Malaysian entertainment industry to face hike of 6% GST

KUALA LUMPUR: Malaysian government has decided to impose goods and services tax on rising Malaysian entertainment industry.

“Looking at how the entertainment industry has grown in the past few years, we are looking at an RM1bil industry next year,” Malaysia Major Events (MME) general manager Tony Nagamaiah told Customs Today.

Furthermore, concerts are a niche industry so an additional 6% would not be likely to deter fans, Royal Malaysian Customs Department GST director Datuk Subromaniam Tholasy said.

MME’s records show the organisation facilitated 50 major entertainment, sports and arts events last year, attracting some 124,164 international tourists to spend at least a night in Malaysia, bringing in some RM981mil in total tourist expenditure.

That’s 28% more international tourists from the 97,211 in 2013, and more than double the RM476mil in total tourist expenditure that year.

“Next year, we are certain to hit more than RM1bil in total tourist expenditure,” Nagamaiah said. Incepted in 2010, MME is a division of the Malaysia Convention & Exhibition Bureau (MyCEB), a non-profit organisation under the Tourism and Culture Ministry to grow the national tourism industry.

“It is the organisers and promoters that will need to find more sponsorship to cover the higher event costs. If you bring the right value proposition to a potential corporate sponsor, it would make sense for them to sign on. But what is lacking is relevant experience in these promoters. Our local guys just don’t have the skills nor experience to sell to the corporate guys,” Nagamaiah says.

Next year, MME intends to ride on the Year of Festivals momentum in keeping with the uptrend of events in Malaysia. “Our target for next year should be 45 events, but I’m sure we will easily hit 60,” he says. From 2012 to 2014, the MME ran 20, 25 and 50 events, respectively, exceeding the targeted 15, 25 and 35 events for each year.

“It helped that this is our Visit Malaysia Year, so we jumped on the bandwagon. That enabled us to use the other agencies’ resources under the ministry. Our elevated branding had concert organisers coming to us,” Nagamaiah explains. Grants offered to event promoters by MME, however, would not be levied the GST, Nagamaiah says.

“For example, for an event estimated to cost RM3mil, our total recommended support would be RM850,000 and the rest by sponsorships from other corporations. This is after considering the return on INVESTMENT (ROI) ratio,” Nagamaiah said.

To calculate the ROI of an event, the MME uses a structured mechanism developed by international accounting firm PricewaterhouseCoopers, which calculates via a back engine the event’s economic impact on a country and produces the ROI for every dollar the MME INVESTS in an event.

If an event is estimated to cost RM3mil, the MME’s total recommended support would be RM850,000, and the balance to be funded via sponsorships from other corporations.

“This is after considering the ROI ratio, and that would be 1:26,” Nagamaiah says, adding that MME will continue other homegrown events like Urbanscapes, Good Wives and Ironman, where it had targeted 1,100 athletes at its Putrajaya event this year but drew in 1,300, of which 80% were foreigners.

A good number of the participants in the sporting event were from Australia and New Zealand. “We want to develop more homegrown events. Lifestyle runs like the Zombie and Colour Run, and the Penang Marathon are very attractive to tourists who can have a short and cheap holiday in Malaysia in conjunction with their events,” Nagamaiah said.