ASEAN Regulatory Brief: Malaysia Cabotage Policy, Philippines Tax Reform, and Laos Land Concessions

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MALAYSIA: Sarawak, Sabah and Labuan exempted from cabotage policy

With effect from June 1, 2017 the states of Sarawak and Sabah as well as the Federal Territory of Labuan will be exempted from the cabotage policy. As per the erstwhile policy, only Malaysia-flagged ships were permitted to transport cargo from Peninsular Malaysia to these three territories and vice versa. As a result foreign vessels carrying freight bound for the three territories had to stop at the port of Klang in Selangor state in Peninsular Malaysia in order to transfer the goods to domestic ships for onward shipment to Sarawak, Sabah and Labuan.

The Malaysian transport ministry has announced that the exemption will however not apply to freight transport between Labuan and the states of Sarawak and Sabah. While the domestic shipping industry has protested against the government’s move to end the cabotage policy, it has been welcomed by the local administrations. It is believed that the policy had led to higher prices of commodities and as a result a higher cost of living in the three territories. Observers have stated that now it will be possible to ship goods directly to Sarawak, Sabah and Labuan without having to transfer at a Peninsular Malaysian port.

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PHILIPPINES: Comprehensive tax reform package progresses

The Philippines House Ways and Means Committee has approved the first lot of tax reforms proposed by the administration of President Rodrigo Duterte. Legislators on May 3 approved the reform proposals which include cuts in personal income tax (PIT) and reduction of value added tax (VAT) exemptions. The latter proposal is aimed at countering revenue loss resulting from the lowering of PIT rates. Other elements of the reform package include new or higher excise duties on fuel, and higher excise taxes on automobiles.

As per the proposal to reduce PIT, the maximum rate of taxation will be reduced from the current 32 percent to 25 percent, except for high earners. In addition, while those earning less than P250000 (US$5000) annually will be exempted from payment of any tax, the ultra-rich will be taxed at the rate of 35 percent instead of the current 32 percent. The reform proposals will now be up for a second reading at the House Plenary.

LAOS: Land concession rules tightened

In its bid to crack down on unscrupulous developers, Laos’ government has announced tougher measures to regulate land concessions projects. Prime Minister Thongloun Sisoulith has stated that land concession rights will be withdrawn if no progress is made on projects beyond the officially agreed deadlines. The government has acknowledged that while many land concessions have been awarded, investors have failed to make any progress on projects. Investors are also known to acquire land concessions only to sell the rights to other investors and developers.

In order to end the practice of land concessions changing hands before any project is executed, the government has directed concerned local authorities to investigate any projects that lack progress and report to the government. The Central Committee of Laos Communist Party is expected to soon pass a resolution to address the country’s land use problems.

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