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KUALA LUMPUR 30 March 2020 - The Malaysian government should explore the implementation of corporate social responsibility (CSR) initiative as a way to tackle the economic impact of Covid-19 pandemic.
MIC Youth Political Bureau Chairman, Arvind Krishnan said, the government may formulate a win-win policy such as granting tax relief to companies participating in that initiative.
His full statement is as follows:
First and foremost, I would like to acknowledge all the great efforts done by the government in the recent economic stimulus package known as Pakej Prihatin Rakyat valued at RM250bil, amidst the economic crisis caused by Covid-19.
Unfortunately, while RM250 billion is not a small amount, it is certainly not enough to overcome the economic crisis for days and months to come. What the country needs, is not just for the government to play its part, but for corporations to also step up their game on Corporate Social Responsibility (CSR).
It is noted that the Ministry of Finance (MoF) has already announced tax deduction for donations and contributions made to the Covid-19 Fund and the ministry of health (MoH), by individuals and corporate sectors. However, this scope is limited, since many corporations are either not doing well enough to spare any cash for donations, or they are in no way related to the medical field.
Thus, the government should consider coming up with more policies to get more companies involved in taking up CSR initiatives in battling the Covid-19 outbreak. This notion may seem daunting on corporations, especially for small and medium-sized enterprises (SMEs). However, a win-win policy may be formulated so that smaller corporations may pool in resources in a way they could, at the same time, help them on their taxes too.
For reference, we can look at what India is currently doing. India has recently announced that any funds spent on ‘measures’ to tackle the Covid-19 outbreak will be counted towards the CSR of the company. In India, it is mandatory for companies to spend 2% of their average net profit on CSR activities.
The announcement clarifies that this includes preventive health care and sanitisation as well as disaster management. It further clarified that what constitutes as a ‘measure’ will be interpreted liberally.
This means that most corporations in India will be involved in a united effort to tackle Covid-19 since every single contribution, small or big, will be incentivised. For example, providing food for the homeless may be interpreted as ‘disaster management’.
While we are certainly not ready to emulate India in having CSR as a mandatory obligation for companies to undertake, the government may take a middle ground by extending the same tax deduction for companies that contribute to the cause in battling Covid-19 even if it is not towards the Covid-19 funds announced by MoF or to any of the organizations approved under Section 44 of the Income Tax Act 1967.
A relaxation of such requirements to be eligible for a tax deduction during a crisis such as this, is necessary to spur up more corporations to take up the social responsibility to assist in the cause. For example, companies that have perishable goods but are unable to sell them in time due to the Movement Control Order (MCO) can help in disaster management for the homeless. Companies that have lorries and trucks under rental but are not using them during the MCO may also let them out on a donation basis for logistical needs on tackling Covid-19.
In order to understand how this proposed policy can practically impact the lives of many, references can be made to some of our real-life heroes who are currently undertaking the tasks. Below is a link to a website that has listed 21 fundraisers who are, in one way or another, helping the country in disaster management caused by Covid-19.
https://vulcanpost.com/693014/covid-19-charity-donation-malaysia-food-medical-supplies/
While the effort of these 21 fundraisers is admirable, most unfortunately, they are not organisations under Section 44 of the Income Tax Act 1967. This means that corporations are not incentivised to donate to these fundraisers because such donations are not tax-deductible. Thus, having a relaxation of tax deduction requirements as proposed will certainly help these 21 fundraisers as well as all the many other organizers in the country.
Understandably, under normal circumstances, it is not advisable to relax these requirements as it may lead to exploit by companies, i.e. companies may fake a donation to an unapproved organisation just to get a deduction in tax. However, in times of crisis such as this, it is far more important to focus on helping those in need, than preventing unscrupulous companies from being unjustly enriched.
Thus, I urge the government to consider allowing for any spending by companies in the cause of tackling Covid-19 to be part of CSR activities that are tax-deductible.
Prihatin Rakyat Economic Stimulus Package - Prime Minister's Speech
MIER Press Statement - The Economic Impacts of COVID-19
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