Easier stamp duty rules but building cost higher

The government has slightly loosened rules that will lower the stamp duty for the construction sector, but industry players want things to return to the way it was last year.
Consulting engineers, architects, property developers and contractors say the government's latest stand raises the cost of doing business and hurts efforts to stimulate the economy.

Under Budget 2009, the government said it wanted to simplify stamp duty assessment. However, it turns out that industry players have to pay more.

From January 1 this year, they will have to pay 0.5 per cent duty on all construction services agreements that do not require collateral.

This covers consulting contracts, operation and maintenance contracts, maintenance contracts and facilities services contracts.

It means that a RM10 million construction contract will attract total stamp duty of RM50,000. Previously, the stamp duty on an ordinary service agreement was just RM10.

On Wednesday, the Finance Ministry said on its website that main contractors with government contracts do not have to pay the 0.5 per cent stamp duty.

But subsequent contracts between the main contractor and subcontractors are not exempt and further subcontracts are charged a RM50 flat fee.

"The Finance Ministry, by insisting the private sector pay such astronomical sums in stamp duty, will cause many professionals in the construction industry to face cash flow problems," Association of Consulting Engineers (Acem) president Dr Abdul Majid Abu Kassim said.

Master Builders Association Malaysia (MBAM) president Ng Kee Leen said that contractors are already paying a levy of 0.125 per cent on construction agreements to the Construction Industry Development Board.

This money is used to train and develop construction executives.

"Why are we paying four times more to the Inland Revenue Board? What will the money be used for?" Ng questioned.

Real Estate and Housing Developers' Association Malaysia (Rehda) president Ng Sieng Liong said the higher stamp duty will push up renovation costs.

"Properties will also become more expensive after factoring in these extra costs," he said.

Malaysian Institute of Architects (MIA) president Lee Chor Wah concurred with Abdul Majid.

"The amendment was supposed to simplify stamp duty assessment, but it has turned out to frustrate business investments instead. The July 15 announcement is worsening the recession we're facing," Lee said.

Already, more than half of its member architects have had to take job and pay cuts amid the tough economic climate.

Acem, MIA, Rehda and MBAM are renewing their appeals to the government to revert to last year's flat fee of RM10.

By Business Times (by Ooi Tee Ching)