Broad-based cuts in corporate tax are much more effective than the current tiered step-down system implemented by the government, said PwC Malaysia.

Speaking to Bernama in an interview, the consulting and tax services provider's tax leader, Jagdev Singh, said a tiered step-down system will also be administratively difficult to monitor and implement.

Under the newly announced Budget 2017 proposal, SMEs would be able to get up to a 4.0 percentage point reduction in income tax rate if they are able to increase their chargeable income.

"There are a lot of other alternatives other countries have used in rewarding companies for doing the right thing.

"It could be companies spending their money on innovation as well as research and development, resulting in an increase in their level of profits and (for that) they get a deduction for the money they have actually invested," said Jagdev.

At the current 24 percent rate, Malaysia's corporate tax is higher than its regional peers at about 20 percent.

"If you look at the export-based companies, their profits in a reasonable time period have increased significantly because of the depreciation of the ringgit.

"Also, a lot of property developers use a new company for each new project they undertake, and if their projects start their life in 2017 and moving on to 2018, then they will certainly benefit from this," he added.

Jagdev also emphasised that for Malaysia to be a competitive nation, the government needs to provide continuous encouragements to local companies to further tap into innovation as well as research and development.

"The government needs to play a role in making sure the level of encouragement is there, but I don't see a lot of that in the budget.

"But I am excited with a couple of announcements that the government made namely the Digital Free Zone and the 2050 National Transformation," he added.

- Bernama