LABUAN: The Labuan SME Association has called on the Federal Government to introduce two key measures in Budget 2027 to keep the island’s business sector competitive.
Association president Jefery Tan urged authorities to enforce Section 48 of the Service Tax Act 2018 as intended, ensuring services performed entirely within Labuan are exempt from service tax regardless of where the customer is registered.
Tan explained that without the proper application of Section 48, major industry players face tax-on-tax costs when sub-contracting work to Labuan service providers, which disincentivises the use of local businesses.
The association also proposed an import duty waiver on goods produced by Labuan micro, small, and medium enterprises (MSMEs) when sold to the rest of Malaysia, noting that local processors currently face duty barriers not borne by mainland counterparts.
Tan, who also welcomed the Cabinet’s decision to exempt MSMEs from the new minimum wage increase, said both Budget 2027 proposals carry a modest effect on national revenue whilst safeguarding local employment and island trade.
