William Ng, president of the Small and Medium Enterprises Association, said the proposed tax on dividends of more than RM100,000 earned by individual shareholders will discourage SMEs from growing their business or turning in higher profits.

The main positive outcome for SMEs in the budget was the provision of RM50 million in matching grants for industrial training to be administered by TalentCorp.

Ng said the grants would help ease the talent crunch among SMEs while allowing more students to gain practical experience.

He said the RM3.8 billion for automation and digitalisation will be helpful, while the RM650 million allocated to support women and youth entrepreneurs is an inclusive strategy.

On the dividend tax, he said the bulk of the dividend would go to the business owners as many of them do not draw salaries because of cash flow problems.

Ng said the association understands the government’s need to raise more revenue. However, he urged the government to exempt SMEs from the 2% tax on dividend income.

Ng also said the increase in minimum wage announced in the budget speech would badly affect small and medium-scale enterprises, particularly those in Sabah and Sarawak who would find it difficult to implement the RM1,700 minimum wage from February.

He gave warning of “substantial” job losses as a result of the new wage.

“This will greatly disadvantage the B40 lower-income group, many of whom are reliant on semi-skilled work, as theirs would be among the first jobs to be cut,” he said.

Ng urged the government to allow less-developed states to maintain the current minimum wage, or to do away with minimum wage altogether.