centers to further support end consumers who are not fully digital.
Are The Organisations Now More Open To Go Digital?
According to Brandon Smith, Chief Commercial Officer of Intercity, “Organisations continue to identify specific business processes or operating segments that can shift towards adopting digital methods, especially where there is potential for revenue gains, cost savings, or efficiency improvements.”
Intercity understands these business objectives and tailors our offerings to ensure our digitisation offerings are impactful and deliver real value.
How Does Organizations Transform Themselves?
For example with Majlis Bandaraya Shah Alam, they managed to increase the collection rates of quit rent (cukai pintu) by 30% in 2021. The increased revenue to the local council was crucial to support ongoing frontline services like waste collection and local infrastructure maintenance, especially at a time when many were working from home.
In the case of Majlis Perbandaran Klang, they are able to optimise their mailing of local resident statements and bills, resulting in a 25% cost reduction in 2021, in preparation for further digitisation efforts. These cost savings were then quickly allocated to other crucial services during the pandemic.
“Besides cost savings, digitisation supports the broader goals of environmental sustainability. Given our clients’ focus on impactful ESG actions, from 2020 to 2021 Intercity worked with their clients to save approximately 140,000kg of paper which is the equivalent of saving 3,400 trees,” said Nick Liew.
With The Rise Of Inflation And Interest Rates, How Does Intercity Help Its Clients To Weather The Storm?
As organisations review their operations to adjust to rising costs from inflation and interest rate changes, there is a trend to focus on their core businesses while delegating non-core processes to specialist external service providers to save costs.
In an inflationary environment, Intercity is not immune to supply chain disruptions and rising raw material costs. However as a specialist service provider, Intercity has sufficient scale and ability to manage input costs thus ensuring minimal cost increases for our clients.
To take it one step further and exploit cost savings from digitisation, clients work with Intercity to transform their end consumers’ communication from physical to digital.
Brandon Smith says, “To do this, Intercity runs a digital BPO service on behalf of clients to ensure full communication via print and/or digital channels. The BPO service includes multi-stage data collection, a step-by-step physical-to-digital shift by customer segments, and hands-on technical development & support.”
