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Saturday, June 6, 2009

Builders press for stamp duty exemption

CONSTRUCTION players want the government to immediately exempt imposition of the new stamp duty as the sector is grappling with escalating cost.

"We cannot wait any longer. The matter has become very serious now," Master Builders Association of Malaysia (MBAM) president Ng Kee Leen told newsmen in Kuala Lumpur yesterday.

MBAM said the exemption should be for all service agreements including construction contracts of all types including consultancy contracts, operations and maintenance contracts, maintenance contract projects, and facilities management services contracts.

MBAM feels that construction contracts are not service agreements and therefore do not fall within the scope of "services" under Item 22 of the First Schedule of the Stamp Duty Act 1949.
On Wednesday, Ng told Business Times that the amendment to the Stamp Duty Act, which came into effect on January 1 2009, has resulted in construction cost rising up by 1-2 per cent.

As a result, ordinary service agreements are slapped with 0.5 per cent stamp duty of the total contract value, whereas previously the stamp duty on an ordinary service agreement was fixed at only RM10.

MBAM along with other construction players including architects and consultants hope to voice their grievance during their annual dialogue with the Ministry of Finance on June 11 2009.

He said a memorandum was forwarded to the Ministry of Finance in April but no action has been taken so far.

Ng said the combined effect of stamping all agreements at 0.5 per cent of a contract value is exponential since the nature of the construction industry has multiple levels of subcontrac-ting works.

"MBAM believes that the imposition of the additional stamp duty on construction contracts is inconsistent and counter productive to the policy and objectives set out in the stimulus package plan to help drive the economy out of the turbulent financial crisis by boosting the construction industry which is recognised as an important growth engine in the economy," Ng said.

He said many construction contracts to be executed were negotiated or awarded prior to the amendment where the project costing did not include the additional stamp duty.

"Imposing such much heavier stamp duty may cause serious cash flow constraints and reduced margins for the contractors and consultants in an already highly competitive market and therefore impact the viability of projects committed," Ng added.

By Business Times (by Rupinder Singh)

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