KUALA LUMPUR, 16 October 2024: The Malaysian Tourism Federation (MTF) calls for an efficient tourism allocation in the upcoming budget 2025 to revitalise the country’s tourism sector.
It is more than “pumping money” into the Ministry of Tourism, Arts, and Culture Malaysia; it advocates for a tailored approach that ensures adequate funding and incentives are effectively channelled to private stakeholders and address the industry’s pressing challenges.
“Funding needs to be segmentalised accurately and channelled expeditiously into tourism infrastructure and facilities, products, incentivising key stakeholders, support private sector-initiated events and upskilling the tourism workforce”, says MTF President Datuk Tan Kok Liang.
“In addition, the perennial challenges of the industry need to be tackled by the Malaysia MADANI government once and for all, which includes overhauling the outdated tourism legislation and regulations, resolving entertainment tax issues, mitigating hikes in operating costs, especially manpower and utilities, upgrading of tourism vehicles and encourage domestic travel via tax reliefs.”
Given the industry’s competitiveness regionally and globally, a robust tax incentive framework is needed to stimulate tourism development.
Tan explained that the Federation cautions that a “one size fits all” tax policy approach may not be suitable compared to a targeted approach under the current evolving circumstances.
“For example, some locations in Malaysia need a category four to five-star hotel with international branding to attract high-end tourists and provide a better tourist experience. However, it is perplexing that tax incentives are only given to category one to three-star hotels. This doesn’t make sense, as Malaysia is still far behind other tourism destinations.”
MTF urges policymakers not to brush aside the proposals of the Malaysian Association of Hotels (MAH), the Malaysian Association of Tour and Travel Agents (MATTA), and the Malaysian Budget & Business Hotel Association (MyBHA).
Hotel associations have long advocated for investment incentives to promote sustainable development in the hospitality sector. While the government, through the National Tourism Policy, has set a clear goal of achieving a sustainable tourism industry by 2030, there still needs to be strong incentives to propel industry players toward this transition.
“We hope the upcoming budget will finally prioritise and allocate funding to support this crucial initiative,” the MTF president stated.
The traditional and currently available tax incentives for the past years up to budget 2024 need to be revisited, which includes pioneer status eligibility for up to three-star category of hotels and convention centres, Income tax exemption for organising specific conference and sports events, investment tax allowance on building extension or modernisation, double deduction for overseas promotion expenses, tax exemption for motor races, chartering of luxury yacht and special tax rates for film production. These incentives ought to be reviewed to ensure they remain relevant and practical to reflect the current business environment, failing which, they need to be updated or repealed in budget 2025.
Broader and more inclusive tax incentives should be offered in budget 2025 to accelerate tourism development for significant subsectors of the tourism industry.
The MTF president pointed to a glaring exclusion: the tax incentive for tour operators organising domestic or international tourists in Malaysia, which was withdrawn in the year of tax assessment 2023. MTF urges the Ministry of Finance to reintroduce this incentive to support domestic travel, and tax savings may be utilised for marketing activities.
“To position Malaysia as a premier destination and increasing international arrivals have its complexities due to changing behavioural and travelling patterns and higher tourist expectations. It requires support and understanding from interlocking government agencies, more conducive policies and aggressive private sector-driven initiatives backed by the government.
“We hope the budget allocation shall be monitored by the Ministry of Finance in preparation for Visit Malaysia Year 2026 (VMY 2026) with a strong emphasis on infrastructure and facilities improvement, product development, enhancing and diversifying destination marketing, improving rural tourism infrastructure, expanding digitalisation and human resource development to drive tourism growth,” concluded Tan.
