What is it about?
As Malaysia joins the automation race by embracing Industry 4.0, one of the initiatives the Malaysian government has taken to stimulate profitable income and retain investors is through tax incentives. By leveraging on the confidential tax return data, this paper intends to determine factors influencing the utilization of Reinvestment Allowance (RA) tax incentive in Malaysian industry, subsequently encouraging holistic industrial transformation.
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Why is it important?
The Malaysian government reckons RA tax incentive as the key to strengthening industrial capability in this era of automation. This incentive is believed to provide means for firms to deal with forthcoming challenges of Industry 4.0 and reduce the cost of competitive business globally. Despite the appealing RA incentive schemes proposed, Malaysian industries are yet to be on par with other successful industrialized countries due to the lack of significant technological upgrading. This is the first study to examine the success of RA using confidential tax return data which could benefit the policymakers to improve the tax incentive to promote the application of Industry 4.0 among incentivised firms.
Perspectives
Malaysia’s Industry 4WRD is focused on digitally transforming Malaysia’s manufacturing sector and its related services to embrace Industry 4.0. The policy aims to position Malaysia as a strategic partner for smart manufacturing, a primary destination for high-technology industries and a total solutions provider for the manufacturing sector in the region. As an incentive to upgrade facilities, the government grants RA to manufacturing companies which have been in operation for at least 12 months and incur qualifying capital expenditure for the expansion of production capacity, modernisation and upgrading of production facilities, and diversification into related products and automation of production facilities. It is also crucial for the Malaysian government and policymakers to construct a conducive mechanism in Industry 4.0 to encourage high utilization of these incentives to promote positive involvement as well as steady contributions of taxes and revenue growth.
Taxation Nadiah Abd Hamid
Universiti Teknologi MARA
Read the Original
This page is a summary of: DETERMINATS OF REINVESTMENT ALLOWANCE (RA) TAX INCENTIVE UTILIZATION IN EMBRACING INDUSTRY 4.0, Polish Journal of Management Studies, December 2018, Czestochowa University of Technology,
DOI: 10.17512/pjms.2018.18.2.08.
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